Northern Illinois Gas Company v. United States

PELL, Circuit Judge,

dissenting.

With due respect, I must dissent from the majority’s approval of Treasury Regulation § 41.4482(d)(3), which disregards the customary-use test set forth in the statute and instead imposes a less equitable equipped-for-use test to determine which taxpayers are saddled with liability for the highway use tax. In my opinion the Ninth Circuit correctly resolved the issue in Pacific Gas and Electric Co. v. United States, 664 F.2d 1133 (9th Cir.1981).

The majority correctly states that the regulation must be sustained unless unreasonable and inconsistent with the statute. Commissioner v. Portland Cement Co., 450 U.S. 156, 169 , 101 S.Ct. 1037, 1045 , 67 L.Ed.2d 140 (1981). Although this standard grants the Secretary discretion in promulgating regulations with which to administer the tax laws, that discretion is limited.

The power of an administrative officer or board to administer a federal statute and to prescribe rules and regulations to that end is not the power to make law— no such power can be delegated by Congress — but the power to adopt regulations to carry into effect the will of Congress as expressed by the statute. A regulation which does not do this, but operates to create a rule out of harmony with the statute, is a mere nullity.

Manhattan General Equipment Co. v. Commissioner, 297 U.S. 129 , 56 S.Ct. 397 , 80 L.Ed. 528 (1936); see also Mohasco Corp. v. Silver, 447 U.S. 807, 825 , 100 S.Ct. 2486, 2496 , 65 L.Ed.2d 532 (1980) (EEOC may not adopt regulations inconsistent with statute.).

Because I agree with the Ninth Circuit that the IRS’s interpretation of 41.-4482(d)(3) is not in harmony with the statute, I cannot subscribe to the majority's conclusion that the equipped-for-use test is a reasonable shorthand test for determining whether a type of truck is customarily used in combination with a heavy trailer.

The principal redeeming factor, as I see it, in favor of arbitrarily adopting this stringent, but unrealistic, equipped-for-use test is that it will produce more money for the public fisc. While this may be cheery news to taxpayers not affected, it also reflects a motivational factor not entirely alien to those charged with the duty of collecting taxes.

Here, however, there is more involved than merely increasing the total of general revenue and that is the objective of keeping in repair our constantly deteriorating highways. For the purposes of meeting that problem, Congress imposed a tax on the use of highways. Logically the intent of Congress was that the highway use tax bear most heavily on those whose use of *544 the highway caused the most wear and tear. Imposing the tax on those types of trucks that are customarily used with heavy trailers is a reasonable method of determining which types of trucks should bear the burden of the tax. The customary-use test is not a fine-tuned means of apportioning the burden of the use tax, but it is related to the actual use of the highways by a type of truck. The equipped-for-use test, in contrast, is inconsistent with Congress’s attempt to apportion the tax equitably. The equipped-for-use test is not reflective of the actual use of heavy trailers. A pintle hook, by itself, causes no additional wear on a highway. As the evidence appellant attempted to introduce demonstrates, utility trucks equipped with pintle hooks more often than not are not used in combination with heavy trailers.

The majority correctly points out that ease in administration is an important aspect of the tax laws. However, here Congress took that factor into account by developing a standard that only requires a simple determination of whether a type of truck is customarily used in combination with heavy trailers. This showing is not unduly burdensome and is a reasonable means of determining who should pay the tax. I do not think that this point was addressed adequately in Northern States Power Co. in which the utility argued that the IRS must show that each truck was customarily used with a trailer. The court properly rejected this argument, but then jumped to the conclusion that the equipped-for-use test was a proper means of determining the customary usage of a type of truck. Northern States Power Co. then is of minimal value in evaluating appellant’s claim.

Because I view the IRS’s current application of the equipped-for-use test as plainly inconsistent with the statute’s mandated customary-use test I do not evaluate the parties’ other claims. I do note, however, that the fact that appellant’s reading of the statute was long accepted by the IRS is entitled to some weight in judging the reasonableness of its current application. This previous acceptance by the IRS is brushed aside in a marginal note in the majority opinion by what amounts in effect to the rather startling proposition that the Secretary is entitled to change his mind, or putting it otherwise, that the law is what the Secretary currently calls it. The fact is here that there was evidence showing, whatever the duty to do so might have been, there was a “particular position” taken.

A system of tax collection which deprives the commercial and industrial world of the opportunity of basing budgetary and other fiscal planning matters on a firm and consistent standard, rather than on one comparable to shifting sand, it seems to me, is one which should be soundly condemned as not being in the best interest of the national economy.

Also, I find it disturbing that this case manifests another example of the apparent disinclination of the tax collecting authorities to put a hand on the oar in the interest of promoting national uniformity and coherence in the application of federal tax laws. See Ginsburg, Making Tax Law Through the Judicial Process, 70 A.B.A.J. 74, 77 (March 1984) (“The tax law has become an extraordinarily intricate game played to arcane, often conflicting rules that often lack moorings in any discernible policy.”).

The Government, of course, had no basis for endeavoring to have the Supreme Court review the Northern States Power decision. But a month later a square conflict among the circuits was created by Pacific Gas. The Government thereupon apparently was willing to forego this silver tray opportunity to seek finality on the troublesome issues presented, and, thereby to seek consistent national construction of the statute. Instead the approach of the Eighth Circuit was adopted although presumably not so in the Ninth Circuit. The Eighth Circuit opinion was a one page opinion affirming a summary judgment in a summary fashion. The Ninth Circuit opinion was by contrast an analytical opinion.

*545 Finally, I am not unmindful that the continued application of the regulation may no longer be a source of other inconsistent opinions as to tax consequences visited on vehicles of the involved types after July 1, 1984. The substantial sum of tax dollars at stake, however, involving such vehicles prior to that date causes a proper resolution of the issue to be of continued vitality and importance. The majority opinion finds in the passage of the 1983 amendment some significance to the effect that Congress was recognizing the rationality of the regulation.

I fail to find any rationality in the adoption of this simplistic approach, although it is bound to increase revenues for highways, an aspect recognizable certainly by the Congress. Clearly the action bears no rational relationship to the issue of whether vehicles merely accepted for use per se contribute to the wear and tear of the highways in the manner that vehicles “customarily used” in combination with heavy trailers do. It strikes me that a reasonably strong inference is presented that Congress was doing nothing more than opting for the money producing aspects of the simplistic test although that test was irrationally related to its own express purpose of imposing the test on vehicles “customarily used.” I express no opinion, leaving for further litigation, often indecisive as we know from prior appeals on the general issue, the question of whether removable coupling devices used only occasionally will bring the equipment within the ambit of the 1983 amendment.

For the foregoing reasons, I would reverse and remand for a factual determination of the customary use of this type of utility truck. Accordingly, I dissent.