Aeroquip-Vickers, Inc. And Subsidiaries, F/k/a Trinova Corp. And Subsidiaries v. Commissioner of Internal Revenue

*184 CLAY, Circuit Judge,

dissenting.

The majority overstates the level of deference revenue, rulings receive. The Supreme Court’s decision in United States v. Mead, 533 U.S. 218 , 121 S.Ct. 2164 , 150 L.Ed.2d 292 (2001), compels me to respectfully dissent. New circuit precedents, in Omohundro v. United States, 300 F.3d 1065 (9th Cir.2003) (per curiam), U.S. Freightways Corp. v. Commissioner, 270 F.3d 1137 (7th Cir.2001), and American Express Co. v. United States, 262 F.3d 1376 (Fed.Cir.2001), are cited by the majority to temper the impact of Mead . But as discussed below, these cases do not diminish Mead nearly to the extent that would be necessary to reach the result arrived at by the- majority. I also wish to emphasize that assuming, arguendo,, we wanted to defer to expertise, we would affirm the Tax Court.

This opinion is noteworthy because it involves a three-judge panel of the Court of Appeals reversing (by a two-to-one vote) a “fully reviewed” (effectively “en banc”) eleven-to-six decision by the United States Tax Court, which handles only complex tax disputes and consists of seventeen eminent jurists who specialize exclusively in tax law. An overwhelming majority of the Tax Court found Commissioner’s Revenue Ruling unpersuasive, although two of three judges of this Court find the Revenue Ruling compelling — in part because Commissioner drafted the regulation. Commissioner is also a party to this dispute; in fact, the IRS seeks to collect millions of dollars. The Tax Court’s experts have no stake in the outcome.

To simplify this controversy: two different kinds of tax guidelines conflict. On its face, a treasury regulation, § 1.1502-3(f), seems to support Taxpayer. An interpretation of that regulation, Rev. Rul. 82-20, seems to support Commissioner. The question is whether the regulation itself or the Revenue Ruling governs the disputed transaction.

I.

In footnote three, the majority explains that “the amount of deference to be accorded to Rev. Rul. 82-20 ultimately turns upon the validity of its reasoning.” I completely agree. Mysteriously, however, the majority also states that the Tax Court erred “[b]y noting only that revenue rulings ‘are not entitled to the deference accorded a statute or a Treasury regulation,’ without explicitly acknowledging that some deference to revenue rulings is proper.” To the extent the majority implies that a revenue ruling could ever receive more deference than its persuasive value warrants, the majority is incorrect.

As the majority properly notes, the Supreme Court’s decision in United States v. Mead, 533 U.S. 218 , 121 S.Ct. 2164 , 150 L.Ed.2d 292 (2001), restricted the scope of Chevron deference. 1 Mead involved a tariff ruling by the Customs Service that classified Mead’s “day planners” as diaries for assessment purposes under the Harmonized Tariff Schedule of the United States, 19 U.S.C. § 1202 . 533 U.S. at 224 , *185 121 S.Ct. 2164 . After reviewing Chevron, the Court stressed that “[t]he fair measure of deference to an agency administering its own statute has been understood to vary with circumstances, and courts have looked to the degree of the agency’s care, its consistency, formality, and relative expertness, and to the persuasiveness of the agency’s position.” Id. at 228 , 121 S.Ct. 2164 (citation omitted). Chevron applies only if “Congress would expect the agency to be able to speak with the force of law when it addresses ambiguity in the statute or fills a space in the enacted law.” Id. at 229 , 121 S.Ct. 2164 . Furthermore, even if the agency has the legislative authority to act with the force of law, “the agency interpretation claiming deference [must be] promulgated in the exercise of that authority.” Id. at 227 , 121 S.Ct. 2164 . The Mead Court ultimately found against the Customs Service because “the terms of the congressional delegation give no indication that Congress meant to delegate authority to Customs to issue classification rulings with the force of law.” Id. at 232-33 , 121 S.Ct. 2164 .

Mead explained that “a very good indicator of delegation meriting Chevron treatment is express congressional authorizations to engage in the process of rule-making or adjudication that produces regulations or rulings for which deference is claimed.” 533 U.S. at 229 , 121 S.Ct. 2164 . According to Mead , when Congress wants an agency to act with legal force, it wants the agency to guarantee “fairness and deliberation,” which the use of a “relatively formal administrative procedure tends to foster.” Id. at 230 , 121 S.Ct. 2164 . Mead also states that notice-and-comment procedures are not the only indicator that Congress intended an agency to act with the force of law, because “other statutory circumstances” may sometimes signal the same legislative objective. Id. 229 , 121 S.Ct. 2164 . The Court, however, cited only one case, NationsBank v. Variable Annuity Life Insurance Co., 513 U.S. 251 , 115 S.Ct. 810 , 130 L.Ed.2d 740 (1995), in which an agency ruling received Chevron deference without notice-and-comment procedures. 2

