Hacker v. United States

United States Court of Appeals
for the Federal Circuit
__________________________

LARRY J. HACKER AND NANCY A. HACKER,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee.
__________________________

2009-1527
__________________________

Appeal from the United States Court of International
Trade in case No. 07-00008, Senior Judge Thomas J.
Aquilino, Jr.
______________________

Decided: July 29, 2010
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DANIEL P. WENDT, Miller & Chevalier Chartered, of
Washington, DC, argued for plaintiffs-appellants. With
him on the brief was DAVID H. HARDIN.

MATTHEW H. SOLOMSON, Trial Attorney, Commercial
Litigation Branch, Civil Division, United States Depart-
ment of Justice, of Washington, DC, argued for defendant-
appellee. With him on the brief were TONY WEST, Assis-
tant Attorney General, JEANNE E. DAVIDSON, Director,
and FRANKLIN E. WHITE, JR., Assistant Director.
__________________________
HACKER v. US 2

Before DYK, MAYER, and SCHALL, Circuit Judges.
MAYER, Circuit Judge.
Larry J. and Nancy A. Hacker appeal a judgment of
the United States Court of International Trade sustaining
a decision by the United States Department of Agricul-
ture (“USDA”) denying their application for trade adjust-
ment assistance (“TAA”) cash benefits. See Hacker v.
United States, 31 Int’l Trade Rep. 1632 (Ct. Int’l Trade
2009). We affirm.
BACKGROUND
The Hackers are farmers who harvest Concord and
Niagara grapes in Berrien County, Michigan. After a
2001 drought destroyed a significant portion of their
grape crops, they received an $80,000 disaster relief
payment from the USDA. The Hackers applied for this
payment on December 5, 2003, and received it on May 17,
2004.
In 2004, grape farmers in the United States were
faced with an influx of low-priced grapes from Argentina.
Accordingly, in March 2006, the Secretary of the USDA
certified Michigan Concord grape producers for TAA
benefits for the 2004 marketing year. See 71 Fed. Reg.
14,677 (Mar. 23, 2006). The Hackers thereafter timely
applied for TAA cash benefits, but their application was
denied on the ground that they had failed to establish
that their net farm income had declined between 2003
and 2004.
The Hackers then appealed to the Court of Interna-
tional Trade pursuant to 19 U.S.C. § 2395 and 28 U.S.C.
§ 1581(d)(4). Subsequently, pursuant to an agreement by
the parties, the Court of International Trade remanded
the case to the USDA. On April 10, 2007, the USDA
issued a remand determination, rejecting the Hackers’
3 HACKER v. US

application for TAA benefits on the ground that their net
farm income, as reported on their federal income tax
returns, had not declined between 2003 and 2004. The
Hackers then filed an amended complaint with the Court
of International Trade and moved for judgment upon the
agency record. They argued that the USDA should not
have relied solely upon their income tax returns in deter-
mining whether their net farm income had declined and
that the agency erred in including the $80,000 disaster
relief payment in calculating their 2004 net farm income.
The Court of International Trade rejected these argu-
ments, however, and sustained the USDA’s decision
denying the Hackers’ application for TAA cash benefits.
The Hackers then timely appealed to this court. We
have jurisdiction under 28 U.S.C. § 1295(a)(5).
DISCUSSION
The Trade Act of 1974, Pub. L. No. 93-618, 88 Stat.
1978 (1975), provided TAA benefits to U.S. workers who
had been adversely affected by foreign competition. This
trade assistance program was made available to farmers
in 2002. See Trade Act of 2002, § 141, Pub. L. 107-210,
116 Stat. 933, 946-53. Congress recently made significant
changes to the TAA program pursuant to the American
Recovery and Reinvestment Act of 2009, Pub. L. 111-5,
§§ 1856, 1881-94, 123 Stat. 115. 1
In 2006, when the Hackers applied for TAA benefits, a
farmer seeking to qualify for cash assistance was required
to: (1) establish that he belonged to an industry certified
by the Secretary of the USDA as having been harmed by

