Private Federal Tax Rulings Are Governed by Standard of Equality and Fairness of Internal Revenue Code, Section 7805(b)–International Business Machines Corp. v. United States
In a private ruling the Commissioner of Internal Revenue concluded that certain computers produced by Remington Rand, International Business Machines’ sole competitor in the manufacture of that type of computer, were not subject to a previously imposed excise tax. IBM immediately requested a similar ruling concerning its identical machines. After a 2½-year delay, the Commissioner ruled adversely on IBM’s request and at the same time prospectively withdrew the favorable ruling from Remington. IBM thereupon sued to recover the tax paid during the period Remington enjoyed the exemption. The Court of Claims held, one judge dissenting, that when two taxpayers ask for identical private rulings, but the Commissioner rules favorably only as to one, the Commissioner abuses the discretion granted to him by section 7805(b) of the Internal Revenue Code if he later reinstates the tax as to the favored taxpayer prospectively only, without refunding to the other taxpayer the taxes paid during the period of discrimination.