Case Title: St. Amour v. Dept. of Social Welfare

Citation: 

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 1991-12-01T00:00:00Z

Document:
NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
 that corrections may be made before this opinion goes to press.


                       Nos. 90-472, 90-475 and 91-533


 Cynthia St. Amour                            Supreme Court

      v.                                      On Appeal from
                                              Human Services Board
 Department of Social Welfare
                                              December Term, 1991

 Olive Belanger
      v.

 Department of Social Welfare


 Cynthia Weed

      v.

 Department of Social Welfare


 John Wesley, Chair

 William R. Dysart and Donna Sutton, Paralegal (On the Brief), Vermont Legal
   Aid, Burlington, for plaintiffs-appellees St. Amour and Belanger

 William J. O'Neill, Vermont Legal Aid, St. Albans, for plaintiff-appellee
   Weed

 Jeffrey L. Amestoy, Attorney General, Montpelier, and Christina Byrom,
   Assistant Attorney General, Waterbury, for defendant-appellant


 PRESENT:  Allen, C.J., Gibson and Johnson, JJ., and Peck, J. (Ret.),
           Specially Assigned



      GIBSON, J.   The Department of Social Welfare appeals from a decision
 of the Human Services Board ordering the Department to consider depreciation
 costs in calculating the net income of self-employed food stamp recipients.
 We reverse.
                                     I.
      Petitioners appealed to the Board from the Department's termination or
 reduction of their food stamp benefits. (FN1) They argued that by failing to
 consider depreciation as a cost of producing self-employment income, the
 Department overestimated their net incomes and improperly reduced their food
 stamp benefits.  The Department maintained that the applicable federal and
 state regulations (FN2) expressly state that depreciation is not an allowable
 cost to be subtracted from self-employment income.  Relying on legislative
 history from the Food Stamp Act of 1977, and ignoring legislative history
 from the Food Stamp Act Amendments of 1980, the Board concluded that
 Congress intended to include depreciation as a cost of producing self-
 employment income.  Based on its conclusion, the Board construed the current
 food stamp regulations to forbid self-employed food stamp applicants to
 subtract the accelerated forms of depreciation permitted by the Internal
 Revenue Service, but to allow such applicants to subtract "specific
 decreases in the value of [their] property and equipment through wear,
 deterioration, or obsolescence."  The Department appeals from that
 determination.
                                     II.
      In order to review the Board's ruling, we must retrace the history of
 the food stamp statutes.  Upon the expiration of the Food Stamp Act of 1964,
 Congress passed the Food Stamp Act of 1977.  Pursuant to that act, "income
 for purposes of the food stamp program shall include all income from what-
 ever source excluding only . . . (9) the cost of producing self-employed
 income . . . ."  7 U.S.C. { 2014(d) (1988).  Subsequent amendments to the
 act have left this language unchanged.  The act is silent as to what
 constitutes "the cost of producing self-employed income"; however, the 1977
 House Committee on Agriculture noted that the existing regulations excepted
 depreciation from the costs of producing self-employment income, and then
 stated as follows:
             While there is no reason to permit for food stamp
           purposes the accelerated forms of depreciation afforded
           under the Internal Revenue Code, some factor for wear
           and tear of machinery and buildings, obsolescence and
           accrued replacement costs should be inherent in doing
           business.  The full amount of self-employment income
           would be recognized as income, but then there would be
           an exclusion for the cost of producing that income.

             Thus, the Department would be expected to revise its
           regulations in this regard to allow some form of
           depreciation in arriving at "net" business income.
 H. Rep. No. 464, 95th Cong., 1st Sess. 25, reprinted in 1977 U.S. Code Cong.
 & Admin. News 1978, 2001-02.  These comments were not discussed in the House
 or Senate conference reports, but the Department of Agriculture did revise
 its regulations to allow some types of depreciation to be subtracted as
 costs of producing self-employment income. (FN3)
      The Food Stamp Act Amendments of 1980 did not change the language of {
 2014(d)(9).  But in the House Conference Report, the conferees "note that
 the Department's regulations defining self-employment income . . . provide
 for allowing as a cost of producing self-employment income depreciation 'for
 equipment, machinery, or other capital investments necessary to the self-
 employment enterprise' and intend that the Secretary no longer permit
 depreciation to be subtracted in determining net self-employment income."
 H. Conf. Rep. No. 957, 96th Cong., 2d Sess. 29, reprinted in 1980 U.S. Code
 Cong. & Admin. News 1057, 1069-70 (emphasis in original).  As a result of
 the conferees' comments, (FN4) the new regulations promulgated in 1982 by the
 Department of Agriculture provided that "[i]n determining net self-
 employment income, the following items shall not be allowable as costs of
 doing business: . . . (D) Depreciation."  7 C.F.R. { 273.11(a)(4)(ii)
 (1991).  As noted, Vermont has adopted this regulation verbatim.
      Focusing on the 1977 House Committee Report, the Board concluded that
 Congress clearly intended to allow depreciation as a cost of producing self-
 employment income, and that the only way to reconcile the current regula-
 tions with that intent is by considering the term "depreciation" to mean
 "the IRS method of calculating depreciation."  (Emphasis in original.)
 Thus, the Board concluded that although the Department "need not be bound by
 any amounts claimed by the petitioner[s] as 'depreciation' on their IRS tax
 returns," it must allow decreases in the value of petitioners' property and
 equipment through wear, deterioration, or obsolescence, as a cost of pro-
 ducing self-employment income.  In support of the Board's decision,
 petitioners argue that the 1980 House Conference Report is not persuasive as
 to the intent of the statute because it is a statement of the members of a
 subsequent Congress regarding a provision that was not amended by the 1980
 Act.
                                    III.
      At the outset of our review of the Board's decision, we point out that
 the Department of Agriculture explicitly stated that its proposed change
 disallowing depreciation as a cost of producing self-employment income was
 suggested by the 1980 Conference Report, which unequivocally stated an
 intention to no longer permit the subtraction of any type of depreciation
 from self-employment income.  See 46 Fed. Reg. 4646 (1981).  Therefore, the
 Board's construction of the Department regulation was a determination that,
 as written, the regulation is inconsistent with the federal food stamp
 statute.
      The food stamp statute is silent as to what constitutes the costs of
 producing self-employment income, but it authorizes the Secretary of Agri-
 culture to issue regulations consistent with the act that are appropriate
 for the effective administration of the food stamp program.  7 U.S.C. {
 2013(c).  If a statute is silent with respect to a specific issue, the
 courts must determine if a challenged agency regulation "'is based on a
 permissible construction of the statute.'"  Lepage v. Yeutter, 917 F.2d 741, 743 (2d Cir. 1990) (quoting Chevron, U.S.A., Inc. v. Natural Resources
 Defense Council, Inc.,