UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 94-1783
NANCY STRICKLAND, ET AL.,
Plaintiffs, Appellees,
v.
COMMISSIONER, MAINE DEPARTMENT OF HUMAN SERVICES,
Defendant, Appellee,
v.
SECRETARY, U.S. DEPARTMENT OF AGRICULTURE,
Third-Party Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. D. Brock Hornby, U.S. District Judge]
Before
Selya, Circuit Judge,
Bownes, Senior Circuit Judge,
and Stahl, Circuit Judge.
Jennifer H. Zacks, Attorney, Civil Division, Dept. of
Justice, with whom Frank W. Hunger, Assistant Attorney General,
Mark B. Stern, Attorney, Civil Division, Dept. of Justice, and
Jay P. McCloskey, United States Attorney, were on brief, for
appellant.
Rufus E. Brown, with whom Jack Comart, Pat Ende, and Pine
Tree Legal Assistance were on brief, for appellees.
February 16, 1995
SELYA, Circuit Judge. This suit questions the validity
SELYA, Circuit Judge.
of a regulation promulgated by the Secretary of Agriculture in
connection with his management of the Food Stamp Act, 7 U.S.C.
2011-2025 (1988) (the Act). Answering the question requires us
to explore the frontiers of Chevron deference. See Chevron
U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S.
837 (1984). Because we believe that proper respect for the
Secretary's interpretation of the applicable statute validates
the regulation, we reverse the district court's order barring its
enforcement.
I.
I.
Background
Background
A
A
The Food Stamp Act
The Food Stamp Act
The Act harks back to 1964. Congress passed it "to
safeguard the health and well-being of the Nation's population by
raising levels of nutrition among low-income households." 7
U.S.C. 2011. The Act creates a federally funded, but state
administered, program designed to distribute food stamps
according to income and family size. The recipient can use these
stamps to purchase food at local markets. Participating
retailers accept the stamps as if they were cash, for the
government redeems them at face value. The Secretary of
Agriculture is charged with overseeing the federal aspects of the
food stamp program. See id. at 2013. Agencies selected by the
several states administer the state aspects of the program. The
2
Department ofHuman Services (DHS) performs thisfunction in Maine.
Congress originally restricted eligibility for food
stamps to families of limited means but made no attempt to define
income (leaving that chore to the states). In 1971, Congress
directed the Secretary to establish uniform standards of
eligibility. The Secretary then promulgated regulations that
defined net income as gross income less "the cost of producing
that income," but excluded depreciation as a component of this
deduction. See 36 Fed. Reg. 14102, 14107 (July 29, 1971)
(enacting former 7 C.F.R. 273.1(c)(1)(b)).
In 1977, Congress retrofitted the Act. In a
comprehensive, detailed revision of the statute, Congress
specified that, for purposes of program eligibility, income was
not to include the "cost of producing self-employed income." 7
U.S.C. 2014(d)(9). Although the 1977 amendments did not define
the term "cost," the House Committee on Agriculture reported that
"the Department would be expected to revise its regulations in
this regard to allow some form of depreciation in arriving at
`net' business income." H.R. Rep. No. 464, 95 Cong., 1st Sess.
25 (1977), reprinted in 1977 U.S.C.C.A.N. 1978, 2001-02. The
Secretary revisited the topic in 1978 and promulgated regulations
allowing depreciation as a cost in calculating self-employment
income. See 43 Fed. Reg. 47846, 47912 (Oct. 17, 1978).
In 1980, a report produced by a joint House-Senate
conference committee muddied the waters. The conference
committee report accompanied the Food Stamp Act Amendments of
3
1980 (the FSAA), Pub. L. No. 96-249, 94 Stat. 357 (1980), which,
among other things, decreased the aggregate value of non-
excludable assets that a family might own while retaining food
stamp eligibility. The report memorialized the conferees'
"inten[tion] that the Secretary no longer permit depreciation to
be subtracted in determining net self-employment income." H.R.
Conf. Rep. No. 957, 96th Cong., 2d Sess. 29 (1980), reprinted in
1980 U.S.C.C.A.N. 1057, 1070. Despite this statement of
congressional intent, however, the FSAA made no change in the
text of the statutory provision that allowed a deduction for the
"cost of producing self-employed income," 7 U.S.C. 2014(d)(9).
