Kraatz & Craig Surveying Inc. v. Commissioner

KRAATZ & CRAIG SURVEYING INC., PETITIONER v.
COMMISSIONER OF INTERNAL REVENUE,
RESPONDENT
Docket No. 26152–08. Filed April 13, 2010.

P’s only activity is land surveying in Tennessee. P does not
employ any licensed engineers, is not associated with any firm
that employs licensed engineers, and does not provide any
services that State law requires to be performed only by a
licensed engineer. Pursuant to sec. 1.448–1T(e)(4)(i), Tem-
porary Income Tax Regs., 52 Fed. Reg. 22768 (June 16, 1987)
(the temporary regulation), engineering includes surveying
and mapping. R determined that P’s land surveying con-
stitutes the performance of services in the field of engineering
pursuant to the temporary regulation and that, therefore, P is
a qualified personal service corporation as defined in sec.

167

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 168 134 UNITED STATES TAX COURT REPORTS (167)

448(d)(2), I.R.C., subject to a flat 35-percent income tax rate
under sec. 11(b)(2), I.R.C. P asserts that the temporary regu-
lation is invalid or, if valid, means that surveying and map-
ping services, if performed by an engineer, would qualify as
services in the qualifying field of engineering and does not
apply in P’s situation. P asserts, citing Grutman-Mazler Engg.
Inc. v. Commissioner, T.C. Memo. 2008–140, and Alron
Engg. & Testing Corp. v. Commissioner, T.C. Memo. 2000–
335, that the Court should look to State law to decide whether
surveying is in the field of engineering. P contends that land
surveying in Tennessee can be performed only by a licensed
land surveyor and that P is not licensed to perform any
activity which State law requires to be performed by a
licensed engineer.
1. Held: Whether a service is performed in a qualifying field
under sec. 448(d)(2), I.R.C., is to be decided by examining all
relevant indicia and is not controlled by State licensing laws.
See Rainbow Tax Serv., Inc. v. Commissioner, 128 T.C. 42,
46–47 (2007).
2. Held, further, the temporary regulation is supported by
the legislative history, by the ordinary meaning of the term
‘‘civil engineering’’, which encompasses surveying, Webster’s
Third New International Dictionary 413 (2002), and by other
indicia that surveying is regarded as within the field of
engineering; it is valid under Natl. Muffler Dealers Associa-
tion v. United States, 440 U.S. 472 (1979) (it implements the
congressional mandate in a reasonable manner), and under
Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467
U.S. 837, 842–843 (1984) (it is not arbitrary, capricious, or
manifestly contrary to the statute).
3. Held, further, P’s land surveying is a service performed
in the field of engineering under sec. 448(d)(2), I.R.C., and P
is subject to the flat 35-percent income tax rate under sec.
11(b)(2), I.R.C.

Maurice W. Gerard, for petitioner.
Caroline R. Krivacka, for respondent.

OPINION

DAWSON, Judge: Respondent determined a deficiency of
$9,762 in petitioner’s Federal income tax for its tax year
ending December 31, 2005. In the notice of deficiency,
respondent determined that petitioner is a qualified personal
service corporation under section 448 subject to a flat 35-per-
cent income tax rate under section 11(b)(2). 1 Whether peti-
1 Unless otherwise indicated, section references are to the Internal Revenue Code in effect for

2005, and Rule references are to the Tax Court Rules of Practice and Procedure.

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tioner is a qualified personal service corporation depends
upon whether petitioner’s sole activity of land surveying con-
stitutes the performance of services in the field of
engineering for purposes of section 448.

Background
This case was submitted fully stipulated under Rule 122,
and the stipulated facts are incorporated as our findings by
this reference. 2
Petitioner was incorporated under the laws of the State of
Tennessee. Its principal place of business is Seymour, Ten-
nessee. Petitioner timely filed Form 1120, U.S. Corporation
Income Tax Return, for 2005, reporting taxable income of
$48,808 and tax of $7,321.
Petitioner is in the business of surveying land, and land
surveying is the only service petitioner provides. Petitioner
does not have any employees who are licensed engineers, is
not associated with any firm that employs licensed engineers,
and does not provide any services that State law requires to
be performed only by a licensed engineer.

