UNITED STATES TAX COURT

CLC

134 T .C . No .

UNITED STATES TAX COURT

KRAATZ & CRAIG SURVEYING INC ., Petitioner v .

COMMISSIONER OF INTERNAL REVENUE, Responden t

Docket No . 26152-08 .

Filed

April 13,

2010 .

P's only .activity island surveying in Tennessee .

P does not employ any licensed engineers, is no t

.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), Temporary

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 constitutes 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 .

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 regulation is invalid

or, if valid, means that surveying and mappin g

SERVED Apr 13 2010

- 2 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

Association 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 35percent income tax rate under sec . 11(b)(2), I .R .C .

Maurice W . Gerard , for petitioner .

Caroline R . Krivacka , for respondent .

1,

3 OPINION

DAWSON,

Judge : Respondent determined a deficiency of $9,76 2

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-percent income

tax rate under section 11(b)(2) .' Whether petitioner is a

qualified personal service corporation depends upon whether

petitioner's sole activity of land surveying constitutes the .

performance of services in the field of engineering for purposes

of section 448 .

Background

This case. was submitted fully stipulated under Rule 122, an d

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 ,

Tennessee . Petitioner timely filed Form 1120, U .S . Corporation

Income Tax Return, for 2005, reporting taxable income of $48,808

and tax of $7,321 .

'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 .

2Respondent previously filed a motion for summary judgment

pursuant to Rule 121 . The parties' submission of the case fully

stipulated renders that motion moot .

- 4 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 .

Discussio n

I .

Applicable Sections of the Internal Revenue Code and

Regulation s

Section 11(a) imposes a tax on the taxable income of every

corporation . Although for Federal income tax purposes

corporations 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

The function test requires that substantially all of the

corporation's activities involve the performance of services in

the fields of "health, law, engineering, architecture ,

3Petitioner has not asserted that it does not satisfy the

ownership test and is deemed, therefore, to have conceded that

the ownership test is satisfied if its land surveying is in the

field of engineering .

5 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 activities .

- 6 II .

Positions of the Partie s

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 asse rts that the regulation

is supported by the legislative history and reflects the

congressional intent .

Petitioner asserts that the temporary regulation as

interpreted 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 . 2008-140, and Alron Enag .

& 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

summarize the relevant State law provisions .

III .

Tennessee Registration Requirements for Engineers and

Land Surveyor s

It is unlawful for any person to practice, either land

surveying or engineering in Tennessee unless the person has been

7 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 statutes .

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 practice of

engineering is governed by the applicable provisions of Tenn .

Code Ann . secs . 62 - 2-101. to 62-2 - 406, 62 - 2-601 ,

(2009 )

and 62-2-602

and regulated by the State Board of Examiners fo r

Architects and Engineers ..

A person who has not practiced surveying for at least 10

years and who wishes to practice land surveying in Tennessee must

pass the fundamentals of land surveying examination prepared by

the National Council of Examiners for Engineering and Surveying

(NCEES ) .

Tenn .

Code Ann .

sec . 62 - 18-10,9 . A person wishing to

practice engineering in Tennessee 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

8 principles and practice of engineering examination .' Tenn . Code

Ann . secs . 62-2-401, 62-2-402, and 62-2-405 .

Tennessee statutes and regulations do not define the

practice 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 measuring and locating lines,

angles, elevations, natural and man-made features 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

platting and layout of lands and subdivisions of land,

including the topography, 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 * * *

'The NCEES prepares separate fundamentals of engineering

exams for the seven major engineering disciplines (chemical,

civil, electrical, environmental, industrial, mechanical, and

other disciplines) ; two-thirds of the questions cover all

disciplines (breadth part) and one-third cover the specific

discipline (depth part) . Eleven percent of the questions in the

depth part of the fundamentals of engineering examination for

civil engineering are questions on surveying .

NCEES prepares separate principles and practice of

engineering examinations in 25 engineering disciplines or

subdisciplines . The civil engineering exam covers five

subdisciplines-construction ., geotechnical, structural,

transportation, and water resources and environmental--and

consists of a breadth part and a depth part . The breadth part

contains questions from all five subdisciplines of civil

engineering . The depth exams focus more closely on a single

subdiscipline of . civil engineering .

- 9 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 prepare 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 surveying :

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 subdivision 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

hazardous 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 on a

subdivision drawing unless that drawing bears the seal

of the engineer 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

- 10 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, appendix H, Design

and Practice Policies, .IV . Delineation of Engineering

and Surveying (Adopted Jan . 26, 1990 ; revised and

adopted Oct . 4, 1997 ; revised and adopted July 10,

2008) . ]

IV .

Casela w

Petitioner asserts that because land surveying in Tennessee

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, consistent 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 services 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,

- 11 education, experience, and examining board requirements but that

there are no standard minimum requirements for technicians who

perform geotechnical testing services under the laws of

Wisconsin . We concluded that geotechnical testing did not

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 "bookkeeping" (defined as a branch of

.accounting), noted that under Nevada law "public accounting"

includes "the preparation of tax returns", and considered that

the "field of accounting" historically included tax returnpreparation 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

12

that those activities were services in the field of accounting .