Hard on the heels of this conference committee report,
the Secretary proposed regulations aimed at eliminating
depreciation from the computation of the cost of producing self-
employment income. In the proposal, the Secretary stated:
The regulations implementing the 1977 Act
included a provision allowing depreciation as
a cost of doing business for self-employed
households ( 273.11(a)(4)(ii)). This was
done in compliance with the legislative
history, H.R. Rep. No. 95-464, p.25. The
Conference Report accompanying the 1980
Amendments suggests that the Secretary delete
depreciation, H.R. Rep. No. 96-957, p.29.
Allowing such costs when determining net
self-employment income results in an
exemption of amounts not constituting "actual
costs" to the household; households are, in a
sense, given a deduction in advance for the
cost of capital goods which is otherwise not
allowed. Appropriate changes are being
proposed to 273.11(a) to correspond to the
Conference Report's suggestion.
46 Fed. Reg. 4642, 4646 (Jan. 16, 1981). The final regulation, 7
C.F.R. 273.11(a)(4)(ii) (1994), mimicked the proposal and
4
instructed the states to disregard depreciation in calculating
net self-employment income.
B
B
The Litigation
The Litigation
Nancy and Lyle Strickland reside in Belgrade, Maine.
They ran a successful construction business until 1990, when the
recession forced them to downsize. Although they remained in
business, their profits dwindled. At about this time, they
applied for, and were granted, food stamp assistance. On their
1992 federal tax return, they reported a business loss of $4,686,
largely due to claimed depreciation ($24,380) on construction
equipment.1 In 1993, the DHS informed the Stricklands that they
would no longer receive food stamps because, based on their tax
return, they had annual self-employment income, without regard to
depreciation, of $19,694. This equalled net income of $1,641.16
per month more than twice the food stamp eligibility limit for
a two-person household. See Stipulated Record at 5 (confirming
that the eligibility ceiling for the relevant period is $766 per
month); see generally 7 C.F.R. 273.9 (1994) (linking income
standards to the federal poverty level).
Disappointed by the finding of ineligibility, the
Stricklands sued DHS in Maine's federal district court. They
challenged the Secretary's amended regulation, 7 C.F.R.
1The Stricklands say that they could not sell their
construction equipment because they would no longer have any
means of producing income. They acknowledge, however, that they
owed more on some pieces of equipment than those pieces were
likely to bring on the open market.
5
273.11(a)(4)(ii) (1994), which excluded depreciation on business
equipment from the allowable "costs of doing business" in
determining a household's eligibility for food stamps, as
offensive to the mandate of 7 U.S.C. 2014(d)(9). DHS filed a
third-party complaint against the Secretary of Agriculture. The
plaintiffs then obtained leave to amend, and asserted claims
directly against the Secretary.2 The parties stipulated to the
relevant facts and the district court certified the Stricklands
as representatives of a class comprising all Maine food stamp
applicants or recipients adversely affected by the amended
regulation on or after July 1, 1992.
On April 8, 1994, the court granted the plaintiffs'
motion for judgment on the stipulated record. See Strickland v.
Commissioner, 849 F. Supp. 818 (D. Me. 1994). The court framed
the decisive legal issue in the following way: "Can Congress
change the law, simply by directing that it be so in legislative
history, without amending the pertinent statutory language?" Id.
at 818. Judge Hornby answered this loaded question in the
negative. He then ruled that the amended regulation could not
stand because the Secretary had promulgated it in response to a
perceived congressional directive, not embodied in a duly enacted
statute, rather than in the authentic exercise of administrative
discretion. See id. at 820. The Secretary now appeals.
2From and after the time that the Secretary answered the
plaintiff's first amended complaint, he has pulled the laboring
oar in defending the regulation.
6
II.
II.
Applicable Legal Principles
Applicable Legal Principles
A
A
Standard of Review
Standard of Review
Interpreting a statute or a regulation presents a
purely legal question subject to de novo review. See McCarthy v.
Azure, 22 F.3d 351, 354 (1st Cir. 1994); Liberty Mut. Ins. Co. v.