Discussion
I. Applicable Sections of the Internal Revenue Code and
Regulations
Section 11(a) imposes a tax on the taxable income of every
corporation. Although for Federal income tax purposes cor-
porations generally are taxed at graduated income tax rates
under section 11(b)(1), qualified personal service corporations
as defined in section 448(d)(2) are taxed at a flat 35-percent
income tax rate. Sec. 11(b)(2).
A qualified personal service corporation is any corporation
that satisfies a function test and an ownership test. Sec.
448(d)(2). Petitioner argues that it is not a qualified personal
service corporation because it does not meet the function
test. 3
2 Respondent previously filed a motion for summary judgment pursuant to Rule 121. The par-

ties’ submission of the case fully stipulated renders that motion moot.
3 Petitioner has not asserted that it does not satisfy the ownership test and is deemed, there-

fore, to have conceded that the ownership test is satisfied if its land surveying is in the field
of engineering.

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The function test requires that substantially all of the cor-
poration’s activities involve the performance of services in
the fields of ‘‘health, law, engineering, architecture,
accounting, actuarial science, performing arts, or consulting’’
(qualifying field). Sec. 448(d)(2)(A). Section 1.448–1T(e)(4)(i),
Temporary Income Tax Regs., 52 Fed. Reg. 22768 (June 16,
1987) (sometimes the temporary regulation), provides:
(4) Function test.—(i) In general.—A corporation meets the function test
if substantially all the corporation’s activities for a taxable year involve the
performance of services in one or more of the following fields—
(A) Health,
(B) Law,
(C) Engineering (including surveying and mapping),
(D) Architecture,
(E) Accounting,
(F) Actuarial science,
(G) Performing arts, or
(H) Consulting.
Substantially all of the activities of a corporation are involved in the
performance of services in any field described in the preceding sentence (a
qualifying field), only if 95 percent or more of the time spent by employees
of the corporation, serving in their capacity as such, is devoted to the
performance of services in a qualifying field. For purposes of determining
whether this 95 percent test is satisfied, the performance of any activity
incident to the actual performance of services in a qualifying field is
considered the performance of services in that field. Activities incident to
the performance of services in a qualifying field include the supervision of
employees engaged in directly providing services to clients, and the
performance of administrative and support services incident to such activi-
ties.

II. Positions of the Parties
Respondent determined that petitioner’s land surveying
constitutes the performance of services in the field of
engineering pursuant to section 1.448–1T(e)(4)(i), Temporary
Income Tax Regs., supra. Respondent asserts that the regula-
tion is supported by the legislative history and reflects the
congressional intent.
Petitioner asserts that the temporary regulation as inter-
preted and applied by respondent is invalid in that it
expands the meaning of engineering beyond the ordinary
meaning and brings into the definition of engineering the
entirely separate profession of land surveying. Citing
Grutman-Mazler Engg. Inc. v. Commissioner, T.C. Memo.

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2008–140, and Alron Engg. & Testing Corp. v. Commissioner,
T.C. Memo. 2000–335, petitioner asserts that the Court
should look to State law to determine whether an activity is
the performance of a service ‘‘in the field of engineering’’.
Petitioner asserts that its land surveying is not performed in
the field of engineering because the activities of engineering
and land surveying are separately licensed and administered
under Tennessee law. For completeness, we briefly summa-
rize the relevant State law provisions.
III. Tennessee Registration Requirements for Engineers and
Land Surveyors
It is unlawful for any person to practice either land sur-
veying or engineering in Tennessee unless the person has
been duly registered or is exempted from registration under
Tennessee law. Tenn. Code Ann. secs. 62–18–101(b), 62–2–
101 (2009). Land surveying and engineering require separate
registration and are governed by separate boards and stat-
utes.
The practice of land surveying is governed by Tenn. Code
Ann. secs. 62–18–101 to 62–18–127 (2009) and regulated by
the State Board of Examiners for Land Surveyors. The prac-
tice of engineering is governed by the applicable provisions
of Tenn. Code Ann. secs. 62–2–101 to 62–2–406, 62–2–601,
and 62–2–602 (2009) and regulated by the State Board of
Examiners for Architects and Engineers.
A person who has not practiced surveying for at least 10
years and who wishes to practice land surveying in Ten-
nessee must pass the fundamentals of land surveying exam-
ination prepared by the National Council of Examiners for
Engineering and Surveying (NCEES). Tenn. Code Ann. sec.
62–18–109. A person wishing to practice engineering in Ten-
nessee must pass two examinations prepared by NCEES—the
fundamentals of engineering examination (not required with
undergraduate engineering degree and 12 or more years of
progressive engineering experience) and the principles and
practice of engineering examination. 4 Id. secs. 62–2–401, 62–
2–402, 62–2–405.
4 The NCEES prepares separate fundamentals of engineering exams for the seven major engi-

