Abbott, Proctor & Paine v. The United States

DAVIS, Judge

(dissenting):

My major difference with the Trial Commissioner’s thorough opinion is over the status and effect of the two Treasury Regulations which I believe dispositive and which the court, as I understand the case, must nullify. One regulation relates to the coverage of the tax (Section 4252(f)) and the other to the “public press” exemption (Section 4253(b)). Both, as I appraise them, are adverse to the taxpayers’ position, and of course both must be upheld if they are reasonable interpretations of the statute. We are not free to by-pass valid Treasury Regulations. Udall v. Tallman, 85 S.Ct. 792, pp. 795, 800-802, decided March 1, 1965; Fawcus Machine Co. v. United States, 282 U.S. 375, 378, 51 S.Ct. 144, 75 L.Ed. 397 (1931); Commissioner v. *350Wheeler, 324 U.S. 542, 546-547, 65 S.Ct. 799, 89 L.Ed. 116 (1945); Commissioner v. South Texas Lumber Co., 333 U.S. 496, 501-503, 68 S.Ct. 695, 92 L. Ed. 831 (1948); Estate of Bahen v. United States, 305 F.2d 827, 829, 158 Ct.Cl. 141, 145 (1962).

Ever since this tax was imposed in 1941 on “wire and equipment service”, the Treasury Regulation has included within that term all “channels furnished between a point of origin and the subscriber’s premises over which are given stock and bond market quotations and reports, racing results, baseball scores, and other sporting results, news items, musical programs, weather reports, the time, etc.” (emphasis added). Treasury Regulations on Facilities and Services Excise Tax (1954 Code), Section 42.-4252-6 (b) (3); Treasury Regulations 42 (1942 ed.), Section 130.38. Especially in its context of a wide-ranging, all-inclusive regulation, this paragraph seems to me clearly to cover news tickers such as the Dow Jones Service.1 Can the regulation nevertheless be disregarded as void? The general words of the statute, taken by themselves, certainly permit the Internal Revenue Service to adopt the position that news tickers are “wire and equipment services.”2 And unlike Commissioner Maletz and the court, I do not find that the 1941 legislative history bearing on the coverage of the tax is so plainly the other way that the regulation must be stigmatized as invalid from its issuance. The House of Representatives originally included news tickers, by name, under the tax; the Senate first excluded them specifically and then deleted all references to them from the coverage section of the bill; the final measure hammered out by the conference did not mention them one way or the other in the coverage provisions. To my mind, there is not much help from the legislative background, or the reports and debates, in explaining this final solution. The letter from Mr. Hogate of Dow Jones is very unclear as to whether he was concerned with the coverage of the tax or with the “public press” exemption (and, if the latter, with the tax-ability of Dow Jones itself or also with the taxability of its subscribers). Senator George was cryptic in asking to delete the original Senate provision expressly excluding news tickers from coverage; his comment (“it is intended to make certain that the general news ticker service is classed as part of the general press”) could well mean that only the exemption, not coverage, was at issue and, even then, only Dow Jones’ own exemption. The conference report is wholly colorless on this point. Complex and refined inferences, based on small differences in wording, may be drawn, not without some persuasive appeal, to support the taxpayers’ position, but for me the upshot of the 1941 legislative consideration of news tickers is that we cannot say with the requisite certainty that Congress affirmatively intended to exclude these services from the extension of the tax to “wire and equipment services”. That being so, I cannot brand the Treasury’s contemporaneous regulation, now twenty years old, as inconsistent with the Congressional aim. Following that regulation, I would hold that Sections 4251 and 4252(f), imposing the tax, embrace the Dow Jones News Service.

The other regulation, dealing with the exemption for the “public press” (Section 4253(b)), is Section 42.4263-2 of the Treasury Regulations on Facilities and Services Excise Tax (1954 Code) (which the court’s opinion quotes in the earlier version, Section 130.45 of Treasury Regulations 42). This part of the regulations declares that the statutory exemption extends to those using a wire and *351equipment service in the course of collecting or disseminating news for or through the “public press.” The Washington Post or the Associated Press, for instance, would not have to pay the tax on their subscriptions to a news ticker. Admittedly, the stockbroker-plaintiffs do not employ the Dow Jones Service in that fashion.

The court and the Commissioner first say that the present regulation and its 1942 predecessor may not confine the exemption to the defined class since they do not, unlike the earlier editions, use the word “only” with respect to that class. This puts too much weight on a slight literary alteration made when the regulation as a whole was recast to cover the 1941 addition of wire and equipment services; the word “only” was placed in another portion (paragraph (a)) of the revised regulation and the definition of the exempted class was put separately in paragraph (b). It is hard to read the regulation as differing, on this point, from the pre-1941 promulgations which indisputably exempted only persons using communications services for the collection or dissemination of news for or through the press. We cannot escape, as I see it, the question of the validity of the regulation.