Commercial Union Ins. Co., 978 F.2d 750, 757 (1st Cir. 1992).
Nevertheless, the availability of plenary judicial review "does
not obviate the devoir of persuasion in a food stamp case in
which a plaintiff challenges the validity of the regulatory
mosaic." Massachusetts v. Secretary of Agric., 984 F.2d 514, 521
(1st Cir.), cert. denied, 114 S. Ct. 81 (1993). An inquiring
court even a court empowered to conduct de novo review must
examine the Secretary's interpretation of the statute, as
expressed in the regulation, through a deferential glass. See
id.
B
B
The Chevron Doctrine
The Chevron Doctrine
Judicial review of an agency's construction of a
statute that it administers involves two separate but
interrelated questions, only the second of which furnishes an
occasion for deference:
First, always, is the question whether
Congress has directly spoken to the precise
question at issue. If the intent of Congress
is clear, that is the end of the matter; for
the court, as well as the agency, must give
effect to the unambiguously expressed intent
7
of Congress. If, however, the court
determines Congress has not directly
addressed the precise question at issue, the
court does not simply impose its own
construction on the statute, as would be
necessary in the absence of an administrative
interpretation. Rather, if the statute is
silent or ambiguous with respect to the
specific issue, the question for the court is
whether the agency's answer is based on a
permissible construction of the statute.
Chevron, 467 U.S. at 842-43 (footnotes omitted).
In performing the first part of a Chevron analysis, no
deference is due. Instead, courts must look primarily to the
plain meaning of the statute, drawing its essence from the
"particular statutory language at issue, as well as the language
and design of the statute as a whole." K Mart Corp. v. Cartier,
Inc., 486 U.S. 281, 291 (1988); accord Dunn v. Secretary of
Agric., 921 F.2d 365, 366-67 (1st Cir. 1990). Beyond this point,
it remains unclear whether, and if so, to what extent, a court
engaged in the first stage of a Chevron inquiry may use other
tools of statutory construction, such as legislative history, in
searching for Congress' unambiguously expressed intent on a
particular issue. See Dunn, 921 F.2d at 367 n.2 (citing
conflicting cases but not resolving the point).
Legislative history is subject to many and varied
criticisms, and the uncertainty about its value in general
parallels the uncertainty about its value in relation to the
Chevron doctrine.3 Respectable authority indicates that it is
3Critics say, for example, that legislative history is
written by staffers rather than by Congress itself; that it is
easily manipulated; that it complicates the tasks of execution
8
appropriate to employ all the "traditional tools of statutory
construction" in the first part of the Chevron analysis when the
statutory language itself is not dispositive. See INS v.
Cardoza-Fonseca, 480 U.S. 421, 432-43, 446 (1987) (examining
legislative history to confirm the validity of an interpretation
suggested by the statute's language) (dictum); Massachusetts v.
Lyng, 893 F.2d 424, 429 (1st Cir. 1990). But there is also
respectable support for the proposition that the Chevron
analysis, in its initial phase, does not look beyond the
statutory text. See, e.g., National R.R. Passenger Corp. v.
Boston & Me. Corp., 112 S. Ct. 1394, 1401 (1992) (stating that
deference is due so long as "the agency interpretation is not in
conflict with the plain language of the statute"); K Mart Corp.,
486 U.S. at 292 ("If the agency regulation is not in conflict
with the plain language of the statute, a reviewing court must
give deference to the agency's interpretation of the statute.");
NLRB v. United Food & Commercial Workers Union, 484 U.S. 112,
133-34 (1987) (Scalia, J., concurring) (criticizing dictum in
Cardoza-Fonseca); Stowell v. Secretary of HHS, 3 F.3d 539, 543
(1st Cir. 1993) (approving deference where "statute is silent
with respect to a specific question").
and obedience; and that it often is shaped by members of Congress
who cannot achieve passage of a desired interpretation in the
actual text of an enacted statute. See Matter of Sinclair, 870
F.2d 1340, 1342-44 (7th Cir. 1989); see also Stephen Breyer, On
the Uses of Legislative History in Interpreting Statutes, 65 S.