neering disciplines (chemical, civil, electrical, environmental, industrial, mechanical, and other
disciplines); two-thirds of the questions cover all disciplines (breadth part) and one-third covers
Continued

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Tennessee statutes and regulations do not define the prac-
tice of engineering. However, Tenn. Code Ann. sec. 62–18–
102(3) defines the ‘‘Practice of land surveying’’ as follows:
‘‘Practice of land surveying’’ means any service of work, the adequate
performance of which involves the application of special knowledge of the
principles of mathematics, the related physical and applied sciences and
the relevant requirements of law for adequate evidence to the act of meas-
uring and locating lines, angles, elevations, natural and man-made fea-
tures in the air, on the surface of the earth, within underground workings
and on the beds of bodies of water for the purpose of determining areas
and volumes, for the monumenting of property boundaries and for the plat-
ting and layout of lands and subdivisions of land, including the topog-
raphy, drainage, alignment and grades of streets, and for the preparation
and perpetuation of maps, records, plats, field notes, records and property
descriptions that represent these surveys * * *

There is some overlap between the functions of a licensed
engineer and those of a licensed land surveyor; e.g., either a
registered engineer or a registered land surveyor may pre-
pare a detailed topographic map to accompany an application
for a coal surface mining operations permit pursuant to
Tenn. Code Ann. sec. 59–8–407 (2002). The Tennessee State
Board of Examiners for Architects and Engineers has
adopted the following delineation of engineering and sur-
veying:
1. Land surveying, measurement and calculation of areas, boundaries,
property lines, the subdivision of property and the plotting thereof must
be done by a surveyor and his drawing must bear his seal.
2. Subdivision road alignment, road grades, cutting and filling of subdivi-
sion lots, and changes to the topography which involves a final grading
plan may be performed by either an engineer or a surveyor; the designer’s
seal must be applied to the drawing. In localities where instability of final
grades and slopes requires analysis of soils to prevent conditions haz-
ardous to life and property, design of roads, slopes, ditches, and building
sites must be done by an engineer.
3. Culverts, storm drainage pipes, water lines, sewer lines, electric power
lines or other utilities not existing prior to development shall not be shown

the specific discipline (depth part). Eleven percent of the questions in the depth part of the fun-
damentals of engineering examination for civil engineering are questions on surveying.
NCEES prepares separate principles and practice of engineering examinations in 25 engineer-
ing disciplines or subdisciplines. The civil engineering exam covers five subdisciplines–construc-
tion, geotechnical, structural, transportation, and water resources and environmental—and con-
sists of a breadth part and a depth part. The breadth part contains questions from all five sub-
disciplines of civil engineering. The depth exams focus more closely on a single subdiscipline of
civil engineering.

