357 U.S.

63
78 S.Ct. 1079
2 L.Ed.2d 1165

Walter W. FLORA, Petitioner,

v.
UNITED STATES of America.
No. 492.
Argued May 20, 1958.
Decided June 16, 1958.

Petition for rehearing pending, see 79 S.Ct. 112.

Mr. Randolph W. Thrower, Atlanta, Ga., for the petitioner.
Mr. John N. Stull, Washington, D.C., for the respondent.
Mr. Chief Justice WARREN delivered the opinion of the Court.

The issue in this case is whether a taxpayer must pay the full amount of an
income tax deficiency before he may challenge its correntness by a suit for
refund under 28 U.S.C. 1346(a)(1), 28 U.S.C.A. 1346(a)(1).

During 1950 petitioner suffered losses on the sale of certain commodities and
futures. He reported them as ordinary losses, but the Commissioner of Internal
Revenue characterized them as capital losses. A deficiency assessment was
levied in the amount of $28,908.60, including interest. Petitioner made two
payments that totaled $5,058.54, and then submitted a claim for refund of that
amount. The claim was disallowed. On Aug. 3, 1956, petitioner brought this
action under 28 U.S.C. 1346(a)(1), 28 U.S.C.A. 1346(a)(1), for refund. The
United States moved to dismiss for want of jurisdiction and for failure to state a
claim upon which relief could be granted. The district judge held that because
petitioner had not paid the full amount of the deficiency he 'should not
maintain' the action. Because the question had not been resolved by the Court
of Appeals, however, he deemed it advisable to pass upon the merits, and upon
doing so entered judgment for defendant United States. 142 F.Supp. 602, 604.
The Court of Appeals for the Tenth Circuit vacated the judgment and remanded

with instructions to dismiss, holding that the complaint 'failed to state a claim'
because petitioner had not paid the entire assessment for the period in question.
246 F.2d 929, 931.1 We granted certiorari, 355 U.S. 881, 78 S.Ct. 150, 2
L.Ed.2d 112, to resolve the conflict between that decision and Bushmiaer v.
United States, 8 Cir., 230 F.2d 146.2
3

The pertinent jurisdictional statute, 28 U.S.C. 1346(a)(1), 28 U.S.C.A.

1346(a)(1), reads as follows:

'(a) The district courts shall have original jurisdiction, concurrent with the Court
of Claims, of:

'(1) Any civil action against the United States for the recovery of any internalrevenue tax alleged to have been erroneously or illegally assessed or collected,
or any penalty claimed to have been collected without authority or any sum
alleged to have been excessive or in any manner wrongfully collected under the
internal-revenue laws * * *.' (Emphasis supplied.) In matters of statutory
construction the duty of this Court is to give effect to the intent of Congress,
and in doing so our first reference is of course to the literal meaning of words
employed. The principle of strict construction of waivers of sovereign
immunity, United States v. Michel, 282 U.S. 656, 51 S.Ct. 284, 75 L.Ed. 598,
and the sharp division of opinion among the lower courts on the meaning of the
pertinent statutory language suggest the presence of ambiguity in what might
otherwise be termed a clear authorization to sue for the refund of 'any sum.'
Consequently, a thorough consideration of the relevant legislative history is
required.

Section 1346 was originally enacted as Section 1310(c) of the Revenue Act of
1921.3 Its essential language seems to have been copied from R.S. 3226, the
predecessor of the present claim-for-refund statute, 26 U.S.C. (Supp. V)
7422(a), 26 U.S.C.A. 7422(a). Those statutes use language identical to that
appearing above to provide that no suit for the refund of a 'tax,' 'penalty,' or
'sum' shall be maintained until similar relief has been sought from the Secretary
or his delegate.4 The meaning that has been ascribed to this language in the
claim-for-refund statute provides the key to what Congress intended when it
used that language in the jurisdictional provision.

