United States Attorney General Opinion, October 24, 1933
| 38 U.S. Op. Atty. Gen. 94
COMPROMISE OF CLAIMS UNDER SECTIONS 3469 AND 3229 OF THE REVISED
 The Secretary of the Treasury (upon the recommendation of the Solicitor of the Treasury and any District Attorney or special attorney or agent in charge of the claim) is without authority under section 3469 of the Revised Statutes to compromise a final judgment if there is no doubt that the judgment can be collected in full.
The Commissioner of Internal Revenue (with the advice and consent of the Secretary of the Treasury and the Attorney General, the latter in cases in which suit has been commenced), is without authority under section 3229 of the Revised Statutes to compromise a case if there is no doubt either as to the legality of the claim or as to the collectibility thereof
The rule is the same as to the compromise of interest and penalties.
To the SECRETARY OF THE TREASURY.
I have the honor to acknowledge the receipt of your letter of July 31, 1933, requesting my opinion with respect to the authority to compromise conferred by Sections 3469 and 3229 of the Revised Statutes. The specific questions presented are as follows:
'1. Has the Secretary of the Treasury (upon the recommendation of the Solicitor of the Treasury and any district attorney or special attorney or agent having charge of the claim) authority under Section 3469 of the Revised Statutes to compromise a final judgment if there be no doubt as to the entire collectibility of the judgment?
You further request that the authority to compromise interest and penalties be separately considered.
'2. Has the Commissioner of Interal Revenue (with the advice and consent of the Secretary of the Treasury and the Attorney General, the latter in cases in which suit has been commenced) [FN2] authority under Section 3229 of the Revised Statutes to compromise a case if there be no doubt as to either the legality of the claim of the Government or the collectibility thereof?'
 The statutes to which you refer provide:
'SEC. 3469. Upon a report by a district attorney, or any special attorney or agent having charge of any claim in favor of the United States, showing in detail the condition of such claim, and terms upon which the same may be compromised, and recommending that it be compromised upon the terms so offered, and upon the recommendation of the Solicitor of the Treasury, the Secretary of the Treasury is authorized to compromise such claim accordingly. But the provisions of this section shall not apply to any claim arising under the postal laws. [Italics supplied.]
It will be observed that Section 3469 is a general statute, while Section 3229 is special. Being special, Section 3229 is exclusive to the extent that it applies. Both sections confer upon the specified administrative officers, acting jointly, unlimited power to 'compromise' the specified cases and claims. Thus the precise question presented with respect to each statute is what is meant by the term 'compromise'.
'SEC. 3229. The Commissioner of Internal Revenue, with the advice and consent of the Secretary of the Treasury, may compromise any civil or criminal case arising under the internal-revenue laws instead of commencing suit thereon; and, with the advice and consent of the said Secretary and the recommendation of the Attorney-General, he may compromise any such case after a suit thereon has been commenced. Whenever a compromise is made in any case there shall be placed on file in the office of the Commissioner the opinion of the Solicitor of Internal Revenue, or of the officer acting as such, with his reasons therefor, with a statement of the amount of tax assessed, the amount of additional tax or penalty imposed by law in consequence of the neglect or delinquency of the person against whom the tax is assessed, and the amount actually paid in accordance with the terms of the compromise.' [Italics supplied.]
Webster's New International Dictionary defines the word 'compromise' as meaning--
'A settlement by arbitration or by consent reached by mutual concessions; a reciprocal abatement of extreme demands or rights, resulting in an agreement; * * *' [Italics supplied.]
 It is well settled that 'mutual concessions' are essential to a valid compromise agreement. Fire Insurance Association v. Wickham, 141 U. S. 564, 577; Owensboro Ditcher & Grader Co. v. Markham, 32 F. (2d) 564, 565 (C. C. A. 6th); Roark v. Fordson Coal Co., 10 F. (2d) 70, 71 (C. C. A. 6th); Big Diamond Mills Co. v. United States, 51 F. (2d) 721, 724 (C. C. A. 8th); Skinner v. Cromwell, 40 F. (2d) 241, 245 (C. C. A. 10th); United States v. Golden, 34 F. (2d) 367, 374 (C. C. A. 10th).
This was recognized by Solicitor General Richards (approved by Attorney General Griggs), in 23 Op. 18, where he said (p. 20):
'A compromise is an adjustment or settlement by mutual concessions. The claim must in some way be doubtful. There must be room for the 'play of give and take'.' [Italics supplied.]