The majority agrees that Chevron does not apply to revenue rulings because such rulings are issued without the force of law. 3 See also Omohundro v. United *186 States, 300 F.3d at 1068 (“Mead involved a Customs Service tariff ruling, which is closely akin to an IRS revenue ruling. Given that the two types of agency rulings are analogous, we are required to apply Mead’s standard of review to an IRS revenue ruling.”); U.S. Freightways Corp., 270 F.3d at 1141 (declining to give Chevron deference to IRS policy statements made without notice-and-comment formalities); Am. Express Co. v. United States, 262 F.3d at 1382-83 (stating that IRS decisions not adopted in regulations after notice and comment are probably not entitled to Chevron deference). The Mead Court noted that agency statements ineligible for Chevron deference may still receive Skidmore deference. Mead, 533 U.S. at 234-35 , 121 S.Ct. 2164 (“Chevron left Skidmore intact and applicable where statutory circumstances indicate no intent to delegate general authority to make rules with force of law, or where such authority was not invoked.”)

In Skidmore v. Swift & Co., 323 U.S. 134 , 65 S.Ct. 161 , 89 L.Ed. 124 (1944), the Court gave an agency pronouncement only the weight it deserved in light of “the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade.” Id. at 140 , 65 S.Ct. 161 .

When the majority claims the Tax Court erred by failing to acknowledge that “some deference to revenue rulings is proper” (emphasis added), the majority overstates Skidmore “deference.” Skidmore “deference” does not always involve “deferring” because the level of respect afforded the agency pronouncement depends on its “power to persuade.” Skidmore, 323 U.S. at 140 , 65 S.Ct. 161 . An agency pronouncement with no persuasive power receives no deference. Therefore, because the Tax Court majority found the Treasury Department’s justification for its revenue ruling unpersuasive, the Tax Court did not err by failing to acknowledge that “some deference to revenue rulings is proper.” Likewise, to the extent this Court finds the Treasury Department’s rationale unpersuasive, we have no obligation to defer. Exactly as the majority explains, “the amount of deference to be accorded to Revenue Ruling 82-20 ultimately turns upon the validity of its reasoning.”

The majority cites a string of four cases in support of its statement that even after Mead “some deference to revenue rulings is proper.” Yet none of these cases push Skidmore “deference” to the level that the majority would have in the present case. The first case cited, Omohundro, 300 F.3d 1065 , grants Skidmore “deference.” But as explained, Skidmore “deference” relies on the “power to persuade.” Omohundro granted “deference” only after ruling, “First, the IRS’s reasoning is valid.” Id. at 1068 . The “deference” accorded was to persuasive reasoning, not merely to IRS interpretive authority. The majority in the present dispute accords deference based upon the Revenue Ruling itself, apart from its persuasive power.

The second case cited, Del Commercial Props., Inc. v. Comm’r, 251 F.3d 210, 214 (D.C.Cir.2001), was released ten days be *187 fore Mead . Given that the majority acknowledges the relevance of Mead , it is not clear why this case is cited.

The third case cited by the majority, U.S. Freightways Corp. v. Comm’r, 270 F.3d at 1139 , states:

Although we acknowledge that even after United States v. Mead Corp., 533 U.S. 218 , 121 S.Ct 2164 , 150 L.Ed.2d 292 (2001), we owe some deference to the Commissioner’s interpretation of his own regulations, we conclude here that the lack of any sound basis behind the Commissioner’s interpretation, coupled with a lack of consistency on the Commissioner’s own part, compels us to rule in favor of Freightways.

This statement highlights again the importance of Mead . While U.S. Freightways professes to accord some “deference,” it is not at all clear that the term is being used to signify anything substantially beyond than the “power to persuade,” under Skid-more. After all, as stated in the quoted passage above, U.S. Freightways rejected the Commissioner’s ruling, which severely calls into question the amount of true deference that was actually given by the Seventh Circuit.

The last case cited by the majority is Am. Express Co., 262 F.3d 1376 . This case, unlike U.S. Freightways, held in favor of the Commissioner. However, American Express is readily distinguishable from the present case. In American Express, the court ruled that the interpretation was not at all in conflict with the applicable regulation, since on its face the regulation simply did not address the issue at hand. Id. at 1381 (“There is nothing on the face of IRS Rev. Proc. 71-21, 1971 WL 26167 that defines the term ‘services,’ .... ”). By contrast, in the present case, the regulation on its face addressed the issue with sufficient clarity to warrant a ruling from the Tax Court, in favor of Taxpayer. Thus, even though American Express professed to accord “deference” to the IRS interpretation, the context in that case was such that the amount of actual deference accorded was not nearly as great as that accorded by the majority in the present case.

While the language contained in Omohundro, U.S. Freightways, and American Express does indicate that even after Mead some “deference” is due to revenue rulings, it is not at all clear that this deference is anything more than Skidmore “deference,” which simply mandates that the reviewing court must consider agency interpretations, examining them for their “power to persuade.”

The following sections explain why the government’s reasoning is invalid.

II.

Unlike the majority, I see no reason to rely on two equally antiquated decisions from other circuits that deal with ostensibly similar tax controversies. 4 Both Walt Disney, Inc. v. Comm’r, 4 F.3d 735 (9th Cir.1993), and Salomon, Inc. v. United States, 976 F.2d 837 (2d Cir.1992), accepted Petitioner’s interpretation in Rev. Rul. 82-20. These cases are distinguishable and outdated.

