to the direct necessity, and can make out a case of gross and indisputable oppression, without adequate remedy at law.'
Applying this standard to the instant case, I feel that the allegations of petitioner's complaint do not create a situation coming' within the exception of 26 U.S.C.A.Int.Rev.Code, § 3653. At best he alleges that collection of the tax will put him out of business, because of his shaky financial condition, thus, depriving his family of the necessities of life, and that the Internal Revenue Agent misled him with acceptance of his oral offer in compromise. But I feel that going out of business of itself does not establish 'the direct necessity' or 'oppression' which justifies interference with the government's collection of its taxes. Sturgeon v. Schuster, 10 Cir., 158 F.2d 811; Burke v. Mingori, 10 Cir., 128 F.2d 996; see Reams v. Vrooman-Fehn Printing Co., 6 Cir., 140 F.2d 237, 241. Plaintiff has a wife and five children, it is true, but he does not allege physical incapacity to earn his living in some other manner (Cf. Mazzella v. Yoke, supra) or that his home will be sold over his head. Cf. Leonardi v. Goldberg, D.C., 76 F.Supp. 747. Nor do plaintiff's other allegations establish a case of 'gross and direct oppression'. He may have been disappointed by the oral acceptance of his offer in compromise, and its later rejection, but I do not see how he has been misled to his prejudice. Certainly plaintiff has not continued to adulterate butter in reliance upon the possibility of future exemptions. He had been put on notice that the Internal Revenue Bureau considered him covered by the Code, which subjected him to a tax of ten cents per pound. There is no allegation that the offer in compromise was to cover future manufacture as well as past, nor would it be sensible to suggest it. The only change in position which plaintiff has suffered which was a result of the Bureau's vacillating policy was the disposal of War Bonds, alleged in the complaint. But if plaintiff's financial condition is so precarious, this would probably have occurred anyway in the subsequent year. In any event, I feel that no case of 'the direct necessity' is made out.
Plaintiff further contends, however, that the imposition here is not a tax, but a penalty, and that the statutory prohibition does not apply to penalties. Lipke v. Lederer, 259 U.S. 557, 42 S. Ct. 549, 66 L. Ed. 1061; Regal Drug Corp. v. Wardell, 260 U.S. 386, 43 S. Ct. 152, 67 L. Ed. 318. He supports this by pointing out that Section 2320(b) has an element of scienter in it. That section provides:
'(b) Adulterated butter. 'Adulterated butter' is defined to mean a grade of butter produced by mixing, reworking, rechurning in milk or cream, refining, or in any way producing a uniform, purified, or improved product from different lots or parcels of melted or unmelted butter or butter fat, in which any acid, alkali, chemical, or any substance whatever is introduced or used for the purpose or with the effect of deodorizing or removing therefrom rancidity, or any butter or butter fat with which there is mixed any substance foreign to butter as defined in subsection (a), with intent or effect of cheapening in cost the product or any butter in the manufacture or manipulation of which any process or material is used with intent or effect of causing the absorption of abnormal quantities of water, milk, or cream.' (Emphasis supplied.)
Nevertheless, I cannot agree with plaintiff's characterization of the levy in the instant case. When a tax is a 'penalty' for the purposes of the statutory prohibition of injunctions is not an easy question. The issue poses a conflict of social policies: the need for orderly collection of governmental revenues against the right not to have property taken away without more protection than the summary distraint procedure affords. In cases like Lipke v. Lederer, supra, where the 'tax' required evidence of crime to justify imposition, where it was an extremely high levy, and where it was part of an avowed attempt to prevent the manufacture of liquor, the second policy prevailed. But where the levy is lower, where the possibility that the measure has true revenue raising aspects is greater, the force of the first policy increases. Certainly the element of scienter alone does not necessarily make this imposition a penalty. Precedent in this Circuit indicates a contrary view. Cf. Rothensies v. Lichtenstein, 3 Cir., 91 F.2d 544. There is no question that the levy in this case has a regulatory effect. 'Every tax is in some measure regulatory. To some extent it interposes an economic impediment to the activity taxed as compared with others not taxed. But a tax is not any the less a tax because it has a regulatory effect * * * .' See Sonzinsky v. United States, 300 U.S. 506, 513, 57 S. Ct. 554, 555, 81 L. Ed. 772. In cases dealing with the related problem of the constitutionality of an imposition which would fall were it to be characterized as a regulatory 'penalty' the Supreme Court has emphasized a policy which is applicable here, as well; i.e., that 'Inquiry into the hidden motives which may move Congress to exercise a power constitutionally conferred upon it is beyond the competency of courts * * * .' See Sonzinsky v. United States, supra, 300 U.S. at page 514, 57 S. Ct. at page 556.
On the facts of this case as alleged in the complaint, I would not feel justified in ignoring the strong policy plainly expressed in 26 U.S.C.A.Int.Rev.Code, § 3653. Accordingly, therefore, the government's motion to dismiss is granted, and an order should be entered in accordance with this opinion.
© 1992-2004 VersusLaw Inc.