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MAI 3, 1949.-Committed to the Committee of the Whole House and ordered

to be printed

Mr. BYRNE of New York, from the Committee on the Judiciary,

submitted the following

REPORT

(To accompany H. R. 4366)

The Committee on the Judiciary, to whom was referred the bill (H. R. 4366) for the relief of Pearson Remedy Co., having considered the same, report favorably thereon without amendment and recommend that the bill do pass.

A similar bill was favorably reported by the committee and passed the House in the Eightieth Congress, but no action taken by the Senate. The facts will be found fully set forth in House Report No. 135, Eightieth Congress, first session, which is appended hereto and made a part of this report. Your committee having given the bill further study recommend favorable consideration to the

bill.

(H. Rept. No. 136, 80th Cong., ist sess. The purpose of the proposed legislation is to authorize the collector of internal revenue to consider and act upon the claim of the Pearson Remedy Co., of Burlington, N. C., as if it had been filed within the period of limitations properly applicable thereto.

STATEMENT OF FACTS It appears that the internal revenue collector at Burlington, N. C., rejected the claim of the Pearson Remedy Co., for its draw-back of tax on distilled spirits used pursuant to the provisions of section 3250 (1), Internal Revenue Code, as amended, for the period ending December 31, 1944, on account of arriving at the office in Burlington, N. C., after the expiration date under the statute which was March 31,

45. If further appears that Mr. C. M. Houser, secretary and treasurer of the company, was the only officer of the company acquainted with its business affairs and he had been unable to look after all of its affairs since September 1944, on account of illness and therefore was late in filing for the draw-back.

Under the statute, the Treasury Department made an adverse report on this proposed legislation in that the claim did not arrive prior to March 31, 1945. Your committee does not feel that the Treasury Department is justified in denying this claim due to the circumstances, and is of the opinon that it should be allowed, and recommends favorable consideration.

Appended hereto is the report of the Treasury Department.

TREASURY DEPARTMENT,

Washington, March 29, 1946. Hon. Dan R. McGEHEE, Chairman, Committee on Claims,

House of Representatives, Washington, D. C. MY DEAR MR. CHAIRMAN: Reference is made to your letter of February 4, 1946, relative to H. R. 530 a bill for the relief of Pearson Remedy Co.

The bill provides that "the claim of Pearson Remedy Company, Burlington, North Carolina, for draw-back, pursuant to section 3250 (1) of the Internal Revenue Code, of tax with respect to distilled spirits used in the manufacture or production of nonbeverage products during the quarter beginning October 1, 1944, and ending December 31, 1944, filed with the Commissioner of Internal Revenue during the month of April 1945, is authorized to be considered and acted upon as if it had been filed within the period of limitations properly applicable thereto. The general manager and secretary and treasurer of the said Pearson Remedy Company, C. M. Houser, was unable on account of illness to file such claim on or before March 31, 1945. the date of the expiration of the period of limitations."

The files of the Bureau of Internal Revenue show that on April 28, 1945, the Pearson Remedy Co. (a corporation), 303 Fisher Street, Burlington, N. C., 'filed with the collector of internal revenue under section 3250 (1), Internal Revenue Code, as amended by section 309, Revenue Act of 1943, a claim for draw-back in the amount of $478.80 on 79.80 proof gallons of distilled spirits alleged to have been used in the manufacture of a certain medicinal preparation during the quarterly period ended December 31, 1944. The claim was accompanied by an affidavit dated April 27, 1945, executed by Mr. C. M. Horner (apparently the same person referred to in the bill as C. M. Houser), the secretary and treasurer of the company, alleging that the failure to file the claim before such date was due to the fact that the affiant was the only officer of the company acquainted with its business affairs and that he had been unable to look after all its affairs since September 1944, on account of illness. The claim was denied on June 5, 1945, for the reason that since it was filed subsequent to March 31, 1945, the expiration date of the statutory period for filing it, its rejection was mandatory.

Subsection (1) of section 3250, Internal Revenue Code (U. S. C., supp., title 26, sec. 3250 (1)), provides in part as follows: “No claim under this subsection shali be allowed unless filed with the Commissioner within the 3 months next succeeding the quarter for which the draw-back is claimed.”!

Section 197.22 of Regulations 29, as amended by Treasury Decision 5338, the regulations prescribed pursuant to the statute, provides as follows: "The claim must be filed with the collector of internal revenue within the 3 months next succeeding the quarter in which the distilled spirits covered by the claim were used in the manufacture of nonbeverage products. No claim will be allowed unless received by the collector within the time so stated."

