Hart v. United States

DAVIS, Judge,

dissenting, with whom FRIEDMAN, Chief Judge, joins:

In Bank of America v. United States, 180 Ct. Cl. 111, 377 F.2d 575 (1967), the court — facing a problem substantially identical with that now before us, except that the significant events all occurred before the 1960 statute and were governed by the pre-1960 law — held that the normal reading of the pre-1960 Code provisions gave taxpayers ten years and that the pre-1960 legislative history was not *233inconsistent with that construction. Expressly recognizing that the 1960 legislative history rebutted the 10-year reading and that the 1960 reenactment (with minor changes in wording) was made retroactive, the court refused to give effect to that understanding in a pre-1960 case because of the constitutional difficulties which would arise if the law was changed retroactively to defeat expectations. "* * * it is our conclusion, stemming from the proposition that Congress would not intentionally raise a serious constitutional problem, that Congress did not intend to retroactively change the pre-1960 law even though it expressly made the new language retroactive. It simply 'intended’ that the new language have the meaning of the old language, at least until 1960.” 180 Ct. Cl. at 120, 377 F.2d at 580.

At the same time, the court several times reserved the question of the impact of the "law after 1960.” See 180 Ct. Cl. at 116, 119, 120, 377 F.2d at 577, 580. Though the "1960 changes in the language of section 901 are so slight that they appear to be insignificant, * * * * it may be significant that changes were in fact made, and resort to the legislative history may be warranted for this reason. * * * Analytically, it would be possible to decide that in the light of the legislative history, the apparently insignificant language changes effected a change (as contrasted with a clarification) in the 'old’ law, so that after 1960, choices must be within the 3-year period. * * * Regarding the period following enactment of the 1960 legislation, it is possible that the 1960 Congress intended that the choice be made within the 3-year period regardless of the intent of the 1954 Congress. It is not necessary for us to reach that question.” 180 Ct. Cl. at 118-19, 377 F.2d at 579-80.

I continue to adhere to Bank of America for pre-1960 cases, but differ from the majority in this post-1960 instance. My reasons, foreshadowed by our reservation in Bank of America, are grounded on these linked propositions:

(a) in 1960, Congress was actually legislating; it enacted the relevant statute for the future, though with only minor changes; it was not merely expressing its view of the coverage of the old law without legislating on that very subject;

*234(b) the clear view given in 1960 by the appropriate committees in their reports — the chief organ of expression of congressional views — is not impossible to reconcile with the statutory language (though it is not the preferable understanding of the bare wording);1

(c) the position stated by the committees in their reports was in no way inadvertent but rather deliberate and considered;

(d) the greatest of deference is due the concurring views of the relevant committees on the meaning of legislation being enacted by that Congress when those views are clear, possible to reconcile with the language of the act, and uncontradicted by any other significant piece of legislative history; and

(e) it would not be inappropriate to construe the statute in one way after its 1960 modification and reenactment, and the other way for the period before the 1960 legislation. I now explore these propositions seriatim.2

1. This is not a case in which a later Congress may merely have given or intimated its understanding of a statute passed by a prior Congress — through committee reports or comparable channels of communication, or through passage of a related statute which is based on a particular view of the prior legislation but does not purport to change or reenact it. In this instance Congress amended and reenacted the portion of section 901(a) concerning the time for choosing the foreign tax credit. Congress was thus legislating on and passing a provision which is crucial to this case, not simply announcing or suggesting its construction of some prior enactment not then before it. In connection with the passage of the 1960 statute, the two committees squarely stated their purpose, in amending and reenacting section 901(a), to confine the choice of the *235foreign tax credit to the 3-year limitation period. They said that the second sentence of section 901(a) was being amended "to make it clear” that the 3-year period governed. S. Rep. No. 1393, 86th Cong., 2d Sess. 15, reprinted in [1960] U.S. Code & Ad. News 3770, 3784. Accord H.R. Rep. No. 1358, 86th Cong., 2d Sess. 11-12 (1960). We may think that the simple and minor changes actually made did not in fact make that objective clear on the face of the statute, but it cannot be denied that the committees had that very purpose in recommending the modification and passage of the revised section 901(a). Their reports related to and interpreted a measure then being considered by that Congress and specifically told the legislators what result the committees intended to reach in that very legislation.3 We must therefore consider the reports as an intrinsic part of the operative congressional process in passing the statute, not as a mere pronouncement on the meaning of some prior statute. See Commissioner v. Bilder, 369 U.S. 499 (1962), discussed infra.4

