United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 25, 2005 Decided December 9, 2005
No. 04-5421
NATIONAL RAILROAD PASSENGER CORPORATION,
APPELLEE
v.
UNITED STATES OF AMERICA,
APPELLANT
Appeal from the United States District Court
for the District of Columbia
(No. 03cv00431)
Teresa E. McLaughlin, U.S. Department of Justice, argued
the cause for appellant. With her on the briefs were Eileen J.
O’Connor, Assistant Attorney General, Kenneth L. Wainstein,
U.S. Attorney, and Robert W. Metzler.
Jean A. Pawlow argued the cause for appellee. With her on
the brief were Shane T. Hamilton and Dennis M. Moore.
Before: TATEL and GRIFFITH, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge TATEL.
2
TATEL, Circuit Judge: In this case, we must decide whether
a statute imposing a tax on telephone calls for which the toll
charge “varies in amount with the distance and elapsed
transmission time of each individual communication” covers
long-distance telephone charges varying by time but not by
distance. The district court concluded that the statute does not
cover such charges, and we agree.
I.
Section 4251 of the Internal Revenue Code imposes a tax on
“toll telephone service,” defined in section 4252(b) as
(1) a telephonic quality communication for which
(A) there is a toll charge which varies in amount with
the distance and elapsed transmission time of each
individual communication and (B) the charge is paid
within the United States, and
(2) a service which entitles the subscriber, upon
payment of a periodic charge (determined as a flat
amount or upon the basis of total elapsed transmission
time), to the privilege of an unlimited number of
telephonic communications to or from all or a
substantial portion of the persons having telephone or
radio telephone stations in a specified area which is
outside the local telephone system area in which the
station provided with this service is located.
26 U.S.C. § 4252(b). Enacted in 1965, this language replaced an
earlier definition of “toll telephone service”: “a telephone or
radio telephone message or conversation for which (1) there is
a toll charge, and (2) the charge is paid within the United
States.” 26 U.S.C. § 4252(b) (1958); Excise Tax Reduction Act
of 1965, Pub. L. No. 89-44, § 302, 79 Stat. 136, 146 (enacting
current language). The 1965 Act phased the tax out over three
3
years, § 302, 79 Stat. at 145, but later Congresses repeatedly
extended the tax, finally making it permanent in 1990, Omnibus
Budget Reconciliation Act of 1990, Pub. L. No. 101-508,
§ 11217, 104 Stat. 1388, 1388-437.
When Congress last amended section 4252(b) in 1965, only
AT&T provided long-distance telephone service. At that time,
AT&T offered two billing plans. The first, Message Toll
Service (MTS), charged each individual call based on duration,
distance traveled, and time of day. Under the second plan, Wide
Area Telephone Service (WATS), customers purchased blocks
of usage time for a flat fee. WATS customers paid either a flat
monthly rate for an unlimited number of calls and minutes or a
lower rate for up to fifteen hours of calling plus a further charge
for each additional hour. Pointing to legislative history, the
parties in this case agree that Congress designed subsection
(b)(1) to cover MTS and subsection (b)(2) to cover WATS. See
H.R. Rep. No. 89-433, at 30 (1965); S. Rep. No. 89-324, at 35
(1965). They also agree that, as Congress intended, section
4252(b) covered all long-distance services existing in 1965.
Taxing all 1965 long-distance service, however, is a far cry
from taxing all long-distance service today. Not only does
AT&T no longer hold a monopoly on long-distance service, but
today’s multitude of long-distance carriers offer far more rate
structures. Most significantly for our purposes, many customers
now pay per-minute charges that remain constant regardless of
how far their calls travel. Appellee National Railroad Passenger
Corporation (“Amtrak”) is one such customer. In particular, for
each of the four services at issue in this case—two types of
domestic “inbound” (also known as “800”) service, an inbound
service from Canada, and a service allowing various Amtrak
locations to contact each other—Amtrak pays a monthly charge
computed by multiplying the number of minutes Amtrak
consumes by a specific rate for that service. As a common
4
carrier, Amtrak is exempt from subsection (b)(2), meaning that
it must pay tax only if its long-distance charges fall within
subsection (b)(1). 26 U.S.C. § 4253(f).