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on a subdivision drawing unless that drawing bears the seal of the engi-
neer who designed them.
4. The issue of whether or not the design of storm water drainage systems
may be conducted by a licensed land surveyor was addressed in an opinion
by the Attorney General’s Office on February 9, 2004 (Opinion No. 04–
018). That Opinion answers the question: ‘‘Does the statute (Tenn. Code
Ann. §62–18–102(3), defining the ‘‘practice of land surveying’’) allow land
surveyors to conduct and perform drainage design and calculations
required for the construction of subdivisions, including determining the
detention and retention of storm water as well as determining the size of
ponds, basins, pipes and culverts which hold and through which storm
water will flow?’’ The Opinion concludes, based on its analysis and past
authorities, that a licensed land surveyor who is not a registered engineer
may not conduct drainage design and calculations of this kind. * * *
[Tennessee State Board of Architectural and Engineering Examiners,
Reference Manual for Building Officials and Design Professionals, app. H,
Design and Practice Policies, IV. Delineation of Engineering and Surveying
(Adopted Jan. 26, 1990; rev. and adopted Oct. 4, 1997; rev. and adopted
July 10, 2008).]

IV. Caselaw
Petitioner asserts that because land surveying in Ten-
nessee cannot be performed by a licensed engineer who is not
also a licensed land surveyor, land surveying in Tennessee is
not in the field of engineering. Petitioner concludes that, con-
sistent with Grutman-Mazler Engg. Inc. v. Commissioner,
T.C. Memo. 2008–140, and Alron Engg. & Testing Corp. v.
Commissioner, T.C. Memo. 2000–335, its land surveying is
not in the field of engineering. But cf. Rainbow Tax Serv.,
Inc. v. Commissioner, 128 T.C. 42, 47 (2007) (whether serv-
ices were within the field of accounting under section
448(d)(2) not controlled by State licensing laws).
In Alron Engg. & Testing Corp. v. Commissioner, supra,
the taxpayer, a Wisconsin corporation, performed both
engineering services and geotechnical testing services. At
issue was whether the geotechnical testing was within the
field of engineering under section 448(d)(2). We observed that
under Wisconsin law an engineer licensed with the State
must meet certain minimum education, experience, and
examining board requirements but that there are no
standard minimum requirements for technicians who per-
form geotechnical testing services under the laws of Wis-
consin. We concluded that geotechnical testing did not

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require the same education, training, and mastery as
engineering and held that it did not constitute engineering.
In Rainbow Tax Serv., Inc. v. Commissioner, supra, we
held that tax return preparation and bookkeeping services
provided by a Nevada corporation were within the qualifying
field of accounting under section 448(d)(2). In that case,
although we examined State law, we noted that section
448(d)(2) requires only that the services be in the ‘‘field of
accounting’’ and is not limited to public accounting. Id. at 46.
We declined to limit services performed in the field of
accounting to those requiring State licensure. Rather, we
applied the regulations promulgated under section 448 and
the ordinary meaning of the words ‘‘accounting’’ and ‘‘book-
keeping’’ (defined as a branch of accounting), noted that
under Nevada law ‘‘public accounting’’ includes ‘‘the prepara-
tion of tax returns’’, and considered that the ‘‘field of
accounting’’ historically included tax return preparation and
bookkeeping services. Id. at 46–47. Thus, although neither
tax return preparation nor bookkeeping requires the same
education, training, and mastery as accounting, we held that
those activities were services in the field of accounting. Cf.
Alron Engg. & Testing Corp. v. Commissioner, supra.
In Alron Engg. & Testing Corp. we looked primarily to
State law in holding that geotechnical testing was not in the
field of engineering. We did not consider other indicia that
might indicate that geotechnical engineering is a branch of
civil engineering that historically includes geotechnical
testing. 5 See supra note 4. However, Rainbow Tax Serv., Inc.
instructs us to consider other indicia in deciding whether a
service is performed in a qualifying field under section
448(d)(2). We shall do so here in deciding whether section
1.448–1T(e)(4)(i), Temporary Income Tax Regs., supra, prop-
erly includes surveying in the field of engineering for pur-
poses of section 448(d)(2).

5 The NCEES principles and practice of engineering breadth examination for civil engineering

includes questions on material testing (e.g., concrete, soil, asphalt) and subsurface exploration
and sampling (soil classification and boring log interpretation). The depth exam for geotechnical
civil engineering includes questions on subsurface exploration and sampling, covering drilling
and sampling procedures, soil classification, general rock characterization, boring log interpreta-
tion, and in situ testing.

