United States Attorney General Opinion, January 14, 1879
| 16 U.S. Op. Atty. Gen. 248
 Where internal-Revenue taxes were paid by a railroad company on dividends of its stock owned by a State, and no application has been made by the company, within the time limited by statute, for a refund: Held that the Commissioner of Internal Revenue has no authority to allow the amount so paid to be applied by way of set-off in discharge of a  liability of the company for taxes arising upon a subsequent assessment.
Nor has he authority, with the concurrence of the Attorney-General and the Secretary of the Treasury, to compromise a tax legally due from such company (the same being solvent) for a sum less than the amount of the tax. The authority to compromise conferred by section 3229 Rev. Stat. does not permit the voluntary relinquishment of a part of a tax lawfully assessed upon and due from a solvent person or corporation.
Hon. JOHN SHERMAN
Secretary of the Treasury.
Your letter of November 14, 1878, informs me that there is a suit pending against the North Carolina Railroad Company for taxes due to the Untied States, in which the corporation claim to file a set-off of an amount paid as taxes upon its stock held by the State, and therefore not liable to taxation. This amount was paid several years ago voluntarily, and no steps were taken to have the assessment revised. It was desired that the excess collected upon the former tax-list be applied to discharge the liability upon which the action aforesaid is founded.
Thereupon you ask these questions:
'Has the Commissioner of Internal Revenue authority under the circumstances mentioned, where taxes have been paid on dividends of stock owned by a State, where no application for a refund has been made within the time limited by statute, to allow the set-off, or to make the reappropriation asked? (2) or has he the authority, by and with the concurrence of the Attorney-General and the Secretary of the Treasury, to compromise a tax legally due from this solvent corporation for a sum less than the amount of said tax?'
It is obvious that the claim set up by the company is the case of an exaction of an internal tax supposed to be illegal or excessive. The statutes have not only indicated the manner, but have limited the time in which such claims are to be presented. The assessment having been once made in due form, the Commissioner can review and reduce it only upon an appeal to him taken and prosecuted as there directed, within the statutory period. (Rev. Stat., sec. 3228; Cheatham v. United States., 92 U. S., 85.)
To allow the excess now to be offset or reappropriated  would be in effect to grant to this company a privilege denied to ordinary citizens in procuring a refund.
The authority conferred by Revised Statutes, section 3229, to compromise a case arising under the internal-revenue laws, does not permit the voluntary relinquishment of a part of a tax lawfully assessed upon and due from a solvent person or corporation. A compromise implies some mutuality of concession, some real doubt about the legality of the claim, or the ability to meet it, which does not exist in this case. Both of your questions are, therefore, answered in the negative.
Very respectfully, your obedient servant,