The original claim-for-refund statute, Section 19 of the Revenue Act of July 13,
1866, provided that no suit should 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

* * *.'5 On this 'appeal' the Commissioner was empowered to 'remit, refund,

and pay back' all taxes or penalties improperly assessed or collected.6 When the
appeal requirement was restated in Section 3226 of the Revised Statutes,7
Congress added the 'penalty' and 'sum' clauses, bringing together for the first
time the three-way division that survives in 26 U.S.C. (Supp. V) 7422(a), 26
U.S.C.A. 7422(a), and 28 U.S.C. 1346(a)(1), 28 U.S.C.A. 1346(a)(1).
The revisers left no indication of what significance, if any, was to be attached to
this addition.
8

During the period of this formative legislation refund suits could not be brought
against the United States because of its sovereign immunity. Tax litigation took
the form of an action of assumpsit against the collector. See City of
Philadelphia v. Diehl, 5 Wall. 720, 18 L.Ed. 614.8 Such suits were of course
subject to the provision in Section 19 of the 1866 Act that they must be
preceded by 'appeal' to the Commissioner. The meaning of that command,
which later became R.S. 3226 and eventually, as amended, 26 U.S.C. (Supp.
V) 7422(a), 26 U.S.C.A. 7422(a), was considered in Cheatham v. United
States, 92 U.S. 85, 23 L.Ed. 561. There, in response to an appeal, the
Commissioner of Internal Revenue had set aside the first assessment of
taxpayer's 1864 income taxes and directed the local assessor to make a second
one. The taxpayer paid the second assessment and sued the collector for refund.
The Court held that by failing to appeal from the second assessment the
taxpayer failed to comply with Section 19 and hence had no right of action. In
the course of its opinion the Court made this careful statement of the remedies
then available to taxpayers who sought to contest the correctness of their tax:

'So also in the internal-revenue department, the statute which we have copied
allows appeals from the assessor tothe 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.

10

'* * * 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 precedent to a resort to the courts by the party against
whom the tax is assessed. * * * If the compliance with this condition (that suit
must be brought within six months of the Commissioner's 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. * * *
11

'The objecting party can take his appeal. He can, if the decision is delayed
beyond twelve months, 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. * * *'9
(Emphasis added.)

12

From this carefully considered dictum it is unmistakably clear that the Court
understood the statutes of that time to require full payment of an assessed tax as
a condition precedent to the right to sue the collector for a refund. This
understanding of the statutory scheme appears to have prevailed for the
succeeding fifty or sixty years. It was never suggested that the addition in R.S.
3226 of the clause beginning 'any sum' effected any change. The Cheatham
case was decided after that addition was made, and it gave no indication that
the 'condition precedent' of which it spoke had already been abrogated by
Congress. Consistent with that understanding, there does not appear to be a
single case before 1940 in which a taxpayer attempted a suit for refund of
income taxes without paying the full amount the Government alleged to be due.
Court opinions that took occasion to comment on the extent of payment are
consistent with the Cheatham declaration,10 and that case has continued to be
cited with approval to the present day.11 Such was the understanding of the
necessity for full payment in the suit against the collector.

13

Since the statute now under consideration, 28 U.S.C. 1346(a)(1), 28 U.S.C.A.

1346(a)(1), employs language identical to that in the statute under which the
full-payment understanding developed, R.S. 3226, a construction requiring
full payment would appear to be more consistent with the established meaning
of the statutory language. Furthermore, the situation with respect to tax suits
against the United States at the time 28 U.S.C. 1346(a)(1), 28 U.S.C.A.
1346(a)(1) was enacted, the express purpose of its enactment, and subsequent
expressions of congressional intent all suggest that the principle of full payment
was to be rpeserved.

14

The jurisdictional provision that is now 28 U.S.C. 1346(a)(1), 28 U.S.C.A.

1346(a)(1) was first enacted in Section 1310(c) of the Revenue Act of 1921.12
At that time the United States was already suable in the District Courts. Since
1887 the Tucker Act had allowed suit against the United States for claims less
than $10,000 'founded upon * * * any law of Congress * * *,'13 and that
language included suits to obtain refund of income taxes. United States v.
Emery, Bird, Thayer Realty Co., 237 U.S. 28, 35 S.Ct. 499, 59 L.Ed. 825.