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V. ‘‘Field of Engineering’’
When a court reviews an agency’s construction of the
statute which it administers, ‘‘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 U.S.A. Inc.
v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842–843
(1984). A regulation adopting a ‘‘permissible construction’’ of
a statute is due deference ‘‘if the statute is silent or ambig-
uous with respect to the specific issue’’. Id. at 843; see also
Bingler v. Johnson, 394 U.S. 741, 751 (1969) (regulation was
valid where definitions of terms in the regulation ‘‘[com-
ported] with the ordinary understanding of ’’ the terms).
Thus, we first must decide whether the temporary regula-
tion’s inclusion of surveying in the field of engineering is a
permissible construction of section 448(d)(2).
The words of a statute should be given their normal
meaning and effect in the absence of a showing that some
other meaning was intended. Leocal v. Ashcroft, 543 U.S. 1,
9 (2004). If the intent of Congress is clearly and unambig-
uously expressed by the statutory language at issue, the
Court must apply the statute according to its terms. Zuni
Pub. Sch. Dist. No. 89 v. Dept. of Educ., 550 U.S. 81, 93–94
(2007) (‘‘normally neither the legislative history nor the
reasonableness of the Secretary’s method would be deter-
minative if the plain language of the statute unambiguously
indicated that Congress sought to foreclose the Secretary’s
interpretation’’).
Section 448 lists eight qualifying fields but does not define
any of them. When interpreting the text of a statute, courts
frequently begin by looking to the common and ordinary
meaning of a word set forth in a dictionary. See, e.g., Carcieri
v. Salazar, 555 U.S. ll, ll, 129 S. Ct. 1058, 1063–1064
(2009); Rousey v. Jacoway, 544 U.S. 320, 326 (2005); Carlson
v. Commissioner, 116 T.C. 87, 94 (2001). However, analyses
of the legislative history and purpose of a statute are also
traditional tools of statutory construction. ‘‘If a court,
employing traditional tools of statutory construction,
ascertains that Congress had an intention on the precise
question at issue, that intention is the law and must be given
effect.’’ Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc.,

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supra at 843 n.9. We begin our analysis with the legislative
history because it provides evidence of congressional intent
with respect to the precise point at issue. See Zuni Pub. Sch.
Dist. No. 89 v. Dept. of Educ., supra at 105–106 (Stevens, J.,
concurring).
A. Legislative History and Purpose
Congress enacted section 448, which generally prohibits C
corporations, partnerships that have a C corporation as a
partner, and tax shelters from using the cash method of
accounting, as part of the Tax Reform Act of 1986, Pub. L.
99–514, sec. 801, 100 Stat. 2345. Before the enactment of sec-
tion 448, taxpayers whose businesses did not involve inven-
tories generally could elect to use any method of accounting
that clearly reflected income and that was regularly used in
keeping the taxpayer’s books and records under section 446.
Congress enacted section 448(a) because it believed ‘‘that the
cash method of accounting frequently fails to reflect
accurately the economic results of a taxpayers’s trade or
business over a taxable year.’’ H. Rept. 99–426, at 605 (1985),
1986–3 C.B. (Vol. 2) 1, 605. However, Congress recognized
that the simplicity of the cash method justified its continued
use by certain types of taxpayers and for certain types of
activities. Id. Congress recognized that individuals, especially
those engaged in professional activities, personal service cor-
porations, and entities where the income is taxed at the indi-
vidual level (such as partnerships and S corporations)
traditionally had used the cash method of accounting in the
operation of their trades or businesses and should be able to
continue to use that method. Id. Thus, in section 448(b) Con-
gress provided exceptions to section 448(a), including the
exception for qualified personal service corporations defined
in section 448(d)(2).
The conference report on the Tax Reform Act of 1986, Pub.
L. 99–514, sec. 801, 100 Stat. 2345, states:
A qualified personal service corporation is a corporation that meets both
a function test and an ownership test. The function test is met if substan-
tially all the activities of the corporation are the performance of services
in the field of health, law, engineering (including surveying and mapping),
architecture, accounting, actuarial science, performing arts or consulting.
[H. Conf. Rept. 99–841 (Vol. II), at II–285 (1986), 1986–3 C.B. (Vol. 4) 1,
285; emphasis added.]