Cf .

Alron Engg . & Testing Corp . v . Commissioner ,

In Alron Engg . & Testing Corp .

supra .

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 .'

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 , properly includes surveying in

the field of engineering for purposes of section 448(d)(2) .

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 . Natura l

5The 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

interpretation, and in situ testing .

13

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 ambiguous with respect

to the specific issue" .

394 U .S . 741,

751

Id .

at 843 ; see also Bingler v . Johnson ,

(1969) (regulation was valid where definitions

of terms in the regulation "[comported] with the ordinary

understanding of" the terms) . Thus, we first must decide whether

the temporary regulation'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 unambiguously 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 determinative 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

- 14 Salazar , 555 U .S .

Rousey v . Jacoway

129 S . Ct . 1058, 1063-1064 (2009) ;

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 . , 467 U .S . 837, 843 n .9

(1984) . We begin our analysis with the legislative histor y

.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 . ,

A.

supra at 105-106 (Stevens, J ., concurring) .

Legislative History and Purpos e

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 . 99514, sec . 801, 100 Stat . 2345 . Before the enactment of section

448, taxpayers whose businesses did not involve inventories

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

15 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 corporations,, and entities where the

income is taxed at the individual 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) Congress 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 i f

substantially 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 11-285 (1986), 1986-3 C .B . (Vol . 4) 1, 285 ; emphasis

added . ]

The conference report shows that Congress intended surveying

and mapping to be treated as services performed in the field of,

- 16

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 chemica l

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"

accounting) .

'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 t o

allow the retained earnings to be taxed at the lower

corporate graduated rates . [H . Rept . 100-391 (Part 2),

at 1097 (1987) .]

17 Webster's Third New International Dictionary 413 (2002)

defines "civil engineering" as "a branch of engineering concerned

primarily with public works (as

land surveying , the building of

highways, bridges, waterways, or harbors * * *) but also

embracing private enterprises (as railroad and-airport building,

private building construction, and farm drainage)" . (Emphasis

added .) Thus, land surveying is within the ordinary meaning of

engineering .

C.

Other Indici a

"The traditional concept of civil engineering is the

integrated practice of engineering embracing a number of related

specialty areas including, but not limited to, construction,

transportation, structures, water resources . and environmental,

and geotechnical engineering ." American Society of Civil

Engineers (ASCE) Policy Statement 432 (first approved 1994,

adopted May 2, 2008) . '

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 engineerin g

disciplines, other than civil, of the importance of surveying t o

7The American Society of Civil Engineers, founded in .1852,

is America's oldest national engineering society, representing

more than 147,000 members of the civil engineering profession

worldwide . See http ://www .asce .org/inside/ .

k

f

18 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 planning and execution of

surveys for the location, . design, construction,

operation, 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

- 19 Analysis of errors and tolerances associated with

the measurement, field layout and mapping or other

plots of survey measurement required .in support 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~e' surveying, includes all

surveying 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 .

*

Rational e

Engineering surveying is one of the necessary

skills of a civil engineer . A civil engineer may

specialize in engineering surveying, thereby developin g

the necessary expertise in the execution and analysis

of measurements to the highest level practicable . The

engineering surveyor, as„a specialist, 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 an d

'Webster's Third New . International Dictionary 311 (2002)

`defines "cadastral" as "1 of or relating 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 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 ."

20 subdivision road alignment, road grades, cutting and filling o f

subdivision lots, and changes to the topography which involves a

final grading plan fall 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 . Surveying Engineering,

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 Engineers ."

Id .

at

102 .

D.

State Licensing Laws Not Controllin g

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 surveying

may be performed by an individual who is not a licensed engineer

- 21 does not remove those services from the "field of engineering" .

See Rainbow Tax SBrv ., Inc . v . Commissioner , 128 T .C . at 46 (tax

preparation and bookkeeping 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 o f

circumstances 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 .

Hoey,

Tower,

327 U .S . 280 (1946), and Lyeth v .

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 Unite d

States v . Pelzer , 312 U .S .

399, 402-403 (1941) ;

Lyeth v . Hoey ,

su ra at 194 . Thus, the provisions of the revenue laws "'are not

to be taken as subject to state control or limitation unless th e

language or necessary implication of the section involved makes,

- 22 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 . 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

23 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

history and regulations, application of the normal meaning of the

.term "health", "law", "engineering", "architecture",

"accounting", "actuarial science", "performing arts", or

"consulting", and examination of services historically regarded

as within the qualifying field . See Rainbow Tax Serv ., Inc . v .

Commissioner , 128 T .C . 42 (2007) .

VI .

Conclusio n

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 surveying ; and by other

indicia that surveying is regarded as within the field of

engineering . It implements the congressional 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 . 47 2

(1979), and Chevron U .S .A .

Inc . v . Natural Res . Def . Council,

4

- 24 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 sectio n

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 .

9Under Natl . Muffler Dealers Association v . United States ,

440 U .S . 472 (1979), an interpretative 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 statute" .