Amtrak initially paid the tax, but believing its service to be
nontaxable under subsection (b)(1), it filed a refund claim with
the Internal Revenue Service (IRS). Receiving no response,
Amtrak filed suit in the U.S. District Court for the District of
Columbia. Cf. 26 U.S.C. § 6532(a)(1) (requiring taxpayer to
wait six months before filing suit). The district court, joining a
chorus of other federal courts, found subsection (b)(1)
inapplicable because Amtrak’s charges did not vary by distance,
and accordingly granted summary judgment for Amtrak. Nat’l
R.R. Passenger Corp. v. United States, 338 F. Supp. 2d 22
(D.D.C. 2004); see also OfficeMax, Inc. v. United States, ___
F.3d ___, No. 04-4009, 2005 WL 2861031, 2005 U.S. App.
LEXIS 23635 (6th Cir. Nov. 2, 2005) (resolving this issue in
favor of taxpayer), aff’g 309 F. Supp. 2d 984 (N.D. Ohio 2004);
Am. Bankers Ins. Group v. United States, 408 F.3d 1328, 1331-
1337 (11th Cir. 2005) (same), rev’g 308 F. Supp. 2d 1360 (S.D.
Fla. 2004); Hewlett-Packard Co. v. United States, No. C-04-
03832, 2005 WL 1865419, at *2-*5, 2005 U.S. Dist. LEXIS
19972, at *5-*13 (N.D. Cal. Aug. 5, 2005) (same); Reese Bros.,
Inc. v. United States, No. 03-CV-745, 2004 WL 2901579, at *3-
*13, 2004 U.S. Dist. LEXIS 27507, at *10-*44 (W.D. Pa. Nov.
30, 2004) (same); Fortis, Inc. v. United States, No. 03 Civ. 5137,
2004 WL 2085528, at *5-*13, 2004 U.S. Dist. LEXIS 18686, at
*17-45 (S.D.N.Y. Sept. 16, 2004) (same); Am. Online, Inc. v.
United States, 64 Fed. Cl. 571, 576-581 (Fed. Cl. 2005) (same);
Honeywell Int’l, Inc. v. United States, 64 Fed. Cl. 188, 198-203
(Fed. Cl. 2005) (same).
The government now appeals. Our review is de novo.
Dunaway v. Int’l Bhd. of Teamsters, 310 F.3d 758, 761 (D.C.
Cir. 2002).
5
II.
We begin, as we must, with the statute’s language. Hughes
Aircraft Co. v. Jacobson, 525 U.S. 432, 438 (1999). Subsection
(b)(1) imposes a tax only when “there is a toll charge which
varies in amount with the distance and elapsed transmission time
of each individual communication.” 26 U.S.C. § 4252(b)(1).
Amtrak’s charges do not vary by both time and distance, so that
would seem to end the matter. The government nonetheless
urges us to find ambiguity in the statute, arguing that because
Congress sometimes uses the word “and” disjunctively, we
should interpret the statute to require only that the charge vary
with distance or elapsed transmission time. We may not do so.
In 1965, when Congress passed section 4252(b), MTS
charges varied by both time and distance. Reading “and”
conjunctively therefore makes the statute mirror the MTS
system, precisely what Congress intended. See supra at 3. To
be sure, Congress does sometimes use the word “and”
disjunctively. Indeed, it did so in this very statute: No one
would contend that a service must satisfy both subsection (b)(1)
and subsection (b)(2) to constitute “toll telephone service,” as a
conjunctive reading of the “and” separating the two sections
would require. Because the two subsections describe separate
types of services, not criteria for a single service, such a reading
would be absurd. In contrast, reading the “and” that separates
“distance” from “elapsed transmission time” conjunctively
produces just the result Congress intended, i.e., a tax on MTS
service.
