MARY ELIZABETH BEATTIE AND CATHERINE ANNE BEATTIE, ETC.,
PETITIONERS V. UNITED STATES OF AMERICA

   DAVID J. GREISEN, ETC., PETITIONER V. UNITED STATES OF AMERICA

   No. 87-1130, 87-1244

   In the Supreme Court of the United States

   October Term, 1987

   On Petitions for a Writ of Certiorari to the United States Court of
Appeals for the Ninth Circuit

   Brief for the United States in Opposition

            TABLE OF CONTENTS
   Questions presented
   Opinions below
   Jurisdiction
   Statement
   Argument
   Conclusion

                            OPINIONS BELOW

   The opinion of the court of appeals (Pet. App. 1-12) /1/ is
reported at 831 F.2d 916.  The opinion of the district court (Pet.
App. 13-39) is reported at 635 F. Supp. 481.

                             JURISDICTION

   The judgments of the court of appeals were entered on November 5,
1987.  The petition for a writ of certiorari in No. 87-1130 was filed
on December 30, 1987, and the petition for a writ of certiorari in No.
87-1244 was filed on January 24, 1988.  The jurisdiction of this Court
is invoked under 28 U.S.C. 1254(1).

                          QUESTIONS PRESENTED

   1. Whether amounts paid to petitioners by the State of Alaska
pursuant to its Permanent Fund dividend program constituted "income"
that can constitutionally be taxed (No. 87-1244).

   2. Whether these payments were excludable from taxable income as
"gifts" under 26 U.S.C. 102 (both petitions).

                               STATEMENT

   1. In 1976, the State of Alaska amended its Constitution to
establish the "Permanent Fund," into which the State must deposit at
least 25% of its mineral income each year.  Alaska Const. Art. IX,
Section 15.  The constitutional amendment prohibits the legislature
from appropriating any of the principal of the Fund, but it permits
the State to use the earnings for general governmental purposes.  In
1980, the Alaska legislature enacted the Alaska Permanent Fund
dividend program (the Act), 1980 Alaska Sess. Laws ch. 21 (reprinted
in Pet. App. 40-49), to distribut annually to residents of the State a
portion of the Fund's earnings.  Under this statute, each resident
over the age of 18 was to receive an annual dividend equal to one
dividend unit for each year of Alaska residence since Statehood.  1980
Alaska Sess. Laws ch. 21, Section 2;  Pet. App. 42-43.

   Section 1 of the Act described its "policy, purposes and findings"
(Pet. App. 40).  Section 1(a) stated (Pet. App. 40):  "It is the duty
and policy of the state with respect to the natural resources
belonging to it and the income derived from those natural resources to
provide for their use, development, and conservation for the maximum
benefit of the people of the state." Section 1(b) then described the
purposes of the Act as follows (Pet. App. 40-41):

         (1) to provide a mechanism for equitable distribution to the
      people of Alaska of at least a portion of the state's energy
      wealth derived from the development and production of the
      natural resources belonging to them as Alaskans;

         (2) to encourage persons to maintain their residence in
      Alaska and to reduce population turnover in the state;  and

         (3) to encourage increased awareness and involvement by the
      residents of the state in the management and expenditure of the
      Alaska permanent fund (art. IX, sec. 15, state constitution).

   Ronald and Patricia Zobel, who had been residents of Alaska for
only a short time, filed an action challenging the validity of the
distribution plan.  They alleged that the statute, by granting
benefits predicated upon length of residence, violated their right to
equal protection of the laws and their right to free interstate
migration.  While the Zobels' case was pending, the Alaska legislature
enacted "backstop" legislation to take effect if the durational
requirements were invalidated.  1982 Alaska Sess. Laws ch. 102,
Section 19.  This legislation retained the preamble and statement of
purposes of the 1980 legislation, but it provided that all persons,
including children, resident in the State for six months who intended
to remain in the State were to receive a dividend payment from the
earnings of the Permanent Fund.  When this Court invalidated the
original statute insofar as it granted different dividends to those
who had resided in Alaska for differing periods of time (Zobel v.
Williams, 457 U.S. 55 (1982)), the "backstop" legislation took effect.
 Pet. App. 16-18.