Since R.S. 3226 was cast in the broadest of terms, its requirement that refund
suits be preceded by an 'appeal' to the Commissioner clearly applied to the
Tucker Act cases, United States v. Michel, 282 U.S. 656, 51 S.Ct. 284, 75
L.Ed. 598, and the related requirement that full payment must be made prior to
suit seems to have been assumed to be equally applicable. For amounts in
excess of the $10,000 Tucker Act limitation the taxpayer could invoke his old
remedy against the collector.
15

The complementary nature of the two District Court remedies was impaired
when this Court re-emphasized the rule requiring the collector to be sued
personally. A suit against the office or the successor in office of a deceased
collector could not be maintained. Smietanka v. Indiana Steel Co., 1921, 257
U.S. 1, 42 S.Ct. 1, 66 L.Ed. 99. Senator Jones of New Mexico interrupted floor
debate on the Revenue Act of 1921 to call attention to this decision. In his view
it meant that when the particular collector was dead a taxpayer suing for more
than $10,000 had to bring suit in the Court of Claims. In addition to the extra
expense and inconvenience of litigating in Washington, a Court of Claims
judgment carried no interest. The Senator proposed an amendment, stating:

16

'What is here proposed is that we shall remedy that situation by providing that
where the collector to whom the revenue was paid has died then the claimant
may sue the United States. It simply brings about an equitable situation and
prevents the taxpayer from having to suffer the hardships which would be
brought upon him simply through the accident of the death of the collector to
whom he paid the money. I offer the amendment for the purpose of remedying
that situation.'14

17

The amendment, which was accepted without further comment, conferred

jurisdiction on the District Court,

18

'Concurrent with the Court of Claims, of any suit or proceeding, commenced

after the passage of the revenue act of 1921, for the recovery of any internalrevenue tax alleged to have been erroneously or illegally assessed or collected,
or of any penalty claimed to have been collected without authority or any sum
alleged to have been excessive or in any manner wrongfully collected under the
internal-revenue laws, even if the claim exceeds $10,000, if the collector of
internal revenue by whom such tax, penalty, or such was collected is dead at
the time such suit or proceeding is commenced.'15

19

The amendment's narrow-stated purpose refutes any suggestion that Congress

intended further to expand or even to restate the jurisdiction of the District

Court in refund suits brought against the United States. As we have seen, the
District Courts already had such jurisdiction under the Tucker Act, and there is
no indication that Congress intended any change in the terms on which that
action was made available other than the change that was clearly set forth. The
statute that is now 28 U.S.C. 1346(a) (1), 28 U.S.C.A. 1346(a)(1) was
enacted merely to remove the jurisdictional amount limitation of the Tucker Act
in the special situation where the collector could not be sued. See Lowe Bros.
Co. v. United States, 304 U.S. 302, 305, 58 S.Ct. 896, 897, 82 L.Ed. 1362. The
House Conference Report and a contemporary Treasury Department
declaration confirm this view of the statute's effect.16
20

The similarity of essential language leaves no doubt that the terms of the
jurisdictional provision were copied from the claim-for-refund statute, R.S.
3226, as amended by Section 1318 of the Revenue Act of 1921.17 The fact that
this language had for many years been considered to require full payment
before suing the collector, and the fact that the avowed purpose of the 1921
amendment was merely to cure an inadequacy in the suit against the collector,
combine as persuasive indications that no change was intended in the fullpayment principle declared in Cheatham v. United States, supra.

21

When Congress created the Board of Tax Appeals in 1924,18 it demonstrated a

clear understanding that refund suits could only be maintained upon full
payment of the tax alleged to be due. The House Committee proposing the bill
explained its purpose as follows:

22

'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, excessprofits, war-profits, or estate taxes. Although a taxpayer may,
after payment of his tax, bring suit for the recovery thereof and thus secure a
judicial determination of 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
non-liquid 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.'19

23

Petitioner argues that the 'hardship' the Board of Tax Appeals was created to
alleviate was not the taxpayer's inability to sue without paying the whole tax
for petitioner erroneously concludes that the 1921 amendment conferred that
rightbut the Government's power to collect the balance due while a refund
suit was in progress. But the Committee Report quoted above clearly
demonstrates that the hardship about which the Congress was concerned was
the hardship of prelitigation payment, not post-litigation collection. Old Colony
Trust Co. v. Commissioner of Internal Revenue, 279 U.S. 716, 721, 49 S.Ct.
499, 501, 73 L.Ed. 918. 20

24

The final step in the evolvement of 28 U.S.C. 1346(a)(1), 28 U.S.C.A.