In both Disney and Salomon, the taxpayers sought rulings from the IRS as to *188 whether they would qualify for tax-free “D” reorganizations. Disney, 4 F.3d at 737 ; Salomon, 976 F.2d at 839 . Also in both cases, the taxpayers represented to the IRS that they would recapture ITCs associated with property transferred to newly formed subsidiaries. The IRS then issued private letter rulings stating that the transactions would qualify as tax-free “D” reorganizations. See Priv. Ltr. Rul. 8215003, 1981 WL 175857 (Oct. 22, 1981) (Disney ruling); Priv. Ltr. Rul. 8132115, 1981 WL 172094 (May 18, 1981) (Salomon ruling). Each taxpayer then reorganized its business, but did not recapture the ITCs. Disney, 4 F.3d at 736 ; Salomon, 976 F.2d at 838 . In the ensuing litigation, Commissioner did not challenge the effectiveness of the reorganizations, see Disney, 4 F.3d at 738 ; Salomon, 976 F.2d at 839 , but Commissioner never expressly stipulated that the transactions met the requirements of §§ 355 and 368(a)(1)(D). In contrast, Commissioner made that stipulation in this case, which means Commissioner concedes that the split-off was “not used principally as a device for the distribution of the earnings and profits” of LOF or LOF Glass. See I.R.C. § 355(a)(1)(B). 5

Even without this distinction, neither Disney nor Salomon should influence this Court. Both Disney and Salomon explicitly stated that IRS revenue rulings deserve “great deference.” Disney, 4 F.3d at 740-41 ; Salomon, 976 F.2d at 841 . We cannot know what conclusion the Salomon or Disney courts would have reached had they not afforded the Commissioner “great deference” revenue rulings unquestionably no longer receive. See Omohundro v. United States, 300 F.3d at 1068 ; U.S. Freightways Corp., 270 F.3d at 1141 ; Am. Express Co., 262 F.3d at 1382-83 . This tremendous difference makes Disney and Salomon inapplicable in contemporary tax litigation.

III.

The next step is to consider whether the Commissioner has offered a persuasive position.

A.

The consolidated return provisions in the tax code allow multiple corporations (including a parent and subsidiaries) to file a single consolidated tax return. I.R.C. §§ 1501, 1504(a)(1). The majority notes this, but fails to recognize how the single taxpayer theory implicates the present controversy.

To file a consolidated return, each subsidiary must be linked, directly or indirectly, to the common parent by an ownership chain of both 80% of the voting power of the subsidiary and 80% of the value of the subsidiary’s stock. I.R.C. § 1504(a)(2). Once a group of corporations elects to file a consolidated return, the corporations must remain in the group unless they *189 cease to qualify as group members or the Secretary consents to deconsolidation. I.R.C. §§ 1501, 1504; Treas. Reg. 1.1502-75. Congress and the Treasury Department realized that “[i]n substance, there was little distinction between a corporation that chose to conduct its business by means of divisions and another corporation that preferred to operate its various businesses through subsidiaries.” Crestol, et al., The Consolidated Tax Return ¶ 1.01 at 1-2 (5th ed.2000). Therefore, consolidated returns allow parents and subsidiaries to be treated as though they were a “single taxpayer.” Commissioner concedes that the economic approach underlying the consolidated return regime is the “single taxpayer theory.” (Comm’r Br. at 14-16.) As noted, the majority offers no response to this argument.

B.

Congress delegated authority to the Treasury Department to promulgate regulations governing the distribution of tax credits among the members of a consolidated group. Accordingly, the Secretary of the Treasury instituted § 1.1502-8, which covers the handling of “consolidated tax credits,” including the disposition of Section 38 property. See Treas. Reg. § 1.1502 — 8(f). Under section 1.1502-3(f)(2)(i):

a transfer of Section 38 property from one member of the group to another member of such group during a consolidated return year shall not be treated as a disposition or cessation within the meaning of section 47(a)(1). If such Section 38 property is disposed of, or otherwise ceases to be Section 38 property or becomes public utility property with respect to the transferee, before the close of the estimated useful life which was taken into account in computing qualified investment, then section 47(a)(1) or (2) shall apply to the transferee with respect to such property (determined by taking into account the period of use, qualified investment, other dispositions, etc., of the transferor). Any increase in tax due to the application of section 47(a)(1) or (2) shall be added to the tax liability of such transferee (or the tax liability of a group, if the transferee joins in the filing of a consolidated return).

(emphasis added). Thus, the regulation tests the transferee to determine whether it must recapture ITCs and whether the transferee may report the recapture on its separate return (if it has left the consolidated group) or the consolidated group return (if the transferee remains a member of the group). 6 No other consolidated return regulation addresses ITC recapture and no other regulation explicitly requires ITC recapture when a transferee of Section 38 property is split-off from the affiliated group in a valid “D” reorganization. The majority offers no response to this argument.

C.