1 The TAA statute no longer requires farmers to
demonstrate a decline in net farm income in order to
qualify for cash benefits. See 19 U.S.C. § 2401e (2009).
HACKER v. US 4

increased volumes of low-priced imports, (2) show that he
met certain gross income limitations, and (3) demonstrate
that he had suffered a decline in “net farm income” in the
year for which he was seeking benefits. See 19 U.S.C. §
2401e (2006).
The only issue presented on appeal is whether the
Court of International Trade correctly upheld the USDA’s
determination that the Hackers’ were ineligible for TAA
cash benefits because their net farm income was higher in
2004 than it was in 2003. The Hackers acknowledge that
their net farm income, as reported on Schedule F of their
federal income tax returns, was higher in 2004 than it
was in 2003. They argue, however, that they are entitled
to TAA cash benefits because the USDA should have
recalculated their income on an accrual basis, thereby
shifting the $80,000 disaster relief payment they received
in 2004 to an earlier tax year.
We find this argument unpersuasive for several rea-
sons. First, because the USDA’s regulatory definition of
“net farm income” was promulgated pursuant to an ex-
press delegation of congressional authority, it is entitled
to broad deference from this court. Second, as we ex-
plained in Steen v. United States, the TAA statute was
intended to provide cash benefits to those farmers and
fishermen who had suffered an “overall loss in their
farming (or fishing) income” as a result of competition
from imported goods. 468 F.3d 1357, 1362 (Fed. Cir.
2006). Because the Hackers’ total net income from all
farm sources increased, rather than decreased, between
2003 and 2004, they did not suffer an “overall loss” in
their farming income. Finally, even assuming arguendo
that the USDA had an obligation to consider whether a
TAA applicant’s net farm income had declined when
calculated on an accrual basis, the Hackers failed to
provide the documentation necessary to certify that their
5 HACKER v. US

net income, calculated on an accrual basis, was lower in
2004 than it was in 2003. See 7 C.F.R. § 1580.301(e)(6)
(2006).
I.
“Congress expressly delegated to the Secretary of Ag-
riculture the responsibility to determine ‘net farm in-
come’” for purposes of awarding TAA cash benefits. Steen,
468 F.3d at 1362. The TAA statute specified that cash
benefits were available only if a “producer’s net farm
income (as determined by the Secretary) for the most
recent year [was] less than the producer’s net farm in-
come for the latest year in which no adjustment assis-
tance was received by the producer . . . .” 19 U.S.C.
§ 2401e(a)(1)(C) (2006) (emphasis added). Subsequently,
pursuant to formal notice and comment rulemaking, the
Secretary promulgated a regulation defining “net farm
income” for TAA purposes as the net farm income re-
ported on an applicant’s federal income tax return. See 7
C.F.R. § 1580.102 (2006) (“Net farm income means net
farm profit or loss, excluding payments under this part,
reported to the Internal Revenue Service for the tax year
that most closely corresponds with the marketing year
under consideration.”).
“If Congress has explicitly left a gap for the agency to
fill, there is an express delegation of authority to the
agency to elucidate a specific provision of the statute by
regulation. Such legislative regulations are given control-
ling weight unless they are arbitrary, capricious, or
manifestly contrary to the statute.” Chevron U.S.A. Inc.
v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843-44
(1984) (footnote omitted); see Steen, 468 F.3d at 1363
(emphasizing that the USDA’s definition of “net farm
income” must be given “broad deference”). We see nothing
in the agency’s regulatory definition of “net farm income”
HACKER v. US 6

which is arbitrary, unreasonable or inconsistent with the
objectives of the trade assistance statute. See Steen, 468
F.3d at 1363 (concluding that the USDA’s decision to
define “net fishing income” as the net fishing income
reported on a TAA applicant’s tax return was reasonable).
To the contrary, the net farm income reported on a
farmer’s federal tax return should, quite obviously, corre-
spond to his actual income from farming activities. 2
Although many taxpayers are permitted to report income
on either an accrual or a cash basis, the reporting method
selected must “clearly reflect” the income the taxpayer
has received. See 26 U.S.C. § 446(b). Thus, regardless of
whether a farmer elects to report income on an accrual or
a cash basis, use of income tax data provides a reasonably
accurate—as well as an administratively efficient—means
of identifying those farmers who have suffered a loss in
net farm income for TAA eligibility purposes. See Gulf
Oil Corp. v. Hickel, 435 F.2d 440, 446 (D.C. Cir. 1970)
(“An agency confronted with a complex task may ration-
ally turn to simplicity in ground rules, and administrative

