811.512394 Shipping/40

The Secretary of the Treasury ( Morgenthau ) to the Secretary of State 37

Sir: I have the honor to acknowledge your communication dated August 23, 1934,38 regarding certain income taxes which have been the subject of communications between this Department and the three Japanese Steamship companies, Nippon Yusen Kaisha, the Osaka Shosen Kaisha, and the Toyo Kisen Kaisha, with which you transmitted a copy of a memorandum dated July [August] 20, 1934, addressed to the Acting Secretary of State and signed by the Chargé d’Affaires, Japanese Embassy.

In the memorandum signed by the Chargé d’Affaires of the Japanese Embassy in which the matters in controversy were described, it is suggested for immediate specific attention that the Government of the United States refrain from repeating its action taken with respect to detaining in a port of the United States the steamships of these companies as was done in the case of S. S. Saro [Soyo?] Maru and that it permit an extension of time past the ninety-day period for the payment of the taxes.

There is, of course, no intention of taking action with respect to either of the companies now under consideration such as was taken against the S. S. Saro Maru unless circumstances which in the judgment of this Department would justify such action were to develop. You, of course, appreciate that the action appeared necessary to the Bureau officials because of the clear intimation by a representative of [Page 837] Toyo Kisen Kaisha that the company had no assets within the reach of the revenue authorities of this country and that there would be no cooperation in respect of collection of the taxes ultimately determined to be due by the Board or the courts. In short, the United States Government was forced to take the action in question because a jeopardy situation was definitely presented in that case. As stated above, it is not anticipated that such a necessity will arise in the cases of the Nippon Yusen Kaisha and the Osaka Shosen Kaisha.

It is evident that the second immediate interest of the Chargé d’Affaires of the Japanese Government has reference to the ninety-day period within which a petition to the United States Board of Tax Appeals must be filed, when he suggests that collection be not enforced immediately upon the expiration of the ninety days. The ninety-day period within which a taxpayer may file a timely petition with the United States Board of Tax Appeals, for the redetermination of its tax liability, is a jurisdictional provision of the appropriate Congressional enactment and is not a mere rule of convenience of the Treasury Department capable of extension by this department. There is no intention or disposition, upon the record as it now exists, to attempt immediate collection if a timely petition is filed with the Board of Tax Appeals; but if such timely petition be not filed the statutes of the Congress in such cases require that the imputed tax be collected and the taxpayer left to his remedy by way of filing claim for refund.

According to the records of this office, a petition has been filed in the case of Toyo Kisen Kaisha. The taxpayers’ representatives are well advised as to the requirements of the law in this respect and no doubt an appropriate petition will also be filed prior to September 10, 1934 (the date of the expiration of the ninety-day period within which a petition should be filed) with respect to the other companies.

I think it is entirely appropriate that your Department advise the representatives of the Japanese companies that there is every disposition on the part of the Treasury Department to discuss and to settle amicably the tax dispute under consideration.


H. Morgenthau Jr.
  1. Copy transmitted to the Japanese Chargé by the Acting Secretary of State in his covering note dated August 31.
  2. Not printed.