Once § 1.1502-3(f)(2)(i) imposes transferee liability for ITC recapture on consolidated group members, § 1.1502 — 3(f)(3) provides five illustrations of how § 1.1502-3(f)(2)(i) will apply:

Example (1). P, S, and T file a consolidated return for calendar year 1967. In such year S places in service Section 38 *190 property having an estimated useful life of more than 8 years. In 1968, P, S, and T file a consolidated return and in such year S sells such property to T. Such sale will not cause section 47(a)(1) to apply.

Example (2). Assume the same facts as in example (1), except that P, S, and T filed separate returns for 1967. The sale from S to T will not cause section 47(a)(1) to apply.

Example (3). Assume the same facts as in example (1), except that P, S, and T continue to file consolidated returns through 1971 and in such year T disposes of the property to individual A. Section 47(a)(1) will apply to the group and any increase in tax shall be added to the tax liability of the group. For the purposes of determining the actual period of use by T, such period shall include S’s period of use.

Example (4). Assume the same facts as in example (3), except that T files a separate return in 1971. Again, the actual periods of use by S and T -will be combined in applying section 47. If the disposition results in an increase in tax under section 47(a)(1), such additional tax shall be added to the separate tax liability of T.

Example (5). Assume the same facts as in example (1), except that in 1969, P sells all the stock of T to a third party. Such sale will not cause section 47(a)(1) to apply.

When closely scrutinized, these examples vindicate Taxpayer’s position.

In example one, P, S, and T are members of a consolidated group at all times. There is no § 47 disposition of the Section 38 property when S obtains it and sells it to T, because T has simply assumed S’s role.

In example two, S acquires the property from P before the corporations become members of a consolidated group. S then transfers the property to T after the corporations form a consolidated group. P still did not engage in a § 47 transfer because the entire transaction occurred within a consolidated group.

In example three, the corporations acquire and transfer the Section 38 property while belonging to a consolidated group, but T then transfers the Section 38 property to some unrelated party. This triggers a § 47 ITC recapture for which the consolidated group is responsible. 7

In example four, when T transfers the Section 38 property to an unrelated third party, P, S, and T are no longer members of a consolidated group. Thus, T files a separate return. T’s transfer outside the group triggers the ITC recapture and that “additional tax shall be added to the separate tax liability of T.” Treas. Reg. § 1.15.02-3 (Ex. 4). The liability is not imposed on S, the transferor of the Section 38 property, or P, the other group member. Transferee liability is imposed on T. This reflects the policy embedded in § 47 and the ITC provisions that the responsible entity (now T) must continue to use Section 38 property its trade or business for the appropriate period.

*191 In example five (like example one), the Section 38 property was acquired by S and transferred to T while all parties remained members of a consolidated group. When P sells T’s stock to a third party, no recapture occurs. The rule of transferee liability dictates that there is no ITC recapture because T remains liable for ITC obligations as the transferree of Section 38 property. If T disposes of the property, ceases using it in its trade or business, or joins a new consolidated group, T will be liable. 8 The original transferor has no post-transfer recapture liability.

Example five reflects precisely what happened in this case. A parent (LOF) transferred Section 38 assets to a subsidiary (LOF Glass) that was a member of the parent’s consolidated group. The parent then transferred its stock in the subsidiary to a third party outside the consolidated group (Pilkington). 9 According to example five, any liability for recapture lies with the transferee, not with the original parent/transferor.

D.

In Rev. Rui. 82-20, 1982- 1 C.B. 6 , the IRS considered the application of the ITC recapture provisions of the IRC and the consolidated return regulations. Specifically, the IRS applied § 1.1502-3(f) to a corporate reorganization which, as in this case, qualified under §§ 355(a)(1) and 368(a)(1)(D) for nonrecognition treatment. The ruling involved a transfer of assets, including Section 38 property, by a parent corporation to its wholly-owned subsidiary, followed by a distribution of the subsidiary’s stock to one of the parent corporation’s shareholders. Since the parent and the subsidiary filed a consolidated tax return, the situation addressed in the Revenue Ruling is very similar to that presently before this Court.

The ruling initially noted that under Treas. Reg. § 1.47 — 3(f)(5)(ii) a recapture determination is required when the trans-feror of the Section 38 property does not retain a substantial interest in the subsidiary. This is in tension with § 1.1502-3(f)(2)(i), which does not treat the transfer from one member of a consolidated group to another as a § 47 disposition. To reconcile these provisions, the Commissioner assumed that the consolidated return regulation, § 1.1502 — 3(f)(2)(i), was “premised on the assumption that the property [would] remain[ ] within the consolidated group. When there is no intention at the time of the transfer to keep the property within the consolidated group, the transaction should be viewed as whole and not as separate transactions.” Rev. Rui. 82-20.

The rationale, according to the Commissioner, is that a parent corporation’s transfer of Section 38 property to its wholly-owned subsidiary is not treated as a disposition so long as the parent corporation substantially owns the subsidiary. I.R.C. § 47(b). When such a transfer is followed by a split-off of the subsidiary’s stock, however, recapture is imposed immediately because the transferor no longer retains a “substantial interest” in the transferee. If the government has correctly interpreted § 1.1502(f)(2)(i), then Taxpayer must recapture the ITCs. The majority offers no response to this argument.