On that issue, I start with the tortuous and ambiguous wording of Section 4253 (b) exempting “News Services.” It is in just such cases that interpretative regulations must be accorded their fullest scope. Cf. National Lead Co. v. United States, 252 U.S. 140, 145, 40 S.Ct. 237, 64 L.Ed. 496 (1920); White v. Winchester Country Club, 315 U.S. 32, 35-36, 41, 62 S.Ct. 425, 86 L.Ed. 619 (1942); American Sugar Refining Co. v. United States, 56 F.Supp. 988, 991, 102 Ct.Cl. 180, 186 (1944). Prom 1918, when the first communications tax was imposed (Revenue Act of 1918, 40 Stat. 1057, 1102, Section 500(g)), the Treasury, in its general pronouncements, has confined the “public press” exception to the collection and dissemination of news for or through the press. At first, the statement of that position seems to have been left wholly to the concise but clear words of the earlier legislation itself. In 1932, Article 20 of Treasury Regulations 42, issued under the Revenue Act of 1932, spelled out the exemption in detail. An amendment in 1938 (T.D. 4825, 1938-2 Cum.Bull. 402), after the 1938 Revenue Act expanded the exemption to radio, carried the same conception forward and applied it to broadcasting. After the 1941 Act added “wire and equipment services”, Treasury Regulations 42 (as already pointed out) took the same position, as did the comparable regulation under the 1954 Code. This is a period of over forty-five years in which the Treasury’s general thinking has been opposed to applying the exemption to non-media taxpayers such as those before us.

This long history outweighs, in my scales, the two-year period (1955-1957) during which the Internal Revenue Service said that subscribers to the Dow Jones Service were exempt.3 That summary ruling did not explain its conclusion or cite the regulation, and, if I must choose between the long-standing public interpretation and this short-lived private ruling as the true reflection of the Treasury’s general position, I am compelled to choose the former. Nor do I think that the Treasury’s position can be gathered from its apparent failure to attempt, for some years, to collect the tax payable by non-press subscribers. In the field of taxation it is precarious to draw inferences from non-collection when published regulations provide for payment of the tax. There are too many practical and pragmatic reasons why the taxpayers may have been left unharried.

Lastly, I consider the 1941 legislative history, once again, too inconclusive for us to say that it conflicts with the regula*352tion. That history demonstrates that Congress desired Dow Jones itself to be free of the tax, but it is wholly equivocal on the exemption of non-press subscribers to the News Service; if anything, the balance can be read to favor the defendant. The regulation stands unimpaired and should be applied to plaintiffs.

They urge that, if the Code requires them to pay the tax, it is unconstitutional as an infringement of First Amendment rights. But these stockbrokers, who employ the Dow Jones News Service in their business, cannot complain that any rights of theirs are violated by the requirement that they pay an 8% tax on their use of a wire service, any more than they can refuse to pay the telephone or telegraph tax or a sales impost. Nor are the rights of Dow Jones broken by this minor and non-discriminatory excise tax, payable by business subscribers, on the transmission of news (as well as other information) by wire. Cf. Grosjean v. American Press Co., 297 U.S. 233, 250, 56 S.Ct. 444, 80 L.Ed. 660 (1936); Mur-dock v. Commonwealth of Pennsylvania, 319 U.S. 105, 112, 63 S.Ct. 870, 87 L.Ed. 1292 (1943); Follett v. Town of McCormick, 321 U.S. 573, 577-578, 64 S.Ct. 717, 88 L.Ed. 938 (1944); Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 192-194, 66 S.Ct. 494, 90 L.Ed. 614 (1946); Mabee v. White Plains Publishing Co., 327 U.S. 178, 184 (1946).

LARAMORE, Judge, concurs in the foregoing dissenting opinion.

. There is no contention that the Internal Revenue Service has ever interpreted this regulation as inapplicable to the Dow Jones Service.

. As enacted in 1941, the tax was imposed on “any” wire and equipment service; and tbe specification of services comprised in that term ended with the general phrase “and all other similar services” (emphasis added). The 1954 Code retains the latter phrase.

. I do not believe the other rulings which Dow Jones received (in 1932 and 1940) on the communications tax have been shown to be inconsistent with the Government’s understanding of the regulation. On the contrary, the 1940 ruling stated explicitly that the exemption depended on the subscriber’s use.