Such has been the position taken by all of the Attorneys General passing upon the question (12 Op. 543; 16 Op. 259; 617; 21 Op. 50; 264; 23 Op. 18; 631; 36 Op. 40) except two (17 Op. 213; 29 Op. 217). With those two I am unable to agree.
There is much to be said for the proposition that a liberal rule should exist, but my opinion is that if such a course is to be taken it should be at the instance of Congress. I conclude that where liability has been established by a valid judgment or is certain, and there is no doubt as to the ability of the Government to collect, there is no room for 'mutual concessions', and therefore no basis for a 'compromise'.
A similar answer must be made to your inquiry with respect to the power to compromise interest and penalties.
The several statutes provide that the interest shall be collected as a part of the tax. [FN3] Big Diamond Mills Co. v.  United States, 51 F. (2d) 721, 725 (C. C. A. 8th). See United States v. Childs, 266 U. S. 304. The two may not be divorced and the interest compromised separately. Big Diamond Mills Co. v. United States, supra, p. 725; Colorado Milling & Elevator Co. v. Howbert, 57 F. (2d) 769, 772 (C. C. A. 10th). It follows that the tax and the interest constitute one liability which goes to make up a 'case' arising under the internal revenue laws within the meaning of Section 3229, Revised Statutes, supra, which, when reduced to judgment, constitutes one 'claim' within the meaning of Section 3469, Revised Statutes, supra. There is nothing in the statute to justify a division of such a 'case' or of such a 'claim', and precisely the same situation prevails as to the penalties. [FN4] Ely & Walker Dry Goods Co. v. United States, 34 F. (2d) 429 (C. C. A. 8th).
With respect to the latter it is worthy of note that by Section 5293, Revised Statutes, Congress conferred upon the Secretary of the Treasury a limited power to remit fines, penalties or forfeitures imposed under authority of any internal reverue law where the amount did not exceed one thousand dollars, provided 'it was incurred without willful negligence or fraud'. However, that statute was repealed in 1922 (c. 356, Sec. 642, 42 Stat. 858, 989), and Congress has not seen fit to restore such power. Thus it will be seen that Congress has never extended unlimited power to remit or cancel penalties, and the power it did extend it recalled. In the face of this action I cannot conclude that Section 3229 confers unlimited power to remit or forgive a penalty where liability is clear and there is no doubt as to the ability of the Government to collect.
 These conclusions make it unnecessary for me to consider the several situations to which you specifically refer.
FN1 The publication of this opinion was temporarily withheld.
FN2 Attention is invited to Section 5 of Executive Order No. 6166 (June 10, 1933), which transfers to the Attorney General exclusive power to compromise cases where suit has been commenced.
FN3 Sec. 274(j), Revenue Act of 1926 (c. 27, 44 Stat. 9) and Sec. 292, Revenue acts of 1928 (c. 852, 45 Stat. 791) and 1932 (c. 209, 47 Stat. 169) provide for 6 per cent. interest upon deficiencies to be 'collected as a part of the tax'. Secs. 274(k) and 276(a) and (b), Revenue Act of 1926, and Secs. 296 and 294(a) and (b), Revenue Acts of 1928 and 1932, provide that if a deficiency is not paid in accordance with the terms of an extension of time, or if the tax is not paid when due, or if a deficiency is not paid in full within 10 days from the date of demand from the Collector, there shall be collected 'as a part of the tax' interest at the rate of 1 per centum a month.
FN4 Sec. 275(a), Revenue Act of 1926, and Sec. 203, Revenue Acts of 1928 and 1932 impose a 5 per cent. penalty upon deficiencies due to negligence or intentional disregard of rules and regulations where no fraud is involved, and provide that such penalty 'shall be assessed, collected, and paid in the same manner as if it were a deficiency'. Sec. 3176, Revised Statutes, as amended by Sec. 1103, Revenue Act of 1926, and Sec. 291, Revenue Acts of 1928 and 1932 impose a 25 per cent. penalty for willful failure to make and file a return as required by law, and provide that such penalty shall be added 'to the tax'. Sec. 3176, Revised Statutes, as amended by Sec. 1103, Revenue Act of 1926, Sec. 275 of the 1926 Act, and Sec. 293(b), Revenue Acts of 1928 and 1932 provide that in case a false or fraudulent return or list is willfully made, or if any deficiency is due to fraud with intent to evade tax, the Commissioner shall add to the tax 50 per cent. of its amount.