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The conference report shows that Congress intended sur-
veying and mapping to be treated as services performed in
the field of engineering for purposes of the function test. 6
The temporary regulation reflects that intent.
B. Definitions of Engineering and Civil Engineering
Webster’s Third New International Dictionary 752 (1993)
defines ‘‘engineering’’ as:
the science by which the properties of matter and the sources of energy
in nature are made useful to man in structures, machines and products—
see chemical engineering, civil engineering, electrical engineering,
hydraulic engineering, industrial engineering, mechanical engineering,
municipal engineering, sanitary engineering[.]

The field of engineering includes any branch of
engineering. See Rainbow Tax Serv., Inc. v. Commissioner,
128 T.C. at 47 (the field of accounting includes bookkeeping,
defined in Webster’s Third New International Dictionary
(1981) as a ‘‘branch’’ of accounting).
Webster’s Third New International Dictionary 413 (2002)
defines ‘‘civil engineering’’ as ‘‘a branch of engineering con-
cerned primarily with public works (as land surveying, the
building of highways, bridges, waterways, or harbors * * *)
but also embracing private enterprises (as railroad and air-
port building, private building construction, and farm drain-
age)’’. (Emphasis added.) Thus, land surveying is within the
ordinary meaning of engineering.
C. Other Indicia
‘‘The traditional concept of civil engineering is the
integrated practice of engineering embracing a number of
related specialty areas including, but not limited to, construc-
tion, transportation, structures, water resources and environ-
mental, and geotechnical engineering.’’ American Society of
6 The year after the enactment of sec. 448, in the Omnibus Budget Reconciliation Act of 1987,

Pub. L. 100–203, sec. 10224, 101 Stat. 1330–412, Congress amended sec. 11(b), making qualified
personal service corporations defined in sec. 448(d)(2) ineligible for the graduated income tax
rates contained in sec. 11(b)(1) and imposing tax on them at the highest rate (34 percent at
that time). The House Ways and Means Committee explained:
The personal service income of corporations owned by its employees is taxed to the employee-
owners at the individual graduated rates as it is paid out as salary. The committee believes that
it is inappropriate to allow the retained earnings to be taxed at the lower corporate graduated
rates. [H. Rept. 100–391 (Part 2), at 1097 (1987).]

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Civil Engineers (ASCE) Policy Statement 432 (first approved
1994, adopted May 2, 2008). 7
ASCE recently adopted Policy Statement 333 (adopted April
24, 2007) in response to ‘‘some confusion with respect to the
role of civil engineers in the practice of surveying’’ and the
‘‘lack of understanding on the part of certain engineering dis-
ciplines, other than civil, of the importance of surveying to
the practice of civil, aeronautical, mechanical, and mining
engineering, among others.’’ Id. Policy Statement 333 defines
‘‘Engineering surveying’’ as follows:
Policy
Engineering surveying is defined as those activities involved in the plan-
ning and execution of surveys for the location, design, construction, oper-
ation, and maintenance of civil and other engineered projects.
Such activities include:
The preparation of survey and related mapping specifications;
Execution of photogrammetric and field surveys for the collection of
required data, including topographic and hydrographic data;
Calculation, reduction and plotting of survey data for use in engineering
design;
Design and provision of horizontal and vertical control survey networks;
Provision of line and grade and other layout work for construction and
mining activities;
Execution and certification of quality control spatial measurements during
construction;
Monitoring of ground and structural stability, including alignment
observations, settlement levels, and related reports and certifications;
Measurement of material and other quantities for inventory, economic
assessment and cost accounting purposes;
Execution of as built surveys and preparation of related maps and plans
and profiles upon completion of construction; and
Analysis of errors and tolerances associated with the measurement, field
layout and mapping or other plots of survey measurement required in sup-
port of engineering projects.
Engineering surveying may be regarded as a specialty within the
broader professional practice of engineering and, with the exception of
boundary, right of way, or other cadastral[8] surveying, includes all sur-
7 The American Society of Civil Engineers, founded in 1852, is America’s oldest national engi-

neering society, representing more than 147,000 members of the civil engineering profession
worldwide. See http://www.asce.org/inside/.
8 Webster’s Third New International Dictionary 311 (2002) defines ‘‘cadastral’’ as ‘‘1: of or re-

lating to the records of a cadastre: concerned with assembling or keeping the records necessary
to the cadastre 2 of a map or survey: showing or recording property boundaries, subdivision