Cal. L. Rev. 845, 845-47 (1991) (describing various attacks on
legislative history, but defending its use when judges are faced
with unclear statutory language).
9
We think that the difference between these two views
may, as a practical matter, be more apparent than real.4 In any
event, we do not find the legislative history in this case
determinative. Thus, we need not precisely define the function,
if any, of legislative history under Chevron. Rather, we assume
arguendo, but do not decide, that an inquiring court may look in
that direction during the initial stage of a Chevron inquiry.
On this assumption, the question whether Congress has
spoken on a particular question involves two smaller steps. We
look first to the statute's language. If the text, given its
plain meaning, answers the interpretive question, the language
must prevail and further inquiry is foreclosed. If no such
readily apparent meaning springs from the statute's text, we next
examine the legislative history, albeit skeptically, in search of
an unmistakable expression of congressional intent. And if, at
that stage, the statute itself, viewed in connection with the
statutory design and the legislative history, reveals an
unequivocal answer to the interpretive question, the court's
inquiry ends.
Thus, it is only when a court cannot discern an
unmistakably clear expression of congressional intent that the
Chevron inquiry moves into its second stage. Until then,
4Courts that exclude legislative history during the first
stage of the Chevron analysis may well decide to consider it
during the second stage in order to determine whether the
agency's interpretation is a permissible one. Thus, compelling
legislative history probably will preclude a contrary agency
position under either of the two views of Chevron.
10
deference is not a consideration but from that point forward,
deference looms large. The court must examine the agency's
interpretation to see how it relates to the statute. This
examination involves a high degree of respect for the agency's
role. The agency need not write a rule that serves the statute
in the best or most logical manner; it need only write a rule
that flows rationally from a permissible construction of the
statute. See, e.g., Cohen v. Brown Univ., 991 F.2d 888, 899 (1st
Cir. 1993) (noting that it is unimportant to the Chevron analysis
whether the court, if writing on a pristine page, would prescribe
a different version of the regulation). In other words, an
agency's interpretive regulations must stand "unless they are
arbitrary, capricious, or manifestly contrary to the statute."
Chevron, 467 U.S. at 844.
To be sure, the Chevron doctrine has a protean quality.
Under it, courts afford varying degrees of deference to agency
interpretations in varying circumstances. See Stowell, 3 F.3d at
544; Sierra Club v. Larson, 2 F.3d 462, 468-69 (1st Cir. 1993).
To cite an example that possesses particular pertinence for
present purposes, deference is "particularly appropriate in
complex and highly specialized areas where the regulatory net has
been intricately woven." Massachusetts Dep't of Educ. v. United
States Dep't of Educ., 837 F.2d 536, 541 (1st Cir. 1988) (quoting
Citizens Sav. Bank v. Bell, 605 F. Supp. 1033, 1042 (D.R.I.
1985)). Accordingly, "[m]atters of accounting, unless they be
the expression of a whim rather than an exercise of judgment, are
11
for the agency." Id. (quoting Cheshire Hosp. v. New Hampshire-
Vt. Hospitalization Serv., Inc., 689 F.2d 1112, 1117 (1st Cir.
1982)); accord American Tel. & Tel. Co. v. United States, 299
U.S. 232, 236-37 (1936).
Ultimately, of course, deference depends on the
persuasiveness of the agency's position. See, e.g., United
States v. 29 Cartons of *** An Article of Food, 987 F.2d 33, 38
(1st Cir. 1993). Furthermore, an administrative agency's
entitlement to deference is not limited to its initial
interpretation of a statute. Agencies "must be given ample
latitude to adapt [their] rules and policies to the demands of
changing circumstances." Rust v. Sullivan, 500 U.S. 173, 187
(1991) (citations and internal quotation marks omitted).
Consequently, an explained modification, even one that represents
a sharp departure from a longstanding prior interpretation,
ordinarily retains whatever deference is due. See id. at 186-87;
Stowell, 3 F.3d at 544.