E.

Rev. Rui. 82-20 is inconsistent with § 1.1502(f)(2)(i) because the treasury regu *192 lation focuses on making the transferee responsible for the Section 38 property, whereas the Revenue Ruling looks to the “intent” of the.:parties in the consolidated group. Depending on whether the parties in the consolidated group intended to transfer the Section 38 property to a third party ultimately, either the transferor or the transferee may have to recapture the ITCs.

First, if intent were the decisive factor under the regulation, the regulation would make that clear. Commissioner argues that the regulation does make that clear, because in crucial example five, the parent, subsidiary, and transferee file consolidated returns in 1967 and 1968, and the subsidiary transfers its Section 38 property in 1968, but the parent does not sell the transferee’s stock until 1969.' § 1.1502-3(f)(3) (Ex. 5). Commissioner concludes that the parent does not recapture the ITCs in this example only because the parent waited a year before selling the transferee’s stock. 10 Since the hypothetical parent waited a year, the consolidated group must not have “intended” to move the assets outside of the group when it transferred them within-group to its subsidiary.

This extraordinarily strained hypothesis is hard to accept primarily because the relevant regulations never mention intent. One cannot reasonably believe that the Treasury Department meant an intent test but, rather than saying so expressly, it said so through the circuitous route Commissioner defends. A parent company could certainly wait a year before transferring assets outside the consolidated group, yet have intended to make the transfer from the outset. Most likely, example five has the relevant events occurring in different years simply to make the hypothetical as simple and clear as possible with respect to the order in which the transactions take place. That certainly seems a more plausible explanation than to assume the reference to a different year somehow implies an intent standard. It also seems reasonable that the Treasury Department merely wanted example five to illustrate the clear language in § 1.1502 — 3(f)(2), which places obligations on the transferee without discussing the transferor’s intent. 11

*193 Second, the interpretation in Rev. Rul. 82-20 fails to respect the single-taxpayer theory that underlies the consolidated return regulations. As already noted, according to I.R.C. § 47(a)(1) and (2), if a transfer between now-consolidated group members triggers recapture, the transfer- or is liable for the recapture while the transferee has no liability. I.R.C. § 47(b); Treas. Reg. § 1.47-3 (f)(5). The single taxpayer theory, however, involves ignoring transactions between members of a consolidated group. By attempting to impose recapture liability on the transferor, Commissioner would create situations— like this one — where liability would remain with the group even after the subsidiary holding the assets has left. This conflicts with the single-entity approach by treating a now-separate corporation as though it still belonged to the consolidated group. 12 It is significant, therefore, that the Supreme Court attempts to interpret the consolidated return regulations in a manner consistent with the single-entity theory. See United Dominion Industries v. United States, 532 U.S. 822 , 121 S.Ct. 1934 , 150 L.Ed.2d 45 (2001) (holding that the single-entity approach is the proper method for calculating product liability losses among a consolidated group).

Due to the single-taxpayer theory embodied in the consolidated return regulations and the resulting transferee liability imposed on LOF Glass for the ITC recapture, LOF’s transfer of the Section 38 property to LOF Glass did not trigger § 47; there was no disposition of Section 38 property, and thus no ITC recapture. See Treas. Reg. § 1.1502 — 3(f)(2)(i). Commissioner argues that even if this is the correct interpretation of § 1.1502 — 3(f)(2)(i), the initial transaction became relevant for § 47 purposes when LOF Glass left the LOF-affiliated group because the parent (LOF) no longer retained interest in the Section 38 property.

In April of 1986, LOF Glass split-off from the LOF affiliated group in the “D” reorganization with the exchange of LOF Glass shares for Pilkington’s interest in LOF. This occurred immediately after LOF made LOF Glass an independent subsidiary, but the parties stipulated that LOF Glass continued to use the Section 38 property in the glass business both before and after LOF Glass left the consolidated group. When LOF Glass left the group, it *194 did so subject to the transferee obligation for the ITC recapture that arose when it received the Section 38 property along with the LOF Glass Division business initially. See Treas. Reg. § 1.1502 — 3(f)(2)(i).

Although Commissioner argues, in accordance with Rev. Rui. 82-20, that these intra-group transfers and the “D” reorganization evince an intent to avoid ITC recapture by disposing of the property outside of the group, the worst the transactions show is nothing more than a shift in ITC recapture liability. 13 By transferring the LOF Glass Division and the Section 38 property within the consolidated group, the parties imposed liability for the ITC recapture on LOF Glass. When Pilking-ton acquired LOF Glass — albeit one day later- — LOF Glass brought with it the same ITC recapture obligation. If LOF Glass became a member of a Pilkington consolidated group, then that consolidated group would be subject to ITC recapture as well. See Treas. Reg. § 1.1502-3 (f)(2)(i). Under the consolidated return regulations, the ITC recapture obligations remained, although now assigned to a different party. .

IV.

