away from tax day and during the height of the crescendo of tax preparation season somewhere out there i'm sure there are tax preparers who are puzzling through the morass of the cases in this area without being able to figure out should handle their particular case they can probably do as well by plucking the petals off a daisy rather than trying to figure it out from the case law the context here help to remind us that for public tax compliance simplicity is better than complexity and clarity is better than inscrutability by example if there were any doubt that there is uncertainty in the law consider our situation where the government first issued the taxpayers a statutory notice of deficiency for additional taxes saying that the amount in question was not excludable i filed a petition to the united states catchword within the ninety day window provided by law and a few days before the end of the ninety day window we got a letter saying oops we're sorry you don't know anything go talk to counsel's office to have the have the appropriate paperwork m excerpts of record page forty six is where you'll find that letter from the i r s so the iris itself cannot figure out what they want to do in a situation like this will eventually wind up in for the tax court judge and you have a have a trial in the did didn't come out well for you yet if that and so obviously counsel did not by the wishes of his client to have the case go away what's wrong with the decision of the texas court the well aside from the past fact that it took two years to come out and cites only two cases both of which were in my favor without explaining why they are against me i can't think of too many other problems over plus i lost in an area where there are cases i believe at least as expressed in my review back to at least one hundred forty six if not earlier which support our view of the law although i don't want to harp on the whole historical context because what i'm really more concerned about your honor is to emphasize on a note of simplicity that i talked about earlier in my presentation here i want to emphasize that there are some much more recent cases t us the guidance that we need and i'm sticking primarily of the of the given space which is so important it's not an appellate case i understand and maybe it's a little foolish to be citing trial court cases to an appellate form but the  so thoroughly reasoned and and vividly reflects an understanding of the system involved the forepart system involved in the pensions disability pension service disability pension service connected disability pensions i should say for public safety employs the the regulation this specific problem in the regulation is it is in the some paragraph b third sentence which as i read it codifies existing offing that if you have a service pension it doesn't it is it is not going to be tax excludable even if you have a workplace injury unless the pension is authorized under a worker's compensation law and the worker's compensation law a qualifying worker's compensation law court in the cases is you have a law that purports to compensate to replace injuries  you have a formal finding by relevant or that there is a workplace injury and it is terminations by relevant or granting a pension in compensation for the workplace what happens when part of the pension is for worker's comp and part of it is based on your just your service or your age what happens if part of what i've been hearing part of the pension is for worker's compensation and part of it is because of your link the service in your age well the point that i'm going to be heading toward arising out of arising out of the givens precepts which is you asked why was this pension granted you the analysis is full at that point and whether the pension that granted under the worker's compensation law has tom ponens that mirror looked like a cross reference to a service pension is it does not matter because the reason why the pension was granted to begin with is that it is the authorization for that pension arose out of workers compensation you have a case the whole so holds his or case and so holes other than this givens case perhaps  your position is that regardless the component of the payments if it's part of injury disability workman's comp and park service payment the regardless that the service payment is based on age and years of service that if the pension is granted to the pension the account work related disability accident or injury right workplace injuries and for workplace injuries and therefore if you will the two could be the availability of sick leave for non workers cop type injuries poison to as a worker's comp  payment and therefore it's include of all income and the given score it takes a look at this and says the fact that some of the compensatory elements of the act might be the same as those enjoyed by other county employees who have not suffered in industrial injuries in no manner whatsoever served to remove such compensation from outside the purview of the worker's compensation what was he compensated for injuries sustained in the taxable income sick pay is taxable income outside the worker's comp arena a cash flow modeled on a service pension likewise biology should administrative agency granting the workers compensation pension stated in its letter to the taxpayer and this is in the record your honor stated in it s letter under oath already of a california statute income that he had been receiving as a service pension while waiting for the determination of whether he bitch representing three people campbell scott and wyman i'd like to respond to one question the question if i understood right was what's wrong with the steward opinion now obviously i don't represent mr stuart taylor did a good job on that but my response and because i do respond to district court opinions in all three of these cases essentially followed s my point that i attempt to make a sewerage was issued by one judge it was not and that judge judge foley did not review given its givens was a full court opinion and united states tax court which would normally be more binding than a single judge opinion he didn't discuss givens and givens held and hold that