C
C
Taming the Oxymoron
Taming the Oxymoron
"Subsequent legislative history" is, as others have
noted, see, e.g., Continental Can Co. v. Chicago Truck Drivers,
916 F.2d 1154, 1157 (7th Cir. 1990), an oxymoron. What is more,
the hazards inherent in virtually all legislative history are
magnified when congressional materials are created after the
fact, and the views of a subsequent Congress are imputed to the
earlier Congress that enacted a given statute. See Consumer
12
Prod. Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 117
(1980); United States v. Price, 361 U.S. 304, 313 (1960).
Despite these problems, however, such materials occasionally have
been found useful in decrypting an unclear statute. See, e.g.,
Seatrain Shipbuilding Corp. v. Shell Oil Co., 444 U.S. 572, 596
(1980); United States v. Ven-Fuel, Inc., 758 F.2d 741, 758-59
(1st Cir. 1985). We conclude that the value, if any, of such
post-enactment materials should be decided case by case, see
Liberty Mut. Ins. Co., 978 F.2d at 755 n.7, but should always be
ingested with a healthy dose of skepticism.
Finally, in evaluating an agency's response to
subsequent comments by Congress, we must keep in mind not only
the dubious value of such comments, but also two overarching
constitutional principles. First, Congress cannot dictate the
interpretation of a statute by a subsequent expression of one of
its committees (even, as here, a joint conference committee); "it
is the function of the courts and not the Legislature . . . to
say what an enacted statute means." Pierce v. Underwood, 487
U.S. 552, 566 (1988). Second, and relatedly, Congress cannot
amend a statute merely by inserting the proposed change in a
congressional report (even in a report of a joint conference
committee); the amendment must meet the various constitutional
benchmarks, including bicameral passage and presentment to the
President. See U.S. Const. art I; see also INS v. Chadha, 462
U.S. 919, 944-51 (1983).
III.
III.
13
Analysis
Analysis
A
A
Stage One
Stage One
Consistent with the methodology we have outlined, we
begin by examining the plain language of 7 U.S.C. 2014(d)(9) to
determine if it speaks definitively to the necessity of including
depreciation as a "cost" of producing self-employment income. We
think it does not. Like many words, "cost" has more than a
single, unitary meaning. While the plaintiffs proffer opinion
evidence from an economist and an accountant to the effect that
certain professional disciplines routinely calculate depreciation
as a "cost" of producing income, that is only half the story;
common sense argues that the word "cost" may also legitimately be
restricted to cash outlays made in a given period to produce
income. At bottom, then, the word "cost" is a chameleon, capable
of taking on different meanings, and shades of meaning, depending
on the subject matter and the circumstances of each particular
usage. See 20 C.J.S. Cost (1940) (stating flatly that "[t]he
term [cost] is one of equivocal meaning"). And among its varying
constructions, "cost" assuredly can mean the price of, or the
amount that must immediately be expended to purchase, an item.
See, e.g., Webster's Third New International Dictionary 515
(1986) (defining "cost" in its primary sense as signifying "the
amount or equivalent paid or given or charged or engaged to be
paid or given for anything bought or taken in barter or for
service rendered: CHARGE, PRICE"); Black's Law Dictionary 312
14
(5th ed. 1979) (defining "cost" as "Expense; price. The sum or
equivalent expended, paid or charged for something."); Funk &
Wagnalls New Standard Dictionary of the English Language 591
(1934) (defining "cost" as "[t]hat which has to be given for a
thing in order to procure it; especially, the price paid; outlay
of any kind; expense").
In these circumstances, a credible argument can be made
that, as between two plausible meanings, a reader should give the
word "cost" its ordinary meaning as opposed to the more
specialized meaning preferred by accountants or economists. See
Perrin v. United States, 444 U.S. 37, 42 (1979) (recognizing that
undefined words in a statute ordinarily should "be interpreted as
taking their ordinary, contemporary, common meaning"); United
States v. Holmquist, 36 F.3d 154, 159 (1st Cir. 1994) (same),
petition for cert. filed (U.S. Dec. 27, 1994) (No. 94-7485). We
need not go that far, however; it suffices to say that "cost" in
this context can naturally be read as excluding depreciation on
capital goods.