Commissioner also argues that the interpretation of § 1.1502-3(f)(2)(i) contained in Rev. Rul. 82-20 is consistent with the “step-transaction doctrine.” Commissioner notes that the “incidence of taxation depends upon the substance of a transaction,” rather than its form. Comm’r v. Court Holding Co., 324 U.S. 331, 334 , 65 S.Ct. 707 , 89 L.Ed. 981 (1945); see also Kluener v. Comm’r, 154 F.3d 630, 634 (6th Cir.1998). “The step transaction doctrine is a judicial device expressing the familiar principle that in applying the income tax laws, the substance rather than the form of the transaction is controlling.” Brown v. United States, 782 F.2d 559, 563 (6th Cir.1986) (internal quotations omitted). Under this doctrine, “interrelated yet formally distinct steps in an integrated transaction may not be considered independently of the overall transaction.” Comm’r v. Clark, 489 U.S. 726, 738 , 109 S.Ct. 1455 , 103 L.Ed.2d 753 (1989). Although various courts have applied different tests to determine whether the step-transaction doctrine applies in a particular case, this Court uses the “end result” test. Brown, 782 F.2d at 564 . Pursuant to the “end result” test, “purportedly separate transactions will be amalgamated into a single transaction when it appears that they were really component parts of a single transaction intended from the outset to be taken for the purpose of reaching the ultimate result.” Id. (internal quotation marks omitted).

The appeal of step-transaction analysis rapidly dissipates when one remembers that Commissioner stipulated that the transaction appropriately received “D” reorganization treatment, which means Commissioner stipulated, inter alia, that the split-off transaction was “not used principally as a device for the distribution of the earnings and profits” of LOF or LOF Glass. See I.R.C. § 355(a)(1)(B). The Commissioner thus conceded that LOF and LOF Glass were engaged in the “active conduct of a trade or business” for at least five years prior to the transaction and for five years after Pilkington became the owner of LOF Glass. See I.R.C. § 355(a) and (b). If the transfers from LOF Glass Division to LOF Glass and *195 ultimately to Pilkington had economic viability (and thus were not merely tax avoidance transactions), then the step-transaction doctrine cannot apply. See Rev. Rul. 79-250, 1979- 2 C.B. 156, 157 , 1979 WL 51074 (explaining that where each step in a corporate reorganization has an independent legal and economic significance, the step-transaction doctrine does not apply).

The majority cites no authority for the proposition that the IRS can accept an entire transaction as justified by a legitimate business purpose to determine whether “D” reorganization treatment will apply, but not accept a part of that same transaction as motivated by a legitimate business purpose exclusively to determine ITC recapture — particularly given that the “substance over form” principle requires courts to view transactions “as a whole, and each step, from the commencement of negotiations to the consummation of the sale, is relevant.” 14 Court Holding, 324 U.S. at 334 , 65 S.Ct. 707 .

The majority further concedes, as it must, that this ease does not involve a situation where “ ‘[t]he whole undertaking ... was in fact an elaborate and devious form of conveyance masquerading as a corporate reorganization, and nothing else.’ Gregory v. Helvering, 293 U.S. 465, 470 , 55 S.Ct. 266 , 79 L.Ed. 596 (1935) (emphasis added).” By emphasizing “and nothing else,” the majority implies that, despite the government’s stipulation, both a legitimate business purpose and an improper tax avoidance objective motivated the disputed transaction. The majority then cites a Tenth Circuit case, Associated Wholesale Grocers, Inc. v. United States, 927 F.2d 1517,1526 (10th Cir.1991), for the general proposition that a taxpayer may not dodge provisions of the tax code merely because the taxpayer can articulate some business purpose for its activity. In the present dispute, however, Taxpayer offers this Court much more than a general assurance that it had a business purpose for its transaction. 15

Again, the Commissioner stipulated that the transaction properly received “D” reorganization treatment, which means Commissioner stipulated, inter alia, that the split-off transaction was “not used 'principally as a device for the distribution of the earnings and profits” of LOF or LOF Glass. See I.R.C. § 355(a)(1)(B) (emphasis added). The phrase “a device for the distribution of ... earnings and profits” means simply “a device for the distribution of ... earnings and profits [so as to avoid taxes].” Id. Put differently, the Commissioner conceded that the split-off was not principally a tax avoidance mechanism. The majority’s Tenth Circuit step-transac *196 tion case does not involve any stipulation by Commissioner — let alone a concession that the taxpayer’s transaction did not principally serve a tax-avoidance purpose.

Moreover, in Rev. Rul. 79-250, 1979- 2 C.B. 156 , the Commissioner conceded that in § 368 situations like this one, the step-transaction doctrine would not apply. According to the Commissioner, “the substance of each of a series of steps will be recognized and the step transaction doctrine will not apply, if each such step demonstrates independent economic significance, is not subject to attack as a sham, and was undertaken for valid business purposes and not mere avoidance of taxes.” (emphasis added). This seems to resolve the matter, and the majority has no rational reason to defer to Rev. Rul. 82-20 at the expense of Rev. Rul. 79-250.

V.