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veying and mapping activities required to support the sound conception,
planning, design, construction, maintenance and operation of engineered
projects. Engineering surveying does not include surveys for the
retracement of existing land ownership boundaries or the creation of new
boundaries.

* * * * * * *
Rationale
Engineering surveying is one of the necessary skills of a civil engineer.
A civil engineer may specialize in engineering surveying, thereby devel-
oping the necessary expertise in the execution and analysis of measure-
ments to the highest level practicable. The engineering surveyor, as a spe-
cialist, supports and serves other civil engineers in their task of designing
and constructing manmade works for the benefit of mankind. While a civil
engineer may not engage full time in engineering surveying and may not
be considered an expert on all aspects of engineering surveying, they must
be well qualified to perform those aspects of surveying relevant to their
professional activities.

Preparation of a detailed topographic map to accompany
an application for a coal surface mining operations permit
and subdivision road alignment, road grades, cutting and
filling of subdivision lots, and changes to the topography
which involves a final grading plan falls within the ASCE
definition of surveying engineering. In Tennessee those
activities may be performed by a licensed land surveyor as
well as a licensed engineer.
ASCE publishes various journals that provide technical
information for the civil engineering profession, including the
Journal of Surveying Engineering. An article on the history
of engineering surveying by William E. Kreisle published in
the Journal of Surveying Engineering traces the development
of the engineering surveyor, his equipment, and his methods.
Kreisle, ‘‘History of Engineering Surveying’’, 114 J. Surv.
Engg. 102–124 (1988). In the abstract of the article, Kreisle
observes that ‘‘The engineering surveyor, who evolved from
the land surveyor, was the forerunner of all civil engineers,
including the founders of the American Society of Civil Engi-
neers.’’ Id. at 102.

lines, buildings, and other details’’; Black’s Law Dictionary 195 (8th ed. 1999) defines ‘‘cadastre’’
(also spelled ‘‘cadaster’’) as ‘‘A survey and valuation of real estate in a county or region compiled
for tax purposes.’’

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 180 134 UNITED STATES TAX COURT REPORTS (167)

D. State Licensing Laws Not Controlling
The inclusion of surveying in the field of engineering is
supported by the legislative history. Civil engineering is a
branch of engineering, and land surveying falls within the
ordinary meaning of engineering and historically is regarded
as within the field of engineering. The fact that land sur-
veying may be performed by an individual who is not a
licensed engineer does not remove those services from the
‘‘field of engineering’’. See Rainbow Tax Serv., Inc. v.
Commissioner, 128 T.C. at 46 (tax preparation and book-
keeping services are within the field of accounting even when
performed by a corporation that employs no licensed
C.P.A.’s).
‘‘The meaning of the words or the legal status of cir-
cumstances for federal tax purposes need not be identical to
their meaning or their legal effect under state law.’’ Estate of
Steffke v. Commissioner, 538 F.2d 730, 732 (7th Cir. 1976)
(citing Commissioner v. Tower, 327 U.S. 280 (1946), and
Lyeth v. Hoey, 305 U.S. 188 (1938). In interpreting a Federal
taxing statute the Supreme Court said:
Here we are concerned only with the meaning and application of a
statute enacted by Congress, in the exercise of its plenary power under the
Constitution, to tax income. The exertion of that power is not subject to
state control. It is the will of Congress which controls, and the expression
of its will in legislation, in the absence of language evidencing a different
purpose, is to be interpreted so as to give a uniform application to a
nation-wide scheme of taxation. * * * State law may control only when the
federal taxing act, by express language or necessary implication, makes its
own operation dependent upon state law. * * *