2. Underlying the court’s opinion seems to be the assumption that it is impossible to reconcile, on any basis, the committees’ position with the language of the act. I do not share that assumption. Though I agree that the interpretation adopted in Bank of America accords better with the wording as it would normally be understood, it seems to be conceivable to read the text as the committees thought it should be. Defendant points out that the critical words of section 901(a) are that "[s]uch choice * * * may be made or changed,” and argues that the "choice” referred to is solely the choice between a credit or a deduction for the foreign tax; the initial choice of a credit (rather than a deduction) must be made (it is said) within three years, or if a deduction has initially been chosen the change to a credit, if desired, must be made within the same period. See I.R.C. § 901(a). On this view, section 6511(d) (3) (A) assumes *236that a credit has already been timely chosen and allows ten years for an increase in the credit where choice of the credit has already been made within three years. Defendant’s briefs spell out this position elaborately and in detail5 — pointing out, for instance, that the general reference in section 901(a) to the time for making the "choice” as "the period prescribed for making a claim for credit or refund of the tax imposed by this chapter for such taxable year” can refer to section 6511(a), establishing the general "period of limitation on filing claim” (i.e., the 3-year period), rather than the "special period” set up by section 6511(d)(3)(A) (i.e., the 10-year period).6

I need not accept as correct this over-refined and too-sophisticated reading of the face of the statute (unsupported by any significant pre-1960 history) to see that it is neither impossible nor an unduly violent departure from the text. Indeed, that seems to have been the construction adopted by the Joint Committee on Internal Revenue Taxation, surely not a novice or interloper in the tax field, for the pre-1960 period during which the Internal Revenue Service was tending to follow plaintiffs interpretation. See Bank of America v. United States, 180 Ct. Cl. 111, 114-15, 377 F.2d 575, 576-77 (1967). Thus, the 1960 committees were not, in my opinion, stretching the wording sharply beyond the outermost breaking point when they took their stance.7 On the contrary, my judgment is that, if the explicit statements in the 1960 committee reports had appeared in the committee reports (with respect to section 901(a)) when section 901(a) was adopted in 1954 for the *2371954 Code, they would have unhesitatingly been given effect by the courts as well as by the Service, even though those express statements seemed to strain the bare wording.8 It often happens that tax legislation is given a special, refined reading (rather than the normal everyday interpretation) because the pertinent committees have plainly indicated that it should be. Especially with tax statutes, the so-called "plain meaning” can be overcome by express legislative history entitled to acceptance because of its source and character. See, e.g., Commissioner v. Bilder, 369 U.S. 499 (1962), discussed infra.

