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
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,