it's itself it says one of the four says amounts received and frankly that's not capable of any ambiguity because first of all amounts received is what you get in the paycheck and the all of the declarations of my client say that they took what was given so the statute itself doesn't need any this is sam adams receiving i can't remember the exact words on account of on account of work related the statute your honor but something portion of that amount was not received on account of the work related injury was received because of years of service and the need to admit i don't agree with you owed my answer your honor is the california code which i have in front of me three one seven two seven point four it states and i won't take the court's time to read it but it says that that statute takes precedence over all others and it is limited to work related disability and it determines what the how the monthly instalments are paid and so you have to be in a service connected disability for that statute thirty one seven to seven point four to apply and an answer is that there's only a part of a formula to be used there is also  into full regular retirement that the part is not enough it has to be a conversion to a non disability pension  a card on seven forty six or seventy four seven forty seven says the reduced payments do not convert to a non disability pension and i think that what card first of all held totally exclud and so did freeman under similar facts the question was asked whether the whether there is a case in point i submit both those cases are in point and as of course the court most of the court is four eight five six to one bock and follows the card now again it's a tax court summary opinion and it would not be binding on on your honors but it states it has to do with a person who lived in montana and he worked as a police officer in minnesota and retired and it discusses the card and it says we are bound under the tax court gols runabout no no you are you're right about that the that's different from in our case isn't it because in our keys stanton he gets one half of this fee because he has a disability income but because he has time in service which was not  the car he gets more that's right during the time i'm sorry you're correct your honor but my answer is that during the time he was on a work related disability it accrued pension to him as  the courts read that case but that is not the sole criterion the card said it is not a transfer to non work related regular pension here we  formula that is only part of what my clients receive us firefighters who are disabled and so it's merely a method of a part of a computation which has limitations it has  much goes in and can't be over a great amount it is not a total substitute if you will say ok now you know all of your disability pension now you are getting a regular pension on retirement that isn't done declarations written record and say we only get one check and we did not elect anything and so we took what we were given and so really there is no demarcation in th statute i just read part of it doesn't say now after a certain time you're on regular retirement i submit to your honor's that it has to be clear that there's a substitute and say now you're no longer getting disability we course in the briefs and say wait a minute a firefighter who is disabled occupationally can't go back to work they're good they're done their job it's over unlike most professions because there are dressed in a activity that takes a lot of physical toil and often makes people become disabled in a course of their employment they have a special statute and says look you get disability from the first when you apply that to my clients the disability occurs even if you work one day if you're just a fireman a miner standing even if you're training as a fireman and you become disabled you get it forever no matter what how long you work there it's just there's a little more under a formula if you work there a long time this comes as you've asked me says three one seven to seven point four i'm having a little bit of difficulty understanding maybe you can help me with this it seems to say in the first paragraph the first sentence that any retirement for service connected disability he show receive an annual retirement allowance payable monthly sums equal to one half of his final compensation ok that's right now the next sentence seems to say the same thing but to use different sources for the payment explain that to me has not withstanding any other provision of the chapter any member upon retirement for service connected disability shall receive a current service pension or a current service pension combined with the prior service pension purchased by the contributions the county and district is set or which will equal one half of the final compensation what is not saying the same thing twice once does and but then it goes on to say something else or if qualified for a service retirement he shall receive his service or time allowance if such allowance is greater now your position is that by putting that phrase into the statute the legislature said whatever a service related disability guy gets he gets under this paragraph and his service retirement allowance is considered a payment for his service related disability retirement that's my position your honor doesn't make any difference on how you counted up or what you what component you put into to determine how much they get as he could have gotten  service retirement a lie was whether he'd ever been injured or not based on years and service that yes would you say yes it's mentioned in this paragraph converts that ok now you're going to go slowly on a regular non disability pension that supplants the prior amount they merely say this is how we compute it but in order to get through the requirements you have to take a course of physical and it has to be as it's as a statute says service connected disability i say once you get into that other we have with we don't deal all the time in california pension over and over again to give deference to the regulators interpretation who says you know why should we do that in this case the reason your honor is that when you even