Further, section 309 (e) of the Revenue Act of 1943, which amended section 3250 (1), Internal Revenue Code, to provide, among other things, for the allowance of draw-back in respect of 'distilled spirits used for the specified purposes prior to the effective date of title III of the act (April 1, 1944) and not previously claimed, if such draw-back were included in the claim filed for the quarter in which such effective date occurred, contains a proviso that "no claim shall be allowed which was barred by any provision of any prior law.” The Congress thus reaffirmed the limitation imposed by section 3250 (1) in respect of the filing of draw-back claims.

The specific statutory limitation of the time within which such draw-back claims in respect of distilled spirits may be filed was apparently intended to protect the Treasury against fraudulent claims by enabling the Bureau of Internal Revenue to investigate the claims within a reasonably short period after the occurrence of the transactions upon which they are based. The limitation is a reasonable one under the circumstances. Further, reports on file indicate that Mr. Horner was interviewed by a revenue inspector at the claimant's place of business on January 17 and 18, 1945; that he informed the inspector at that time that he had employed Mr. B. P. Jones, an attorney, to prepare the company's draw-back claims; and that notwithstanding the alleged illness of Mr. Horner during the quarterly period in question, the company withdrew and used alcohol and kept a record of its use in such period. It would thus seem that the claimant's failure to file the claim in time may properly be attributed to negligence on its part.

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The claim was rejected under the provisions of a statute having general application to all claims under the same circumstances. Enactment of the bill would have a discriminatory effect, in that it would provide relief for one person under circumstances in which relief would be denied all others similarly situated who may not secure the benefit of special legislation.

It is the recommendation of this Department that the bill be not approved.
The Director, Bureau of the Budget, has advised the Treasury Department
that there is no objection to the presentation of this report.
Very truly yours,

JOSEPH J. O'CONNELL, Jr.,
Acting Secretary of the Treasury.

Burlinga the losers Dufacime a

5 Octobe?

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TREASURY DEPARTMENT,

Washington 25, June 5, 1945. PEARSON REMEDY Co.,

Burlington, N. C. GENTLEMEN: Consideration has been given your claim in the amount of $478.80, filed April 28, 1945, for draw-back of tax on distilled spirits used in the manufacture of nonbeverage products during the quarter October 1 to December 31, 1944.

Section 3250 (1) (5), Internal Revenue Code, as amended by section 309 (b) of the Revenue Act of 1943, provides in part that

No claim under this subsection shall be allowed unless filed with the Commissioner within the 3 months next succeeding the quarter for which the draw-back is.claimed.”

The provisions of law are mandatory in this respect. Therefore, the last date on which this claim could be filed was March 31, 1945.

Since the claim was not received until April 28, 1945, it follows that this office
is without authority to grant allowance thereof. Accordingly, your claim is
rejected.
By direction of the Commissioner of Internal Revenue:
Very truly yours.

STEWART BERKSHIRE,

Deputy Commissioner.

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AFFIDAVIT
NORTH CAROLINA,

Alamance County:
C. M. Homer, being first duly sworn deposes and says that he is secretary and
treasurer of Pearson Remedy Co. and, as such, is general manager of the concern;
that he has been sick and under the care of a physician since September 1944;
that he has been unable to look after all the affairs of the company since September
1944 due to ill health; that he is the only officer of the company acquainted with
the business affairs of the company and that failure to file claim for period October
I to December 31, 1944, for draw-back on alcohol used in producing nonbeverage
products was due to his illness.

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SUPPORTING Data FOR DRAW-BACK UNDER REGULATION 29
Name of claimant: Pearson Remedy Co.
Address: 303 Fisher Street, Burlington, N. C.
Quarterly period: October '1 to December 31, 1944.

PART 1-SPECIAL TAX

tect the Reream rence at 2b.e ose ner is Tanusi aplored ms; sod period

its & sim in

(1) Serial number of special tax stamp: 586
(2) Denomination of stamp: $100.
3 Fiscal year: July 1, 1944, to June 30, 1945.
(1) Date of issuance of stamp: July 1, 1944.
(5) Collection district in which issued: North Carolina.

PART 2 TAX PAYMENT AND RECEIPT OF DISTILLED SPIRITS (1) Date received: November 22, 1944. (2) Name of vendor: U. S. I. (3) Address: Balu.more, Md. (4) Serial numbers of T. P. stamps: 227280. (5) Date tax paid: November 7, 1944. (6) Serial numbers of containers: 29899. (7) Name of distiller: U. S. I. Distilled spirits received (8) Kind: Alco. (9) Proof: 190. - (10) Proof gallons: 102,600.

SCHN

PART 1-USE OF DISTILLED SPIRITS IN MANUFACTURE

(1) Name of product: L. B. P.
(2) Formula No. 1.
New spirits used-(3) Proof gallons: 79.80. (4) Kind: Alco.

Finished products produced-(11) Wine gallons: 365.10. (12) Percent of alcobol, by volume: 9.

Spirits subject to draw-back-(13) Proof gallons: 79.80.

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