The government relies heavily on Slodov v. United States,
436 U.S. 238 (1978), but there too a conjunctive reading would
have done nothing to further Congress’s clear intent. The statute
at issue in Slodov imposed penalties on “[a]ny person required
to collect, truthfully account for, and pay over any tax . . . who
willfully fails to collect such tax, or truthfully account for and
6
pay over such tax, or willfully attempts in any manner to evade
or defeat any such tax or the payment thereof.” Slodov, 436
U.S. at 245 (quoting 26 U.S.C. § 6672). Having assumed
control of a corporation after taxes had already been
“collect[ed],” Slodov could not possibly have done all three
acts—“collect, truthfully account for, and pay over” the tax. Id.
at 246. He therefore believed that the statute had no effect on
him. Id. The Supreme Court rejected this argument as
inconsistent with the statute’s purpose, holding that the phrase
in question “was necessary to insure that the penalty . . . would
be read as applicable only to failure to pay taxes which require
collection, that is, third-party taxes,” as distinguished from
“direct taxes such as employer FICA and income taxes.” Id. at
249. In other words, “the phrase . . . was meant to limit § 6672
to persons responsible for collection of third-party taxes and not
to limit it to those persons in a position to perform all three of
the enumerated duties.” Id. at 250. The provision’s legislative
history supported the Supreme Court’s interpretation and gave
no hint that Congress intended a conjunctive reading. Id. at 249.
Here, by contrast, reading “and” conjunctively accomplishes
exactly what Congress intended.
For the same reason, United States v. American Trucking
Ass’ns, 310 U.S. 534 (1940), does not help the government.
Reading subsection (b)(1) literally produces Congress’s intended
result, not “absurd or futile results” or results “plainly at
variance with the policy of the legislation as a whole.” Id. at
543 (internal quotation marks omitted). Congress meant to tax
all long-distance telephone service existing in 1965, and it
succeeded. At that time, moreover, Congress had no reason to
ensure that the statute covered all future service, as the 1965 Act
phased the tax out by the end of that decade.
Even Revenue Ruling 79-404, upon which the government
relies, conceded that charges like Amtrak’s do not fall within the
7
statute’s language. See Rev. Rul. 79-404, 1979-2 C.B. 382. In
that ruling, the IRS considered whether communications to the
United States from ships at sea fell within section 4252(b). Id.
at 382. Like Amtrak’s service, the charge for such
communications varied only with the call’s duration.
“Literally,” the IRS concluded, “the service provided in this case
does not come within the definition of . . . ‘toll telephone
service’ as . . . currently defined in section 4252 of the Code . . .
because the charge for such service does not vary with distance
and therefore does not meet the requirement of section
4252(b)(1).” Id.
Although the IRS nonetheless concluded that
communications from ships should be taxed because “[t]he
intent of the statute would be frustrated if a new type of service
otherwise within such intent were held to be nontaxable merely
because charges for it are determined in a manner which is not
within the literal language of the statute,” id. at 383, we may not
take that approach here. Indeed, the Supreme Court has
expressly rejected this type of reasoning. In Iselin v. United
States, 270 U.S. 245 (1926), the Court considered a provision
that taxed the sale of theater tickets sold at places other than
ticket offices. The provision at issue, paragraph 3, based the
amount of the tax on the difference between the “established
price” at the ticket office and the price for which the ticket was
sold. Id. at 247. Having received and sold a complimentary
ticket, the taxpayer argued that because the ticket she sold had
no “established price,” the statute imposed no tax on the sale.
Id. at 248. The Court summarized the government’s argument
as follows:
It argues that Congress clearly intended to tax all sales
of tickets; that there is in the section no indication of
intention to exempt from the tax any sale of tickets or
any resale at a profit; that the receipts here taxed are in
8
character substantially similar to those specifically
described in paragraph 3; that this general purpose of
Congress should be given effect, so as to reach any
case within the aim of the legislation; and that the Act
should, therefore, be extended by construction to cover
this case.
270 U.S. at 250. Rejecting this argument, the Supreme Court
held that because no particular provision referred to this kind of
transaction, and because Congress described with some care the
various situations in which tickets were sold, it would enforce
the statute’s “plain and unambiguous” language. Id. at 250-51.
Even assuming no congressional intent “to exempt from taxation
this class of tickets,” id. at 250, the Court reasoned, “[w]hat the
government asks is not a construction of a statute, but, in effect,
an enlargement of it by the court, so that what was omitted,
presumably by inadvertence, may be included within its scope.