3. Moreover, I have no doubt that the committees’ statement of their concurrent understanding of the statute was deliberate and intentional — in no sense inadvertent. While the Internal Revenue Service tended to favor the 10-year span under the "old law”,9 the Joint Committee on Internal Revenue Taxation seems to have considered that to be a mistaken interpretation of the existing law which should not be adopted. See Bank of America, 180 Ct. Cl. 111, 114-15, 377 F.2d 575, 576-77 (1967). The Joint Committee is composed of members of the Senate Finance Committee and of the House Ways and Means Committee; doubtless the Joint Committee’s position paralleled that of the two legislative committees. When the 1960 Act came before the Congress,10 it served as an appropriate vehicle through which to make clear that Congress intended the 3-year period to control the choice of a credit and that the Service’s contrary position, informally taken, was erroneous. I reemphasize that (i) at that time there was no court ruling or intimation favoring the 10-year limitation, (ii) *238even the IRS interpretation was informal rather than formal, and (iii) the congressional committees believed that the 1954 Code already limited a taxpayer’s period of choice to three years. Being of this view that the statute already confined the choice of the credit to three years, the two committees acted naturally when they felt that extensive changes in the statute were unnecessary and a clear statement in the committee reports, plus some minor modifications in language, would be enough. The court refuses to acknowledge this possibility because it believes that the face of the statute could not reasonably be read by anyone as selecting the shorter period for the choice of a credit. Since I take the committees’ interpretation as rational (though mistaken, in the absence of any affirmative pre-1960 legislative history supporting it), I can understand why they acted as they did. I conclude, too, that there was only a minimal chance of inadvertence in adoption of the explicit committee statements on which defendant relies. The committees meant exactly what they said and intended that the reenacted statute should be read in the way they outlined.

4. If, as I think, the words of the statute — considered alone — could be seen as having an ambiguous aspect and because the committees’ concurrent statements were clear, unambiguous, and purposeful, the committees’ 1960 position should control. There is nothing in the rest of the 1960 legislative history to contradict or detract from that position. At least when the legislative text can conceivably be thought to contain some elements of ambiguity, it is still the rule that extrinsic aids to construction can and should be considered. See Train v. Colorado Pub. Int. Research Group, 426 U.S. 1, 9-10 (1976); Cass v. United States, 417 U.S. 72, 77-79 (1974); United States v. American Trucking Ass’ns., 310 U.S. 534, 543-44 (1940); United States v. Dickerson, 310 U.S. 554, 561-62 (1940). See generally Murphy, Old Maxims Never Die: The 'Plain Meaning Rule” and Statutory Interpretation in the "Modern” Federal Courts, 75 Col. L. Rev. 1299 (1975). Of these helps, explicit committee reports (especially where there is no extrinsic material to the contrary) stand in the highest rank. The Supreme Court has often given effect to such statements. See, e.g., Chandler v. Roudebush, 425 U.S. 840, *239859 n.36 (1976); Commissioner v. Bilder, 369 U.S. 499 (1962); NLRB v. Lion Oil Co., 352 U.S. 282, 292 (1957). Justice Frankfurter said in his famous article on statutory interpretation: "A painstaking, detailed report by a Senate Committee bearing directly on the immediate question may settle the matter.” Frankfurter, Some Reflections On the Reading of Statutes, 47 Col. L. Rev. 527, 543 (1947). See also Professor Harry W. Jones’ article, Statutory Doubts and Legislative Intention, 40 Col. L. Rev. 957, 968-69 (1940), discussing this problem and quoting from Learned Hand in SEC v. Robert Collier & Co., 76 F.2d 939, 941 (2d Cir. 1935).

Commissioner v. Bilder, 369 U.S. 499 (1962), is almost directly in point (as I see this case). Under the 1939 Internal Revenue Code, taxpayers were permitted by the IRS and the courts to deduct, as part of their expenses for "medical care,” food and rental costs incurred while spending the winter months in Florida (for example) as part of a regimen of medical treatment. In the 1954 Code, the Congress adopted the very same language with respect to the general scope of "medical care” deductions, but the committee reports both said expressly that living expenses while in Florida (again, for example) were not to be deductible. A minor addition was made to the statute (with respect to transportation for medical purposes) but that change would not seem, in itself, to change the prior rule as to living expenses while away from home. Nevertheless, as in the present instance, the committees hinged their new interpretation on this addition, and said they were "clarifying” the existing law. See 369 U.S. at 501-03.