presuming for this argument for sake of answering the question chevron applies chevron say has completely that if it does apply first you have to decide whether the statutes ambiguous then if it does apply you have to look into the intent of congress the inten of congress from one thousand nine hundred on was that all of the persons who qualified in arduous ak occupations who had on the job injuries that income will be totally exclud unusually and internal revenue code why don't force as all a gross income is exclude of all if you are paid on a service connected disability pension the code section that the government site sixty one has an exception of one hundred for my problems is if the set you it is not unambiguous in other words that is writing to you this is step one and in chevron that's right a chevron murphy which is cited in my brief gives the history of impairment of human capital and the history murphy is or i don't have sight of the court because it cited in my brief burpee were reviewed the history of injuries two people work related and they get into the theory of human capital  congress at that time did not think that human capital should be taxed and so the history is that this all should be excludable now that may not be the present theory but the answer to chevron has that big internal revenue service can't legislate it's up to congress if they want to change that then they can but the statutes been there for almost one hundred years to me actually this is following a by jabez question the lynchpin of your argument is that this regulation is invalid is outside the scope of the statute is that it's right there's no gap to fill your honor ok now if we were to disagree with you about that was the stat was the regulation properly implemented here is  anything incorrect about the way either the tax court or the district courts actually implemented the regulation well i just read what the court said on whether the tax court was incorrect because givens i think is really the case in tax court today you know there are two sides to this story even if that's right if we agree that that the regulation is valid i know you don't agree but if we decide that the regulation is valid does that cook your goose basically not i don't quite agree on i've read that regulation of arse many times says to the extent right and it's a little vague in itself and then it repeats of the sense of if it's work related on the job injuries or says to the extent in the ruling was half of merely have a formula the regulations don't apply the internal revenue service did did not agree with their own regulation the other argument which is a medley different from my answer the internal revenue service the section on service connected disability doesn't convert the payment from one of a service pension into a worker's compensation pension by merely mentioning it as going to be paid to a man who is disabled and retired from service connected disability is transmitted into a worker's compensation payment i think that you could have a different situation which if you gave it to everybody but you're not giving it everybody you're only giving it to people that are qualify for the service retirement and in section thirty one six six ty three point two five of the california government code there are all age and service are linked to service factors you have to be you could retire at the mandatory age of sixty or you could have twenty years of service or you could be eight fifty with ten years of service and so you have to meet the service requirements to get it and that is what the regulation but i understand your position perfectly and it's and it's a reasonable one you know my my them into a worker's compensation payment if the retirement is caused by service related disability as the knee but he argues that i was i think the service actually tried to argue something similar in the givens case lost their they try to take a somewhat complicated scheme but trying to simplify i there was three there was a for an initial year where you got paid in richmond it's because it's not was tax exempt and the second year you could get the workman's compensation benefit or you could get sick pay if it was higher than the workman's compensation benefit and then there was a third amount really wasn't relevant but the the service tried to say that well because part of this sick pay is service related th e whole thing is not under workman's compensation act and they lost because they tried to take and make it all or nothing position and in the action on decision where the service disagreed with givens it pointed out that is not made the right argument that had not made the argument that is relevant here which is it should have been arguing there that only the amount of the sick pay that was in excess of the workman's compensation have here where it says if you qualify for a service requirement tarmon you're then you get this additional benefit and i think that perhaps the wiedmaier cases out of the six circuit which dealt with the question whether the regulation was valid or not is instructive in this case the six circuit expressly held that the regulation was valid and explained that the clear purpose of the regulation this is a single tween benefits that are intended to compensate an employee for a lost earnings capacity due to injury and those benefits that are simply a retirement pension  in consideration of the past services and i think that the language in the regulation talks about to the extent of is significant that you can have a  benefit here and i think there was a regulation here recently does that i would also note that revenue to the extent there is no case directly on point that we have revenue rulings that are directly on point and under this range court's decision in cleveland indians we have or when you're in charge a regulation that these revenue rulings are entitled to substantial deference and the specific revenue rulings that i would cite would be eighty dash forty four and revenue ruling seventy two dash forty four both of those involve statutory schemes that are are really not meaningfully distinguishable from this case they can supply our difference rather than