Since the statutory language does not resolve the
issue, we must consult other sources for guidance as to whether
Congress has spoken plainly on the question sub judice. The
Stricklands asseverate that the legislative history of section
2014(d)(9) adds the requisite clarity. We do not agree. The
lone reference to the subject in the House report accompanying
the 1977 revamping of the Act, heralded by the plaintiffs as the
linchpin of their asseveration, comprises but one paragraph in
15
one report of one of the two chambers that passed the law. While
a solitary reference may sometimes be enough to clear the mists
that obscure a statute's text the relevant inquiry, after all,
is qualitative, not quantitative the solitary reference to
which appellants cling is too slender a reed to be accorded
controlling weight under the totality of the circumstances that
obtain here. See, e.g., United States v. Taylor, 752 F.2d 757,
764 (1st Cir. 1985) (noting the hazards of relying on an isolated
fragment of legislative history there, a single paragraph in a
21-page committee report), rev'd on other grounds, 477 U.S. 131,
152 (1986).
The actual statement that the Secretary "would be
expected" to include "some form of depreciation" is couched in
vague and precatory terms. The statement is neither precise in
its content nor directory in its thrust. In itself, the
statement implies the existence of agency discretion. And,
moreover, whatever force it may possess is diluted because the
1977 amendments employ language that very closely parallels the
language of a previous regulation, on the same subject, that
excluded depreciation. When Congress codifies language that has
already been given meaning in a regulatory context, there is a
presumption that the meaning remains the same. See Commissioner
v. Keystone Consol. Indus., Inc., 113 S. Ct. 2006, 2011-12 (1993)
(explaining that Congress is presumed to be aware of settled
judicial and administrative interpretations of words when it
writes them into a statute); cf. Greenwood Trust Co. v.
16
Massachusetts, 971 F.2d 818, 827 (1st Cir. 1992) (noting that
when Congress borrows a word from a legal source, the word
usually brings along its prior judicial interpretations), cert.
denied, 113 S. Ct. 974 (1993).
We add two related points. First, we think the
traditional infirmities that attend legislative history
generally, see supra note 3 & accompanying text, are accentuated
where, as here, its proponents focus on a single, isolated,
somewhat tentative statement contained in a single document
produced by a single chamber of a bicameral legislature. Second,
although we recognize the uncertain value of post-enactment
materials, we deem the provocative statements in the 1980 House-
Senate conference report competent to lend an element of opacity
to already murky waters.
To sum up, the legislative history underlying section
2014(d), though suggestive, is simply not definitive enough to
suck the elasticity from the word "cost" and convey an
"unambiguously expressed intent of Congress." Chevron, 467 U.S.
at 842-43.
B
B
The District Court's Slant
The District Court's Slant
Nor do we share the district court's view that the
Secretary's change in position forfeits any entitlement to
deference because it occurred as a knee-jerk response to
jawboning that the Secretary mistakenly perceived as a
congressional mandate. In the first place, we know of no
17
sufficient basis for disregarding the Secretary's
characterization of the conference committee's report, which
accompanied the 1982 regulations, as a "suggestion." Hence, we
credit this characterization. By like token, we are obliged, in
the absence of meaningful impeachment, to accept the Secretary's
stated reason for making the change that households were, in a
real sense, being given an unwarranted anticipatory deduction for
the costs of replacing capital goods, and that the practice ought
to be stopped at face value. This is exactly the type of
"reasoned explanation" that, when accompanying an agency's change
of position, can evoke the deference contemplated by the Rust
Court. When an agency explicates a principled basis for revising
an interstitial rule in a plausible way, judges should not simply
shrug it off.
We make one final point. Courts must not lightly
assume that the Executive Branch is untutored, or that cabinet
officers are dolts. Here, for example, we are reluctant to
presume that the Secretary either overlooked or misread an
unbroken skein of cases, see, e.g., Bowsher v. Synar, 478 U.S.
714, 721-27 (1986) (reviewing caselaw and history of separation
of powers); Rhode Island v. Narragansett Indian Tribe, 19 F.3d
685, 699 (1st Cir.) (acknowledging that "[i]n our republican form
of government, legislators make laws by writing statutes"), cert.
denied, 115 S. Ct. 298 (1994), and concluded that he was duty
bound to rewrite the rule simply because the conference committee
groused about it. We think it is much more realistic to infer
18
that the conference committee's unredacted comments served as a
wake-up call, sparking the sort of reexamination that the Rust
Court explicitly sanctioned. In our tripartite system of
government, inter-branch communication and cooperation are not
terrible diseases, to be avoided at all costs, but, rather, are a
tested means of improving the health of the body politic. Thus,
evidence that such a rapport exists, without more, does not cast
doubt on the validity of agency action.
