# UNITED STATES TAX COURT

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## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

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" .

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Atax-court%3A3193a6e45a87b215. Public record. Not legal advice.