The Supreme Court through Justice Harlan sustained the committees’ understanding, in words equally applicable here:

Since under the predecessor statute, as it had been construed, expenses for meals and lodging were deductible as expenses for "medical care,” it may well be true that the Committee Reports spoke in part inartistically when they referred to subsection (e) as a mere clarification of "existing law,” although it will be noted that the report also referred to what was being done as a pro tanto "change” in "the existing definitions of medical care.” Yet Congress’ purpose to exclude such expenses as medical deductions under the new bill is unmistakable in *240these authoritative pronouncements * * *. It is that factor which is of controlling importance here. (369 U.S. at 503-04) (emphasis in original).

The Court also observed that "the explicitness of the Committee Reports renders it unnecessary to consider the Commissioner’s alternative argument [also made in the present case] that the statute on its face precludes these deductions * * 369 U.S. at 504 n.5. This means that the Court was willing to assume arguendo that the statute on its face did not bar the deduction. The Court then added that "the equitable considerations which the respondent [the taxpayer] brings to bear in support of her construction * * * are of course beside the point in this Court since we must give the statute effect in accordance with the purpose so clearly manifested by Congress.” Id.11

Bilder, though probably the closest example, is not alone in giving effect to legislative history which puts strain on statutory language. Perhaps the best known case is United States v. Dickerson, 310 U.S. 554 (1940), in which the Supreme Court — because of the clear legislative history — construed a mere restriction on the use of appropriated monies to pay reenlistment bonuses as a suspension of the substantive statutory provision granting such payments. *241Far more "violence” was done to the literal words in that case than is necessary here.

5. Only a few words are needed on the propriety of adhering to Bank of America for pre-1960 cases and, at the same time, adopting the other rule for the cases arising after and governed by the 1960 statute. That legislation purports on its face to make its changes with respect to the limitations period retroactive to 1953-54, but Bank of America decided that the 1960 Congress did not intend to change the pre-1960 law if it should turn out (as it did) that the 1960 Congress was mistaken as to the intent of the Congress which adopted sections 901 and 6511(d) (3) (A) in 1954. There is nothing inconsistent between that position, grounded in avoidance of a serious constitutional problem caused by retroactivity, and a prospective construction of the statute to impose the 3-year limitations period. My conclusion does not differ in result or theory from the Bilder decision, which accepted one construction of "medical care” deductions for the 1939 Code and the opposite one for the 1954 Code, even though the Court assumed that there was no substantial difference in the wording of the two provisions. As the Bank of America opinion observed, it is analytically possible to hold that, in the light of the 1960 legislative history, the apparently insignificant language changes effected a change (as contrasted with a clarification) in the "old” law, so that after 1960 the choice of the tax credit must be made within the 3-year period — and that this was the intention of the 1960 Congress regardless of the intent of the 1954 Congress. 180 Ct. Cl. 111, 119, 377 F.2d 575, 579 (1967); sec Commissioner v. Bilder supra, 369 U.S. 499, 504-05 (1962). There is no unfairness to taxpayer in this conclusion; the taxable years involved here are 1967-1970, several years after passage of the 1960 statute and well after the adoption of the current Treasury Regulation expressly making the 10-year period inapplicable. Treas. Reg. § 1.901-l(d) (1965); see Rev. Rul. 63-248, 1963-2 Cum. Bull. 623. There was fair and adequate warning of the new position.

For these reasons, I would hold for the Government in accordance with the committees’ reading of the statute.

It must be remembered that at the time the 1960 law was enacted, there was no judicial interpretation outstanding.

I agree, in short, with the Ninth Circuit’s observation in United States v. Woodmansee, 578 F.2d 1302 (1978) that "There is merit in appellant’s [taxpayer’s] argument that the language of the statute supports his position. Yet, on the other hand, the legislative history shows Congress intended the three-year limitation period to be applied as a general rule.” 578 F.2d at 1304 (citations omitted). The Ninth Circuit refused to decide which was the proper general rule, deciding Woodmansee on the special facts of that specific case. For the general rule, I would give effect to the legislative history.

Neither the majority nor taxpayer denies that the views of the committees were clearly and unambiguously stated.