1346(a)(1) took place in the Act of July 30, 1954,21 which removed the $10,000
jurisdictional limitation and eliminated the condition about the collector being
dead or out of office. Far from indicating an intent to allow suit without full
payment of the tax due, the legislative history of that amendment shows a clear
understanding of the Cheatham requirement, and demonstrates a narrow
purpose in no way inconsistent with that requirement. The House Report states:

25

'The purpose of this bill is to permit taxpayers a greater opportunity to sue the
United States in the district court of their own residence to recover taxes which
they feel have been wrongfully collected. This is done by removing the
jurisdictional limitation of $10,000 now imposed on such suits.'22

26

In explaining the present state of the law the Report goes on to point out that a
taxpayer may contest a deficiency assessment by a petition in the Tax Court.
'The taxpayer may, however,' the Report continues, 'elect to pay his tax and
thereafter bring suit to recover the amount claimed to have been illegally
exacted.'23

27

The foregoing study of the legislative history of 28 U.S.C. 1346(a)(1), 28

U.S.C.A. 1346(a)(1) and related statutes leaves no room for contention that
their broad terms were intended to alter in any way the Cheatham principle of
'pay first and litigate later.'24 For many years that principle has been reinforced
by the rule that no suit can be maintained for the purpose of restraining the
assessment or collection of any tax.25 More recently, Congress took care to
except from the operation of the Federal Declaratory Judgments Act any
controversies 'with respect to Federal taxes.'26 To ameliorate the hardship
produced by these requirements Cognress created a special court where tax
questions could be adjudicated in advance of any payment. But there is no
indication of any intent to create the hybrid remedy for which petitioner
contends.

28

It is suggested that a part-payment remedy is necessary for the benefit of a

taxpayer too poor to pay the full amount of the tax. Such an individual is free to
litigate in the Tax Court without any advance payment. Where the time to
petition that court has expired, or where for some other reason a suit in the
District Court seems more desirable, the requirement of full payment may in
some instances work a hardship. But since any hardship would grow out of an
opinion whose effect Congress in successive statutory revisions has made no
attempt to alter, if any amelioration is required it is now a matter for Congress,
not this Court.

29

The judgment of the Court of Appeals is affirmed.

30

Affirmed. **

31

Mr. Justice WHITTAKER, believing that Bushmiaer v. United States, 8 Cir.,

230 F.2d 146; Sirian Lamp Co. v. Manning, 3 Cir., 123 F.2d 776, 138 A.L.R.
1423, and Coates v. United States, 2 Cir., 111 F.2d 609, properly apply the
statutes involved and should be followed, would reverse the judgment below.

See also Suhr v. United States, 3 Cir., 18 F.2d 81. But cf. Sirian Lamp Co. v.
Manning, 3 Cir., 123 F.2d 776, 138 A.L.R. 1423.

See also Sirian Lamp Co. v. Manning, 3 Cir., 123 F.2d 776; Coates v. United
States, 2 Cir., 111 F.2d 609. But cf. Bendheim v. Commissioner, 2 Cir., 214
F.2d 26, 28; Elbert v. Johnson, 2 Cir., 164 F.2d 421, 423424.

42 Stat. 311.

26 U.S.C. (Supp. V) 7422(a), 26 U.S.C.A. 7422(a): 'No suit or proceeding

shall be maintained in any court for the recovery of any internal revenue 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 a claim for
refund or credit has been duly filed with the Secretary or his delegate, according
to the provisions of law in that regard, and the regulations of the Secretary or
his delegate established in pursuance thereof.' R.S. 3226 is quoted in note 7,
infra.

14 Stat. 152.

14 Stat. 111.

'No suit shall be maintained in any court for the recovery of (1) any internal tax
alleged to have been erroneously or illegally assessed or collected, or of (2) any
penalty claimed to have been collected without authority, or of (3) 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 * *
*.' R.S. 3226.
This language is practically identical to that used by the 1866 Act in giving the
Commissioner his refunding powers. 14 Stat. 111, restated in R.S. 3220. The
first category dates back to the 1863 Act. 12 Stat. 729. The third category was
added in 1864. 13 Stat. 239. The 1866 Act rounded out the three categories by
adding the second. 14 Stat. 111. An examination of the legislative history
discloses no indication of the purpose of these successive additions.