To supply omissions transcends the judicial function.” Id. at
251.
The government makes precisely the same argument here
that it did in Iselin:
It argues that Congress clearly intended to tax all
[long-distance telephone charges]; that there is in the
section no indication of intention to exempt from the
tax any [long-distance telephone charges]; that the
[charges] here taxed are in character substantially
similar to those specifically described in [section
4252(b)(1)]; that this general purpose of Congress
should be given effect, so as to reach any case within
the aim of the legislation; and that the Act should,
therefore, be extended by construction to cover this
case.
9
Iselin requires that we give the same reply: “What the
government asks is not a construction of a statute, but, in effect,
an enlargement of it by the court, so that what was omitted,
presumably by inadvertence, may be included within its scope.
To supply omissions transcends the judicial function.” And lest
Iselin’s vintage lead one to doubt its continuing validity, just last
year the Supreme Court relied on it to reject as not “a
construction of [the] statute, but, in effect, an enlargement of it
by the court” an interpretation that would have required adding
a word to the statute’s text. Lamie v. U.S. Tr., 540 U.S. 526, 538
(2004) (quoting Iselin, 270 U.S. at 251) (alteration in original).
III.
We can quickly dispose of the government’s remaining
arguments. Its claim that Congress’s extensions of the tax
following the 1979 revenue ruling amounted to an implicit
adoption of the IRS’s reasoning fails for two reasons. First, as
the ruling itself acknowledges, the statute’s language does not
cover charges varying only by time. Enacting this language
would therefore be a bizarre way for Congress to codify an IRS
ruling applying the tax to such charges. See Brown v. Gardner,
513 U.S. 115, 121 (1994) (“There is an obvious trump to the
reenactment argument, however, in the rule that where the law
is plain, subsequent reenactment does not constitute an adoption
of a previous administrative construction.” (internal quotation
marks omitted)). Second, the government offers no evidence
that Congress ever knew of the revenue ruling. See Pub.
Citizen, Inc. v. HHS, 332 F.3d 654, 669 (D.C. Cir. 2003)
(holding reenactment argument “has little weight absent some
evidence of (or reason to assume) congressional familiarity with
the administrative interpretation at issue”).
The government urges us to read the statute more broadly
because when changing the definition of “toll telephone service”
in 1965, “Congress did not intend to dramatically reduce the
10
scope of the tax base.” Appellant’s Br. 25. We agree that the
1965 amendment caused no immediate reduction in the tax base,
as revised section 4252(b) succeeded in taxing all then-existing
long-distance service. But because Congress replaced the pre-
1965 general language—imposing tax when “there is a toll
charge”—with a precise description of MTS and WATS, we do
not agree that the tax extends to all future service, however
billed.
Nor do we see any merit to the government’s argument that
because the rate for calls from Canada to the United States is
higher than the rate for domestic calls, Amtrak’s charges
actually vary by distance. These rates differ because calls to and
from Canada cross the U.S./Canadian border, not because
Canada is further away. For example, as Amtrak points out,
calls from Niagara Falls, New York and from Niagara Falls,
Canada to the same point in the United States travel the same
distance yet incur different charges. Likewise, calls from
Vancouver to Seattle cost more than calls from Miami to Seattle
even though the latter travel vastly greater distances.
Finally, although the parties discuss whether we should
defer to Revenue Ruling 79-404 pursuant to Chevron U.S.A. Inc.
v. Natural Resources Defense Council, Inc., 467 U.S. 837
(1984), or Skidmore v. Swift & Co., 323 U.S. 134 (1944), we
need not resolve that question. Even were we to afford Chevron
deference to the ruling, we could not let stand an agency
decision that deviates from the statute’s unambiguous meaning.
Chevron, 467 U.S. at 842-43.
We have considered the government’s remaining arguments
and found them to lack merit. Because the district court’s well-
reasoned opinion properly ascertains the statute’s meaning, we
affirm the grant of summary judgment to Amtrak. True, this
interpretation limits the effectiveness of the tax on long-distance
11
calls, but because section 4252(b)(1) is unambiguous, the IRS
must take its case to Congress, not this court.
So ordered.