There is no contrary teaching in the rejection in Tennessee Valley Authority v. Hill, 437 U.S. 153 (1978) — the "snail darter” case — of subsequent appropriations for the Tellico Dam as showing that the structure was not to be covered by the Endangered Species Act. That history did not concern the Endangered Species Act itself (or any amendment to it) but later enactments thought to express Congress’s interpretation of the Species Act or impliedly to repeal part of it.

Including substantial argument that the pre-1960 legislative background is not inconsistent with the Government’s present construction of the Act, though it may not affirmatively support it.

Defendant also points out that section 6511(d) (3) (A) does not refer at all to a "change” and mentions only a "credit” (not a "deduction”); from this defendant infers that that special provision applies only where a credit has already been chosen within 3 years, permitting 10 years for an increase in the credit already chosen. See I.R.C. § 6511(d) (3) (A). In the same connection, the Government underscores that there is only one limitations period for both a credit and a deduction, and that it is very difficult to read the statute as permitting a deduction to be claimed within the 10-year period.

I repeat that, at that time, there were no contrary judicial interpretations. Insofar as any official construction existed, it had to be inferred from Service regulations and positions; there was not even an explicit Service ruling or regulation sustaining the ten-year period. See Bank of America v. United States, 180 Ct. Cl. 111, 117, 377 F.2d 575, 578 (1967).

In accepting the 10-year period for pre-1960 cases, we stressed in Bank of America, as an important factor, that the Service had accepted the taxpayers’ position as a matter of policy. See 180 Ct. Cl. 111, 114, 117, 118, 377 F.2d 575, 576-77, 578 (1967). We also found that the pre-1960 legislative history failed to support the Government’s position (though we likewise found little affirmative support in the history for the 10-year period). Id. at 117-18, 377 F.2d at 578-79.

This is indicated by the ambiguous pre-1960 regulation citing the 10-year provision and, most strongly, by the Service’s acceptance (before the intervention of the Joint Committee) of Bank of America’s claim that the 10-year statute governed. See Bank of America, 180 Ct. Cl. 111, 114-15, 117, 377 F.2d 575, 576-77, 578.

The 1960 statute, Pub. L. No. 86-780, 74 Stat. 1010 (codified at I.R.C. §§ 901, 904, 1503, 6038, 6046), was entitled "An Act to amend the Internal Revenue Code of 1954 to permit taxpayers to elect an overall limitation on the foreign tax credit”; about half of the measure dealt with various aspects of the foreign tax credit.

I should point out that the Supreme Court observed that it "need not consider whether we would be warranted in disregarding these unequivocal expressions of legislative intent if the statute were so written as to permit no reasonable construction other than that urged on behalf of the taxpayer.” 369 U.S. at 504. The Court went on to say that the statute was considered to be ambiguous and that the interpretation of the identical provision of the 1939 Code “necessarily rested on what emerged from a study of the legislative history of that enactment. So too the conclusion in this case, which turns on the construction of the identical words reenacted as part of § 213 [of the 1954 Code provision], must be based on an examination of the legislative history of this provision of the 1954 Code. The Committee Reports foreclose any reading of that provision which would permit this taxpayer to take the rental payments for his Florida apartment as 'medical care’ deductions.” 369 U.S. at 504-05.

As I have said, I do not see the Government’s position in the present case as an impossible or unreasonable construction of the bare legislative text. The majority views the matter otherwise but fails to take account of the significant fact that our Bank of America decision reached its conclusion only after considering the pre-1960 legislative history and IRS policy (including a Treasury Regulation), in addition to the text of the legislation. The court said: "So if we had only the 1954 language and history of section 901 before us, we would have little difficulty in reading the statute to allow 10 years to change a choice — particularly in view of the administrative [IRS] policy.” Bank of America v. United States, 180 Ct. Cl. 111, 118, 377 F. 2d 575, 579 (1967) (emphasis added). It is clear that more than the bare text was weighed in our evaluation.