Burnet v. Harmel, 287 U.S. 103, 110 (1932); see also United
States v. Pelzer, 312 U.S. 399, 402–403 (1941); Lyeth v. Hoey,
supra at 194. Thus, the provisions of the revenue laws ‘‘ ‘are
not to be taken as subject to state control or limitation unless
the language or necessary implication of the section involved
makes its application dependent on state law.’ ’’ United States
v. Irvine, 511 U.S. 224, 239 (1994) (quoting United States v.
Pelzer, supra at 402–403).
We can find no basis in the text of section 448(d)(2) or its
legislative history to conclude that Congress intended to
condition the meaning of ‘‘services in the field of engineering’’
(or any other qualifying field) on State law. In NLRB v.

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 (167) KRAATZ & CRAIG SURVEYING INC. v. COMMISSIONER 181

Hearst Publns., Inc., 322 U.S. 111, 123 (1944), the Supreme
Court rejected an argument that the term ‘‘employee’’ as
used in a Federal statute should be defined by State law,
explaining:
Both the terms and the purposes of the statute, as well as the legislative
history, show that Congress had in mind no * * * patchwork plan * * *.
* * * Nothing in the statute’s background, history, terms or purposes
indicates its scope is to be limited by * * * varying local conceptions,
either statutory or judicial, or that it is to be administered in accordance
with whatever different standards the respective states may see fit to
adopt for the disposition of unrelated, local problems. * * *

Similarly, nothing in the backgrounds, histories, terms, or
purposes of sections 11(b)(2) and 448(d)(2) indicates that they
are to be administered in accordance with different licensing
standards States may adopt. Because State licensing laws
governing engineering (and other qualifying fields) differ
from State to State, defining a qualifying field by State
licensing laws would mean that conduct in one State might
constitute the performance of services in a qualifying field,
whereas identical conduct in a neighboring State would not.
‘‘Congress has given no indication it intended the criminality
of official conduct under federal law to depend on geography.’’
United States v. Weyhrauch, 548 F.3d 1237, 1246 (9th Cir.
2008).
Whether a service is performed in one of the qualifying
fields under section 448(d)(2) is to be decided by all relevant
indicia, including the text of the statute, its legislative his-
tory and regulations, application of the normal meaning of
the term ‘‘health’’, ‘‘law’’, ‘‘engineering’’, ‘‘architecture’’,
‘‘accounting’’, ‘‘actuarial science’’, ‘‘performing arts’’, or ‘‘con-
sulting’’, and examination of services historically regarded as
within the qualifying field. See Rainbow Tax Serv., Inc. v.
Commissioner, 128 T.C. 42 (2007).
VI. Conclusion
We hold that section 1.448–1T(e)(4)(i), Temporary Income
Tax Regs., supra, is a reasonable interpretation of the
statute, supported by the legislative history; by the ordinary
meaning of the word ‘‘engineering’’, which encompasses sur-
veying; and by other indicia, that surveying is regarded as
within the field of engineering. It implements the congres-

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 182 134 UNITED STATES TAX COURT REPORTS (167)

sional mandate in a reasonable manner and is not arbitrary,
capricious, or manifestly contrary to the statute. Accordingly,
it is valid under both Natl. Muffler Dealers Association v.
United States, 440 U.S. 472 (1979), and Chevron U.S.A. Inc.
v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984). 9 We
hold further that petitioner’s land surveying is within the
field of civil engineering, which in turn is within the field of
engineering, and that petitioner is a qualified personal
service corporation defined in section 448(d)(2) and subject to
the flat 35-percent income tax rate under section 11(b)(2).
To reflect the foregoing,
An appropriate order and decision for
respondent will be entered.

f

9 Under Natl. Muffler Dealers Association v. United States, 440 U.S. 472 (1979), an interpreta-

tive regulation is valid if it implements a congressional mandate in a reasonable manner. By
contrast, under Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 844 (1984),
a legislative regulation is upheld ‘‘unless arbitrary, capricious, or manifestly contrary to the stat-
ute’’.

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