C
C
Stage Two
Stage Two
Once we have concluded both that Congress has not
spoken authoritatively on the precise question and that the
Secretary's change of heart is not outside Chevron's precedential
orbit, the remaining pieces of the puzzle fall neatly into place.
Fairly read, the amended regulation is reasonable in light of the
Act's avowed purpose of supplementing the purchasing power of
those unable to afford nutritionally adequate diets.5 The idea
that excluding depreciation from income more accurately reflects
the ability of a family to purchase food and, thus, better
5Indeed, the amended regulation, which uses "cost" in its
lay sense rather than in the specialized plutonomic sense, may
better serve the Act's purposes. In any given accounting period,
depreciation is likely to have scant effect on cash flow even
its proponents must admit that depreciation is, at best, an
approximation (that is, a guess) that exists primarily, if not
exclusively, on paper and it may bear little if any relation to
an actual decrease in the value of a capital asset. Moreover,
although depreciation may account for money set aside to replace
a piece of equipment, there is no guarantee that such equipment
will in fact be replaced with similar equipment or with any
equipment at all.
19
indicates the need for food stamps, is hardly heretical.
Implementing such an idea merely shifts the emphasis of the
relevant measure from an accountant's conception of profit and
loss to a layperson's conception of cash flow. Hence, we cannot
conclude that the Secretary's handiwork, as expressed in the
amended regulation, is "arbitrary, capricious, or manifestly
contrary to the statute." Chevron, 467 U.S. at 844.
The Stricklands themselves are a good illustration of
why the Secretary's second thought makes perfectly good
regulatory sense. In 1992 the Stricklands had revenue in hand of
more than twice the amount designated as the "maximum" income for
a family of two receiving food stamps. We believe that the
Secretary could reasonably conclude that households having this
degree of cash availability are no more in need of food stamps
than families with half as much take-home pay who are, by dint
of their income, ineligible for participation in the food stamp
program.
To be sure, the plaintiffs muster a cavalcade of
contentions that point in the other direction. They argue that
excluding depreciation gives a somewhat arbitrary preference to
self-employed food stamp recipients who elect to rent, rather
than purchase, business equipment, for rental payments are
deductible. They also argue that failure to recognize
depreciation discourages food stamp recipients from undertaking
certain business activities because, if an attributed self-
employment income overstates the real profit they receive, they
20
will forfeit food stamp eligibility. While these may constitute
valid arguments against the wisdom (or, more aptly put, the lack
of wisdom) of the amended regulation, they do no more than show
that both the plaintiffs' and the Secretary's readings of the
word "cost" as it is used in the statute are imperfect. By the
same token, however, both readings are plausible. In that
situation, it is up to the Secretary, not the courts, to balance
the relevant policy considerations and formulate a rule. The
implementation of a statutory term that can reasonably
accommodate two or more interpretations must be left to the
agency.
We hold, therefore, that the amended regulation is an
entirely permissible interpretation of the statute, and, as such,
is an entirely permissible exercise of the Secretary's authority.
Accord St. Amour v. Department of Social Welfare, 605 A.2d 1340
(Vt. 1992) (considering identical issue and upholding the
exclusion of depreciation under section 2014(d)).
IV.
IV.
Conclusion
Conclusion
We need go no further.6 The Secretary's decision to
exclude depreciation from the cost of producing self-employment
income is not inconsistent with the language and history of 7
U.S.C. 2014(d)(9). Moreover, the decision is grounded in a
6This case does not require us to decide whether self-
employed food stamp recipients must be given some alternative
deduction, such as a deduction for replacement costs, in
recognition of either the cost of acquiring capital goods or
their consumption in the course of producing income.
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reasonable interpretation of the statute. Since the amended
regulation must be upheld under Chevron principles, the district
court's contrary judgment is
Reversed.
Reversed.
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