   As a result, petitioners each received dividend checks, $1,000 for
1982 and $386 for 1983.  The State attached to the checks statements
notifying the recipients that the dividends constituted income for
federal tax purposes.  /2/ The Beatties, petitioners in No. 87-1130,
timely filed federal income tax returns for 1983 including as income
the full amount of the dividends received for 1982 and 1983, and they
paid the taxes due in the aggregate amount of $101.40.  Greisen,
petitioner in No. 87-1244, received the $1,000 dividend paid in 1982,
filed a federal income tax return for that year reporting the
dividend, and paid a tax of $2.  Petitioners all filed administrative
claims for refund of the taxes paid on the dividends, and those claims
were disallowed.  Petitioners then brought these two refund suits in
the United States District Court for the District of Alaska, where
they were consolidated.  Pet. App. 19-23.

   2. The district court denied petitioners' motions for summary
judgment and granted the government's motion for summary judgment
(Pet. App. 13-39).  The court found that the intent of the Alaska
legislature in enacting the statute was ascertainable from the statute
itself and its legislative history, and therefore there was no factual
question presented in the case that would make summary judgment
inappropriate (id. at 25-28).  Relying on Commissioner v. Duberstein,
363 U.S. 278 (1960), the court held that the dividends were not gifts
excludable from income under Section 102 of the Internal Revenue Code
/3/ because they were payments by a State for a public purpose that
was not the result of donative intent (Pet. App. 28-33).  In so
concluding, the court found that the preamble to the statement of
purposes for the Permanent Fund dividend program made it "abundantly
clear that the legislature considered itself under some form of
obligation to make the payments in question" (id. at 30).  The court
also rejected the contention that the dividend payments were not
"income" that could constitutionally be subject to taxation,
explaining that the payments were accessions to wealth over which
petitioners had complete dominion and control and therefore fell
within the well-recognized definition of income (id. at 33-38).

   Petitioners' appeals were consolidated in the court of appeals,
which affirmed the judgments below (Pet. App. 1-12).  The court agreed
that the district court had acted correctly in resolving the case at
the summary judgment stage, because discerning the State's motivation
for making the dividend payments was a matter of interpretation of the
statute and its legislative history (id. at 5-6).  The court rejected
the claim that the dividend payments were not "income" and hence could
not constitutionally be subject to taxation.  The court stated that,
even if petitioner Greisen were correct in arguing that mineral
deposits belonged to the individual residents of Alaska rather than to
the State, that would still not advance his argument because the
dividends represented interest from the Permanent Fund, which would be
income regardless of the ownership of the principal.  Id. at 7-8.  The
court held that the payments were not excludable as "gifts" because
the State did not make the payments with donative intent.  The court
explained that, as the district court had found, the preamble to the
statement of purposes in the Act indicated that the dividends were
given out of a sense of moral or legal duty.  The court also pointed
out that the statement of purposes in the Act showed that the
legislature acted with the intent of benefitting the State.  Id. at
8-12.

                               ARGUMENT

   The decision below is correct and does not conflict with any
decision of this Court or of any other court of appeals.  Moreover,
the questions presented concern the treatment of payments received
under a program that is unique to the State of Alaska, and their
resolution depends in large part upon the particular circumstances
surrounding the enactment of that program.  They are therefore not of
broad significance outside the particular context involved here.
Accordingly, there is no reason for review by this Court.

   1. Petitioner Greisen contends (87-1244 Pet. 6-11) that the
taxation of the dividend payments violates the Constitution because
those payments are not "income" within the meaning of the Sixteenth
Amendment.  This contention is without merit for two fundamental
reasons.

   a. First, petitioner misapprehends the constitutional basis for the
tax on the dividend payments.  Article I, Section 8, Clause 1 of the
Constitution provides:  "The Congress shall have Power To lay and
collect Taxes, Duties, Imposts and Excises * * *." This Court has long
recognized that this provision confers upon Congress a comprehensive
power to tax.  See, e.g., Steward Machine Co. v. Davis, 301 U.S. 548,
581 (1937);  Brushaber v. Union Pac. R.R., 240 U.S. 1, 12 (1916);
License Tax Cases, 72 U.S. (5 Wall.) 462, 471 (1867).  This power is
not completely unfettered;  it was made subject to certain specific
constitutional limitations, including the requirement that "direct
(t)axes" must be apportioned according to population.  Art. I, Section
2, Cl. 3;  see also Art. I, Section 9, Cl. 4.