Initially such suits depended upon diversity jurisdiction. Collector of Internal

Revenue v. Hubbard, 12 Wall. 1, 20 L.Ed. 272. Later Congress created
jurisdiction for 'all causes arising under any law providing internal revenue * *
*.' R.S. 629(4). With slight modification that provision became Section 24(5)
of the Judicial Code, 36 Stat. 1092, 28 U.S.C.A. 1340, and is presently 28
U.S.C. 1340. See Lowe Bros. Co. v. United States, 304 U.S. 302, 305, 58
S.Ct. 896, 897, 82 L.Ed. 1362.

92 U.S. at pages 8889.

10

Kings County Savings Institution v. Blair, 1886, 116 U.S. 200, 205, 6 S.Ct.
353, 356, 29 L.Ed. 657 ('No claim for the refunding of taxes can be made
according to law and the regulations until after the taxes have been paid (and) *
* * no suit can be maintained for taxes illegally collected unless a claim
therefor has been made within the time prescribed by the law.'); Pollock v.
Farmers' Loan & Trust Co., 1895, 157 U.S. 429, 609, 15 S.Ct. 673, 700, 39
L.Ed. 759 (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.'); Dodge v. Osborn, 1916, 240 U.S.
118, 120, 36 S.Ct. 275, 276, 60 L.Ed. 557 ('The remedy of a suit to recover
back the tax after it is paid is provided by statute. * * *'); see note 20, infra.

11

E.g., Phillips v. Commissioner, 283 U.S. 589, 595, 51 S.Ct. 608, 611, 75 L.Ed.
1289; United States v. Jefferson Electric Mfg. Co., 291 U.S. 386, 395396, 54
S.Ct. 443, 446447, 78 L.Ed. 859; Dobson v. Commissioner, 320 U.S. 489,
496, 64 S.Ct. 239, 244, 88 L.Ed. 248.

12

42 Stat. 311.

13

24 Stat. 505, 28 U.S.C. 1346(a)(2), 28 U.S.C.A. 1346(a)(2).

14

61 Cong.Rec. 75067507.

15

61 Cong.Rec. 7507. A second amendment provided that interest should be

allowed in any judgment against the United States in these refund suits. Ibid. A
special amendment in 1925 added the right to bring such refund suits when the
collector 'is not in office.' 43 Stat. 972.

16

H.R.Rep.No.486, 67th Cong., 1st Sess. 57; II1 Cum.Bull. 224, 225.

17

42 Stat. 314. The 1921 Act substituted 'claim for refund or credit' where the
statute formerly referred to an 'appeal' to the Commissioner.

18

43 Stat. 336.

19

H.R.Rep.No.179, 68th Cong., 1st Sess. 7. The Senate Committee on Finance

made a similar explanation. S.Rep.No.398, 68th Cong., 1st Sess. 8.

20

'The Board of Tax Appeals * * * was created by Congress to provide taxpayers

an opportunity to secure an independent review of the Commissioner of
Internal Revenue's determination of additional income and estate taxes by the
Board 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.'

21

68 Stat. 589.

22

H.R.Rep.No.659, 83d Cong., 1st Sess. 1.

23

Id., at 2. And see S.Rep.No.115, 83d Cong., 1st Sess.

24

Allen v. Regents of University System of Georgia, 304 U.S. 439, 456, 58 S.Ct.
980, 988, 82 L.Ed. 1448 (concurring opinion).

25

14 Stat. 475 (1867), re-enacted in R.S. 3224, presently in force as 26 U.S.C.

(Supp. V) 7421, 26 U.S.C.A. 7421.

26

49 Stat. 1027, 28 U.S.C. 2201, 28 U.S.C.A. 2201. See S.Rep.No.1240, 74th

Cong., 1st Sess. 11.

**

Petition for rehearing pending, see 79 S.Ct. 112.