More than two decades ago, this Court correctly observed that the Treasury Department’s consolidated return regulations should receive greater deference than interpretations of those regulations. See Wolter Constr. v. Comm’r, 634 F.2d 1029, 1034-35 (6th Cir.1980). This principle unquestionably applies here. It seems either very difficult or impossible for an interpretive statement to survive Skidmore review when that statement conflicts with the text it purports to interpret. Commissioner’s Revenue Ruling is not persuasive because it contradicts the text and examples in § 1.1502-3(0.

For all the aforementioned reasons, I respectfully dissent.

. The Supreme Court foreshadowed Mead in Christensen v. Harris County, 529 U.S. 576 , 120 S.Ct. 1655 , 146 L.Ed.2d 621 (2000). Christensen declined to grant Chevron deference to an opinion letter signed by the acting administrator of the Wage and Hour Division of the Department of Labor, holding that "[¡Interpretations such as those in opinion letters — like interpretations contained in policy statements, agency manuals, and enforcement guidelines — do not warrant Chevron-style deference." Id. at 587 , 120 S.Ct. 1655 . Christensen held that documents issued without the force of law do not receive Chevron deference, see id., but the opinion provided little guidance as to when and to what types of agency statements this exception would apply.

. It is hard to understate Mead’s importance. Justice Scalia described the decision as "one of the most significant opinions ever rendered by the Court dealing with the judicial review of administrative action.” 533 U.S. at 261 , 121 S.Ct. 2164 (Scalia, J., dissenting). Mead effectively limits Chevron to situations in which the agency can show "affirmative legislative intent" that it has lawmaking power. Id. at 239 , 121 S.Ct. 2164 (Scalia, J., dissenting). When Congress intends for the Treasury Department to issue policy statements that have the legal force, Congress clearly so indicates. See, e.g., I.R.C. § 40(f)(3) (authorizing the Secretary to prescribe by regulation the manner in which taxpayers may elect not to have alcohol fuel credits apply); id. at § 414(o) (authorizing the Secretary to prescribe regulations necessary to achieve the purposes of the low income housing credit); id. at § 42(o) (authorizing the Secretary to prescribe regulations to prevent avoidance of employee benefit provisions). A Treasury Regulation expressly states that revenue rulings "do not have the force and effect of Treasury Department regulations” (which do have legal force). Rev. Proc. 89-14, 1989- 1 C.B. 814 .

. However, the majority tries to minimize this. After writing that, "[i]n light of the Supreme Court’s decisions in Christensen and Mead , we conclude that Revenue Ruling 82-20 should not be accorded Chevron deference,” the majority notes that "revenue rulings do, however, constitute 'precedent[s] [to be used] in the disposition of other cases.' Rev. Proc. 89-14, 1989- 1 C.B. 815 . Revenue rulings also serve as 'official interpretation^' by the IRS of the tax laws. Treas. Reg. § 601.201 (a)(6).” (alterations in majority op.). Yet neither the fact that revenue rulings sire “official” or serve as precedent for the IRS to *186 use in other cases gives revenue rulings legal force. See Rev. Proc. 89-14, 1989- 1 C.B. 814 . Under Mead , the absence of legal force is the primary indicia of a regulation warranting only Skidmore deference, see Mead, 533 U.S. at 232-33 , 121 S.Ct. 2164 , and neither the "officiality'’ of revenue rulings nor the Treasury Department’s intent that the IRS use revenue rulings to guide subsequent decisions makes the revenue ruling itself likely to better withstand Skidmore scrutiny because neither factor makes the revenue ruling necessarily more thoroughly considered, consistent, valid, or otherwise persuasively reasoned. See Skidmore v. Swift & Co., 323 U.S. 134, 140 , 65 S.Ct. 161 , 89 L.Ed. 124 (1940).

. The majority properly emphasizes that " '[uniformity among the circuits is especially important in tax cases to ensure equal and certain administration of the tax system.’ ” (quoting Nickell v. Comm’r, 831 F.2d 1265, 1270 (6th Cir.1987)). This principle does not limit our obligation to react to new Supreme Court decisions. As discussed further below, the majority wrongly relies on Chevron-era tax precedents. We cannot ignore Mead in the name of consistency.

. As the majority notes, the Salomon court depended heavily on its conclusion that

[i]n substance, if not in form, the direct and the circuitous transaction are the same. Each achieves a rapid transfer of section 38 property outside the group. To distinguish between them would deny economic reality. Moreover, such a holding would allow the common parent of a consolidated group ... to move section 38 property outside the group without paying recapture taxes simply by first transferring the property to a member subsidiary and then distributing the subsidiary’s stock to the third-party.

976 F.2d at 842 . Disney then quotes this text. See 4 F.3d at 739 . We cannot conclude that Respondent intended "to move section 38 property outside the group without paying recapture taxes,” see Salomon, 976 F.2d at 842 , when Commissioner concedes that the split-off was "not used principally as a device for the distribution of the earnings and profits.” See I.R.C. § 355(a)(1)(B).