2 “For an accrual-method taxpayer, income is in-
cludible in gross income when all the events have oc-
curred which fix the right to receive such income . . . . In
contrast, a cash-basis taxpayer reports income only when
it is actually or constructively received.” MMC Corp. v.
Comm’r, 551 F.3d 1218, 1218 n.2 (10th Cir. 2009) (cita-
tions and internal quotation marks omitted). Once a
taxpayer has elected to use an accounting method for tax
reporting purposes, he generally can not change his
method of accounting without first obtaining the consent
of the Internal Revenue Service (“IRS”). See
26 U.S.C.§ 446(e). Here, the Hackers elected to report
their farm income on a cash basis for income tax pur-
poses, and they offer no persuasive reason why they
should now be permitted to use the accrual method to
calculate net farm income for TAA eligibility purposes.
7 HACKER v. US

convenience, at least where no fundamental injustice is
wrought.”); see also Dixon v. Love, 431 U.S. 105, 114
(1977) (recognizing “the substantial public interest in
administrative efficiency”).
Steen did acknowledge that there might be certain
anomalous situations in which it would be inappropriate
to rely exclusively on income tax information in determin-
ing net farm or fishing income. 468 F.3d at 1363-64. We
explained that there could be some circumstances in
which the net fishing or farm income reported on an
applicant’s tax returns included income from sources
other than fishing or farming or failed to account for all
fishing or farming income. Id. In such circumstances, the
agency might reasonably be required, in determining net
farm income, to consider other financial information
submitted by an applicant and not to rely “solely and
inflexibly” on the net income figures reflected on the
applicant’s tax returns. Id. at 1364.
Here, however, the Hackers point to no evidence dem-
onstrating that the net farm income reported on their tax
returns included non-farm income or failed to include all
of their farm income. Because the $80,000 disaster relief
payment the Hackers received in 2004 was intended to
compensate them for crops lost as a result of drought,
they properly included it in the calculation of their 2004
net farm income. 3 It is well-established that crop disaster

3 Benefit payments that a farmer has previously re-
ceived under the TAA program are specifically excluded
from the calculation of his net farm income for purposes of
determining TAA eligibility. See 7 C.F.R. § 1580.102
(2006) (“Net farm income means net farm profit or loss,
excluding payments under this part, reported to the
Internal Revenue Service for the tax year that most
closely corresponds with the marketing year under con-
sideration.” (emphasis added)). The $80,000 payment the
HACKER v. US 8

payments constitute farm income in that “[a]gricultural
entitlement payments which result from the actual dispo-
sition of a planted crop are proceeds of that crop.” In re
Schneider, 864 F.2d 683, 685 (10th Cir. 1988); In re
Munger, 495 F.2d 511, 513 (9th Cir. 1974) (Government
farm subsidy payments are “proceeds” from crops.); In re
Shore Ltd., No. 99-406892, 2001 Bankr. LEXIS 2176 at *8
(Bankr. D. Kan. June 4, 2001) (“Historically, courts have
held that disaster payments and governmental entitle-
ment payments are proceeds of the debtor’s crops.”).
There is no dispute, moreover, that taxpayers using the
cash method of income reporting must report income in
the year it is received. See, e.g., Healy v. Comm’r, 345
U.S. 278, 281 (1953). Because the Hackers received the
crop disaster payment in 2004, they were required to
include that payment in the calculation of their 2004 net
farm income. See IRS Revenue Ruling 67-404 (1967)
(explaining that a farmer who reports income on a cash
basis must report government subsidy payments in the
year they are received, even if the subsidy payments
relate to crops lost in earlier tax years); IRS Revenue
Ruling 65-98 (1965) (“A taxpayer who reports income on
the cash receipts and disbursement method, and who
receives payments under the provisions of the United
States Department of Agriculture ‘1963 Feed Grain
Program,’ shall include the amount of the advance and
final payments in gross income when they are received, or
when they are made available, whichever is the earlier.”).
Thus, this is not a case in which the net income figure
reported on a TAA applicant’s tax return includes income

Hackers received in 2004, however, was not a trade
assistance payment, but was instead made pursuant to
the USDA’s crop disaster program.
9 HACKER v. US