   It was always apparent that this limitation on direct taxation
applied to taxes on real estate.  See, e.g., Springer v. United
States, 102 U.S. 586, 600-601 (1881);  Hylton v. United States, 3 U.S.
(3 Dall.) 171 (1796).  In Pollock v. Farmers' Loan & Trust Co., 157
U.S. 429, on reh'g, 158 U.S. 601 (1895), this Court held that, like a
tax on real property, taxes on personal property and taxes on income
derived from property were also direct taxes.  Accordingly the Court
held that an income tax on rent, interest, and coporate dividends was
a direct tax requiring apportionment under the Constitution.  The
Court was explicit in stating that it was considering taxes only on
those forms of income.  See 158 U.S. at 635.

   The passage of the Sixteenth Amendment, which granted Congress the
power to tax "incomes, from whatever source derived, without
apportionment among the several States," removed the constitutional
impediment to unapportioned taxation of the forms of income involved
in Pollock.  But the Sixteenth Amendment imposed no limitations on the
comprehensive taxing power granted to Congress by Article I, Section
8, Clause 1, which remains the source of Congress's power to impose
any form of taxation, including income taxes.  The purpose and effect
of the Sixteenth Amendment was to expand Congress's power to tax
income.  As this Court recognized in the seminal cases decided soon
after the adoption of the Sixteenth Amendment and the enactment of the
Income Tax Act of 1913, ch. 16, Section 2, 38 Stat. 166, the Amendment
was needed to permit the imposition of "direct" income taxes without
apportionment, but it was not necessary for taxation of other forms of
income not at issue in the Pollock case.  See Brushaber v. Union Pac.
R.R., 240 U.S. at 17-18;  Stanton v. Baltic Mining Co., 240 U.S. 103,
112-113 (1916);  see also 1 B. Bittker, Federal Taxation of Income,
Estates, and Gifts Paragraphs 1.2.2, 1.2.3 (1981).  Thus, regardless
of the definition of the term "income" in the Sixteenth Amendment,
Congress has the power under Article 1, Section 8, Clause 1, to impose
an income tax that would not have been regarded as a direct tax before
that Amendment was passed.  Accordingly, it has the power to tax
income such as that received by petitioners from the State of Alaska.
/4/

   b. Even accepting for purposes of argument petitioner's premise
that the Sixteenth Amendment is the sole source of congressional power
to tax income, there is no merit to petitioner's contention that
taxing the dividend payments is unconstitutional.  It is well
recognized that Congress, in the enactment of income tax statutes, has
intended to reach all "income" within its constitutional power, except
that specifically excluded by statute.  See, e.g., Commissioner v.
Kowalski, 434 U.S. 77, 82-83 (1977);  Helvering v. Clifford, 309 U.S.
331, 334 (1940).  Indeed, this intent was explicitly stated in the
legislative history when Congress enacted the Internal Revenue Code of
1954.  See H.R. Rep. 1337, 83d Cong., 2d Sess. A18 (1954);  S. Rep.
1622, 83d Cong., 2d Sess. 168 (1954) ("the word 'income' (in Section
61(a)) is used in its constitutional sense").

   The commonly accepted definition of "income" was enunciated by this
Court in Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955),
where the Court concluded that punitive damages could be taxed.
Petitioner admits (87-1244 Pet. 6) that that definition -- "undeniable
accessions to wealth, clearly realized, and over which the taxpayers
have complete dominion" (348 U.S. at 431) -- covers the payments at
issue here.  Petitioner's contention appears to be that the Glenshaw
Glass definition is a definition of "income" only within the meaning
of Section 61(a) of the Code, but that the constitutional definition
of "income" is narrower.  But there is simply no basis for concluding
that this Court in Glenshaw Glass applied a statutory definition of
"income" that exceeded the constitutional power of Congress, thereby
unconstitutionally subjecting the taxpayer in that case to taxation.
Indeed, the Court specifically recognized that Congress intended "to
exert in this field 'the full measure of its taxing power'" (348 U.S.
at 429 (quoting Helvering v. Clifford, 309 U.S. at 334)), thereby
recognizing that the statutory and constitutional definitions are
identical.  Thus, petitioner's contention that the payments here are
not "income" that can constitutionally be taxed must fail.  /5/