. This is different from the ITC provisions in the I.R.C. § 47(a)(1) and (2). In § 47, while a transfer between non-consolidated group members may constitute a "mere change in form that does not trigger recapture,” it is the transferor that the IRS holds liable for the recapture if the transferee disposes of the property or the transferor disposes of its interest in the transferee. The transferee has no liability at all. I.R.C. § 47(b).

. Commissioner argues that this result occurs because the regulations (and examples) assume that the consolidated group members initially intended for the property to remain within the group. This speculation ignores § 1.15 02-3 (f)(2), which imposes liability based on whether or not an intra-group transfer took place, not whether or not the parties intended the Section 38 assets to remain in the group after the transfer.- Notably, the regulations contemplate that T may leave the group and file its own return or a return with a new consolidated group. See Treas. Reg. § 1.1502-3 (f)(2)(i).

. If T joins a new consolidated group, then T and the other members of the new consolidated group would then be liable. See Treas. Reg. § 1.1502 — 3(f)(2).

. As described above, this transfer occurred in exchange for the third party’s (Pilkington's) stock in the parent (LOF).

. This example stand in contrast to this case, in which the parent waited only a weekend to make the transfer.

. Treas. Reg. § 1.1502 — 3(f)(2)(i) states:

a transfer of Section 38 property from one member of the group to another member of such group during a consolidated return year shall not be treated as a disposition or cessation within the meaning of section 47(a)(1). If such Section 38 property is disposed of, or otherwise ceases to be Section 38 property or becomes public utility property with respect to the transferee, before the close of the estimated useful life which was taken into account in computing qualified investment, then section 47(a)(1) or (2) shall apply to the transferee with respect to such property (determined by taking into account the period of use, qualified investment, other dispositions, etc., of the transferor). Any increase in tax due to the application of section 47(a)(1) or (2) shall be added to the tax liability of such transferee (or the tax liability of a group, if the transferee joins in the filing of a consolidated return).

(emphasis added).

The majority claims that:

the more persuasive interpretation is that the decision to assign different events to different calendar years in Example 5 of CRR § 1.1502-3(f), rather than merely listing the order of events, has greater significance. See 2A Singer, Norman J., Sutherland Statutes and Statutory Construction, § 46.06 at 192 (2000 ed.) ("every word of a statute must be presumed to have been used for a purpose”).

The majority wants to infer an intent test because example five lists separate calendar years, instead of simply the order of events. This argument is silly. Had the Commissioner listed the order of events, rather than calendar years, it would not make an intent test *193 a less plausible inference — a taxpayer intending to transfer § 47 assets out of the consolidated group would could still undertake the same series of transactions in the same allegedly nefarious sequence. The reference to "calendar years” as opposed to "the order of events” indicates nothing about whether the Commissioner meant to incorporate an intent test.

The Commissioner’s choice of language, however, tells us much more. If the Commissioner wanted an intent test, he could have used the word "intent” in his example. Sutherland also supports my interpretation. See, e.g., 2A Norman J. Singer, Sutherland Statutes and Statutory Construction § 46.06 at 135 (2000 ed.) ("What a legislature says in the text of a statute is considered the best evidence of the legislative intent or will.”); Singer, supra, § 47:23 at 304-06 (explaining that the doctrine of expressio unius est exclu-sio alterius indicates "an inference that all omissions should be understood as exclusions”).

. Commissioner’s position is also inconsistent with the notion that the entity with the ability to keep the Section 38 property in the appropriate trade or business use should be the same entity that faces recapture if it fails to do so. It may be more efficient to have the taxpaying party be the one that holds the assets rather than force the transferor to attempt to guarantee their future use ex ante by contract, since the property-holder (transferee) can more easily adapt to changes in its economic circumstances over the relevant life of the Section 38 material. Notably, this case is not about whether a tax gets paid, but who will pay it — the transferee or the transferor. Thus, siding with Taxpayer will not necessarily encourage tax avoidance.

. And it is not necessarily an intentional shift, since Commissioner stipulated that the reorganization was "not used principally as a device for the distribution of the earnings and profits of LOF or LOF Glass." (See J.A. at 57.) The Commissioner’s stipulation is discussed more thoroughly in conjunction with the step-transaction issue below.

. One sentence drafted by the majority deserves particular attention. The majority claims, without citation, that "[h]ere, although the individual steps of the transaction had a legitimate business reason, the transaction must be treated as a single unit and judged by its end result.” I have no idea how a party could possibly intend several steps to achieve various legitimate business purposes but simultaneously intend the series of steps to accomplish an illegitimate tax-avoidance objective. As a matter of logic, if an agent undertakes a series of related acts, and if each step is viewed as part of a process intended to achieve an legitimate goal, it is impossible to view all steps as intending to serve illegitimate ends. Somewhere along the line, the agent must have intended at least one of the steps to accomplish something improper (in this case, without a legitimate business purpose). Commissioner concedes Respondent acted with a business purpose at every stage.

. In fact, the Associated Grocers court “share[d] the government’s skepticism as to the alleged significance of taxpayer's claimed business purpose.” 927 F.2d at 1527 . Associated Grocers also involved a completely different statutory provision-a liquidation under I.R.C. § 332 rather than a § 368 restructuring. Id. at 1519.