chevron deference certainly our deference would apply but cleveland indians was a situation where we had a treasury regulation and regulation that was the end of the matter to the extent that there was any ambiguity in the trade is there there was actually an ambiguity treasury relation we don't interest me here we think the plain language of the regulation covers it and in both get your service retirement if it was greater and the service they're held applying to regulation that the fifty percent or the sixty percent was nontaxable but the excess amount was tax i'd also like to i don't think there's any question that the regulations here is valid it was promulgated under section seventy eight zero five of the internal revenue code which allows the secretary of treasury to propagate all needful rules and regulations and as pointed out that these regulations are entitled to chevron deference and the supreme  court confirmed that in a two thousand and eleven decision called mayo foundation which is discussed in our brief and you essentially if the statute does not of directly address the question and we have a reasonable interpretation the regulation is act as reimbursement for aught personal injury or sickness sickness is exempt from tax but it doesn't this fact it doesn't have any definitions it doesn't give examples or explain how it applies and it certainly doesn't talk about a situation where someone's going to be getting a benefit if and only if they qualify for a service retirement which are based upon agent length of service services and as i previously mentioned the six circuit actually addressed the validity i think in general there's a multitude of cases but i think the biggest distinguishing point is that none of them this address a situation where they prevent if it is provided if and only if you qualify for a service retirement that is based on age or length of service or both and so that but as to if a worker were disabled the first day on the job he'd be in total to get half his salary but he'd have to wait until he was fifty five or whatever other age is necessary before it could be bumped up to service pension level got a situation where you got a disability retirement pension based on your occupation injury don't you haven't been working very long and then according to these and then this happened in three separate cases   they can't take away the disability situ pension that situation because he never had any service he never qualify for any service he didn't have any service that would qualify him for their retirement and so therefore in  card they continued to give him the tax exemption even though the amount went down and equaled what you might have died if you qualify for service retirement but the pointed out that he only qualified for disability he did not qualify for service requirements of the court i think is distinguishable from the situation that actually supports our position on close reading  taylor will give you a minute and i think mr give us additional have a minute i would like to touch briefly on a point i made in my original presentation speaking about deference to administrative agencies excerpts page thirty eight his letter  taxpayer saying that he had been granted a disability pension this is a few years after his actual and in his service and it says the effective date is october one two thousand  retroactive to date following last day of compensation that was actually when it was agreed that he had terminated his paid active duty service and it transitioned into the worker's comp mode  believe that the administrative agency tasked with implementing the statutes thinks that this matters that you have a a worker's comp retirement when it is determined to be a worker's comp retirement even as happened mr seward's case they retroactively characterized his service retirement that he took while he was waiting for the for the determination case in may breed a stipulation was made that the individual had been the clock had been ticking for him on his service can june the two sides stipulated to that in court level the two sides did not stipulate in fact the two car to two sides to played to the contrary saying that he had not been accumulating his service pension points i see that you are a type thank you thank you we know that statute does not give specific allowance or instruct the internal revenue service to write regulations under one hundred four that's clear and i don't think there's a argument about that there is the argument that seventy eight o five that's a statute of course that generally gives the i r s a chance right of regulation but it says that it is limited seventy five says to need for regulations out here again we have a statute passed by congress saying all the work related disability payments are excluded so then the revenue service coming in and said wait a minute we want to have a rule that only part is excludable that is the epitome of legislation once again that's up to congress there are very few statutes again that have the say that all incumbents exclusive or all payments or exclude all of this is one of them there's a lot of discussion on which cases are and point freeman which i commend  uncontroverted facts show that freeman sickness developed when i was in active service this is all the showing that is required i submit to that givens is in point and should be followed i realize this tax court case freeman discusses all kinds of prior cases an unusually in internal revenue and many other laws we don't have an amendment of this particular clause in almost one hundred years so all of those prior cases discussed and there was a case called prints that had a combination so there are cases with a whole sense of of the cases that are bent on this and there are several is mansion was distinguished input card a card in the ninth circuit held specifically discuss page the next seven seven six four believe it is here the cars disability benefits do not transfer to a service retirement pension and then it strongly saying that these pensions and none of the amounts of the pensions for work related disability are taxable the if you wrap up appreciated they are running out of time thank you your hon