   2. Petitioners contend (87-1130 Pet. 8-16;  87-1244 Pet. 11-12)
that the Alaska dividends are excludable as "gift(s)" under Section
102 of the Code.  The criteria for determining whether a specific
transfer of property is a "gift" or instead results in income to the
recipient were delineated in Commissioner v. Duberstein, 363 U.S. 278
(1960), where the Court explained that the "critical consideration" in
this inquiry is the transferor's "'intention with which payment,
however voluntary, has been made'" (id. at 285-286 (citation and
footnote omitted)).  The Court framed the inquiry into the
transferor's intention as follows (id. at 285 (citations and footnote
omitted)):  "(I)f the payment proceeds primarily from 'the
constraining force of any moral or legal duty,' or from 'the incentive
of anticipated benefit' of an economic nature, * * * it is not a gift.
 * * * A gift in the statutory sense * * * proceeds from a 'detached
and disinterested generosity,' * * * 'out of affection, respect,
admiration, charity or like impulses.'" Both courts below correctly
concluded that the payments involved here clearly were not gifts under
the analysis set forth in Duberstein.

   As the courts below found (Pet. App. 9-10, 30-31), the preamble to
the Alaska statute demonstrates that the Alaska legislature considered
it to be its "duty" (Pet. App. 40) to remit dividends to Alaska
residents from the income derived from the State's mineral resources.
Since the motivation for the payments proceeded from a perceived
"'moral or legal duty,' * * * it is not a gift" (Duberstein, 363 U.S.
at 285 (citation omitted)).  In addition, the Alaska legislature
clearly contemplated that the State would derive benefits from the
dividend program when it was enacted.  Among the purposes stated in
the Act were "to encourage persons to maintain their residence in
Alaska and to reduce population turnover" and "to encourage increased
awareness and involvement by the residents of the state in the
management" of the Permanent Fund (Pet. App. 41).  Indeed, it was
these elements of the program that impelled the Supreme Court of
Alaska to uphold the program as consistent with the Alaska
Constitution's requirement that any appropriation of public money be
made for a "public purpose." See Williams v. Zobel, 619 P.2d 448,
460-464 (1980).  These perceived and anticipated benefits to the State
also negate treatment of the dividend payments as gifts.  /6/

   Petitioners argue (87-1130 Pet. 7, 10-13) that the Duberstein test
should not have been applied, and the court of appeals instead should
have inquired whether the payment could appropriately be characterized
as part of a "quid pro quo" arrangement.  Petitioners further maintain
that the benefits to the State listed in the statute's statement of
purposes are not sufficiently "substantial" to make the dividend
payment part of a quid pro quo arrangement.  This argument is flawed.
Even if a "guid pro quo" analysis were substituted for the
well-recognized Duberstein analysis, that would not assist
petitioners.  Their opinion of the substantiality of the benefits
identified by the State is irrelevant.  The Alaska legislature
concluded when it enacted the dividend program that the State would
receive benefits in return for making the payments, and its
expectation of those benefits is a sufficient "quid pro quo" to
preclude the tax treatment of the dividend payments as "gifts" under
either analysis.  /7/

   3. Petitioners contend (87-1130 Pet. 16-17;  87-1244 Pet. 11-12)
that the district court should not have decided this case at the
summary judgment stage because the question of "donative intent" under
Duberstein is a factual one that should have been submitted to a
factfinder.  As both courts below correctly concluded (Pet. App. 5-6,
25-28), however, the question of the intent of the legislature in
enacting a statute is a legal one, to be resolved, as in any case
involving statutory interpretation, by reference to the text of the
statute and its legislative history.  See Heard v. Commissioner, 326
F.2d 962, 965-966 (8th Cir.), cert. denied, 377 U.S. 978 (1964).
Accordingly, as petitioners' own motions for summary judgment
necessarily recognized, there were no factual issues in this case
requiring a trial, and the district court therefore properly decided
the case at the summary judgment stage.