from non-farm sources or fails to include income from all
farm sources.
II.
Furthermore, allowing the Hackers to exclude the
$80,000 crop disaster payment from the calculation of
their 2004 net farm income would be contrary to the
purpose of the TAA statute, which was designed to pro-
vide cash benefits “to persons whose overall financial
well-being has suffered as a result of import competition.”
Steen, 468 F.3d at 1362 (emphasis added). Because those
farmers or fishermen who do not experience an overall
decline in net farm or fishing income have presumably
“successfully adjusted to the competition from imports,
there is no reason to suppose that Congress would want
them to share in the cash benefits afforded under the
[TAA] program.” Id.
In Steen, the USDA denied TAA cash benefits to a
commercial fisherman because he had failed to show that
his net fishing income was lower in 2002 than it was in
2001. Id. at 1360. On appeal, the fisherman argued that
the agency had erred in denying his application for bene-
fits because although his total income from all fishing
activities had increased between 2001 and 2002, his
income from the fishing of Pacific salmon—the commodity
that had been certified for TAA benefits—had decreased.
This court, however, rejected that argument, explaining
that when Congress used the term “net farm income” in
the TAA statute “it meant to encompass income from all
farm products, not simply adversely affected commodi-
ties.” Id. at 1361 (emphasis in original). Accordingly,
because there had been no “overall loss” in income from
all fishing activities, the commercial fisherman was not
eligible to receive TAA benefits. Id. at 1362.
HACKER v. US 10

A similar analysis applies here. Although the Hack-
ers’ income from actual grape production was allegedly
lower in 2004 than it was in 2003, their total farm income
increased in 2004 due to their receipt of the $80,000 crop
disaster payment. Because the Hackers did not experi-
ence an “overall loss” in farm income between 2003 and
2004, the USDA correctly rejected their application for
TAA cash benefits.
III.
Finally, even assuming arguendo that the USDA had
any obligation to consider whether a TAA applicant’s net
farm income had declined when calculated on an accrual
rather than a cash basis, the Hackers failed to provide the
documentation necessary to certify that their net farm
income, calculated on an accrual basis, was lower in 2004
than it was in 2003. In 2006, a TAA applicant was re-
quired to certify that his “net farm income” had declined
in the year for which he was seeking TAA benefits. 7
C.F.R. § 1580.301(b)(4)(2006). To comply with this re-
quirement, an applicant had to provide either
“[s]upporting documentation from a certified public ac-
countant or attorney,” or “[r]elevant documentation and
other supporting financial data, such as financial state-
ments, balance sheets, and reports prepared for or pro-
vided to the Internal Revenue Service or another U.S.
Government agency.” 7 C.F.R. § 1580.301(e)(6). The
Hackers, however, failed to provide “[s]upporting docu-
mentation from a certified public accountant or attorney”
establishing what their net farm income would have been
in 2003 and 2004 if that income had been calculated on an
accrual rather than a cash basis. 4 Nor did they provide

4 The Hackers’ reliance on the Anderson cases from
the CIT is misplaced. See Anderson v. United States, 462
F. Supp. 2d 1333 (Ct. Int’l Trade 2006) (“Anderson I”);
11 HACKER v. US

comprehensive financial statements or balance sheets
demonstrating that their net farm income, calculated on
an accrual basis, was lower in 2004 than it was in 2003.
Instead, they simply argued for an ad hoc shifting of
certain income and expense items to different tax years.
Because the Hackers did not submit the supporting
documentation required by 7 C.F.R. § 1580.301(e)(6), they
failed to certify that their total net farm income, calcu-
lated on an accrual basis, was lower in 2004 than it was
in 2003. The USDA, therefore, correctly denied their
application for TAA cash benefits.
CONCLUSION
Accordingly, the judgment of the United States Court
of International Trade is affirmed.

Anderson v. United States, 469 F. Supp. 2d 1300 (Ct. Int’l
Trade 2006) (“Anderson II”); Anderson v. United States,
493 F. Supp. 2d 1288 (Ct. Int’l Trade 2007) (“Anderson
III”). As a preliminary matter, it should be noted that the
Hackers, unlike the TAA applicant in the Anderson cases,
failed to submit tax forms prepared by a certified public
accountant establishing what their net farm income
would have been using an accrual method of accounting.
See Anderson III, 493 F. Supp. 2d. at 1292. More funda-
mentally, to the extent that Anderson I suggests that the
USDA has an obligation to recalculate, on accrual basis,
the net farm income of all TAA applicants, it is inconsis-
tent with our decision in Steen. As discussed previously,
Steen held that, absent a showing that income tax data
includes non-farm income or fails to include all farm
income, the USDA can properly rely on the net farm
income reported on an applicant’s tax returns in deter-
mining whether he has suffered a decline in net farm
income. 468 F.3d at 1363 (rejecting the argument that
when determining “net farm income” for TAA eligibility
purposes, the USDA “is barred from using the standards
applied under the Internal Revenue Code as a basis for
making that determination”).
HACKER v. US 12

COSTS
No costs.
AFFIRMED