                              CONCLUSION

   The petitions for a writ of certiorari should be denied.

   Respectfully submitted.

   CHARLES FRIED

      Solicitor General

   WILLIAM S. ROSE, JR.

      Assistant Attorney General

   ERNEST J. BROWN

   RAYMOND W. HEPPNER

      Attorneys

   MARCH 1988

   /1/ "Pet. App." refers to the appendix to the petition in No.
87-1130.

   /2/ Pursuant to a request by the State, the IRS had issued a
private ruling, which stated that the dividend payments were taxable
income.  Priv. Ltr. Rul. 81-21-122 (Feb. 27, 1981).  The Internal
Revenue Service subsequently published Revenue Ruling 85-39, 1981-1
C.B. 21, concluding that the Alaska dividend payments are includible
in gross income.

   /3/ Unless otherwise noted, all statutory references are to the
Internal Revenue Code (26 U.S.C.), as amended (the Code or I.R.C.).

   /4/ Though he does not explicitly make the contention in this
Court, petitioner Greisen argued in the courts below that the citizens
of Alaska owned the State's mineral resources and hence the tax on the
dividend payments was not on income, but rather was a direct tax on
property.  As the district court demonstrated (Pet. App. 36-38), the
premise of this conention is erroneous;  the Alaska Constitution
itself makes clear that the mineral resources belong to the State.  In
any event, even if petitioner's premise were correct, Stanton v.
Baltic Mining Co., supra, is direct authority for the proposition that
income derived from such mineral resources is subject to federal
taxation.

   /5/ Petitioner erroneously contends (87-1244 Pet. 8) that Simmons
v. United States, 308 F.2d 160, 167-168 (4th Cir. 1962), conflicts
with the decision below because it recognizes the Glenshaw Glass
definition as an interpretation of the Sixteenth Amendment.  Clearly,
Simmons creates no conflict with the decision below.  By petitioner's
own admission (87-1244 Pet. 6), the payments involved here would be
income if the Simmons definition were applied.  And the court below
found that the payments were income.  The fact that the court below
did not find it necessary to invoke Glenshaw Glass to reach the same
result that the Fourth Circuit concededly would have reached on these
facts does not create a conflict in the circuits.  Nor do the
commentators cited by petitioner (87-1244 Pet. 6-7) support his
position in any way.  They merely express the view that the Glenshaw
Glass opinion did not clearly indicate which of the two theories set
forth above provided the basis for the Court's conclusion that the
punitive damages there could constitutionally be taxed as income.
Either of these rationales would similarly require rejection of
petitioner's contention that the Constitution does not permit taxation
of the type of income involved here.

   /6/ Petitioners assert (87-1130 Pet. 9) that these stated purposes
are outweighed by the other purpose listed in the statute -- the
intent to "provide a mechanism for equitable distribution to the
people of Alaska of at least a portion of the state's energy wealth"
(Pet. App. 40-41).  But there is no basis for concluding that this was
the "dominant reason" (87-1130 Pet. 9) and therefore no basis for
ignoring the other stated purposes, which manifestly preclude gift
treatment.

   /7/ Moreover, Section 542 of the Highway Revenue Act of 1982, Pub.
L. No. 97-424, Tit. V, 96 Stat. 2195, reflects the apparent
understanding of Congress that these dividend payments are taxable.
That statute, which was proposed by Senator Murkowski of Alaska, was
designed to relieve some recipients of the Alaska dividend from the
necessity of filing an income tax return when they owed no tax because
of the $1,000 personal exemption provided by Section 151 of the Code.
It excuses from filing "an individual whose only gross income for the
taxable year is a grant of $1,000 received from a State which made
such grants generally to residents of such State." The text of the
statute itself characterizes such payments as "gross income" and
therefore belies the contention that they are excludable from gross
income under Section 102 of the Code.