definition of sale contained in the fuel excise tax provisions is the definition that covers it in the transaction and that definition has two components there must be a transfer of title to the goods in exchange for consideration here a r transferred the fuel mixtures to the anaerobic digester companies and in exchange the anaerobic digester companies paid for the fuel but they also provided the additional consideration of assuming the liability  transferred to the digester companies is not quantified and the in the record however what i think the claims court has overlooked is that the fuel mixtures did provide a benefit to the the other form of consideration your honor and i think this is what's been left out of the discussion the other form of that consideration is the digester companies could use part of the by products of the corn still if they could use the methane and they did use and the method increase production of the fuel products increase the methane production and they were able to use the methane then to create electricity the other thing that they did for the companies was they disposed of the final by product as one of the by products they couldn't use and they had the obligation to dispose of those by products and this court said in caltech that if the purchaser assumes the liability assumes contingent liabilities and their liabilities associated with disposal of these not the economic substance of the act is truly a sale st of all we don't believe the economic substance doctrine applies to this type of tax credit this isn't well this is an incentive tax credit like the tax credit in the th circuit opinion of sex which this court cited in salem financial in salem financial the court noted that we don't expect companies like this to make a profit when they're dealing with to create new fuel resources so here we don't think the economic substance doctrine apply and this court in salem financial agreed when you have a nascent technology such  other one to simply return the money to them if you exclude the contingent liabilities then yes i would argue it's still a sale under the only case that's dealt with the sale of the fuel tax  the excise tax is a case called bass station and while i realize it's not well i think if you're only giving that is example perhaps someone could argue it's not a sale however i'd like to point out the best station case because it's instructive on how now that the government generally view sale under the fuel excise tax regulations if you look at basque station there was no profit involved in that transaction whatsoever what happened in best station was that the best station  purchased the entire shipment of fuel from texaco and transport petroleum transported provided services to them of transporting the fuel transport petroleum could meet the minimum purchase requirements to buy fuel from texaco so what would happen is an exchange for performing those services and paying for the gas that they gat where there was no profit they just paid at cost the guess they got the th circuit said yet that was a services or other things and here we have services where the services were flowing to you that's right your honor we provided title to the goods we had title to the alternative fuel mixture and then you paid for the yeah sure honor but still there was a disposal obligation at the end of the processing that had to be complied with and what i want to do is step back a little bit and look at the economic substance cases and frank lyon the supreme court case all of those cases say you have to look at the market realities in existence at the time that with the the court for crimes did know your honor we don't think we don't think they did because we only there were only eight hundred d digesters in the united states that were producing their own industry in energy out of three thousand four hundred and fifty dollars digesters in the united states so there wasn't a market for this fuel that the tax credit was to incentivize people to learn how to do this because sometimes people get stuck in a rut and they go oh we've never done that before we don't want to think about it this tax credit incentivize these individuals to go out and try to sail these alternative fuels to the the inner of the digesters because they were creating net thing they could create methane that could then produce electricity and then if they produced enough electricity they could sell that electricity to local power companies that had clients have done that in the past so this was an industry that congress was trying to spur with this tax incentives and it did have i mean even if you think the economic substance doctrine applies this transaction had economic substance this was a paper transaction it wasn't a structured transaction in an accounting firm or a wall firm with a bunch of paper that generated the have basis and then a loss they they went out and they incurred economic risks and in pursuing this in pursuing this they they had to pay for transport they had to pay for insurance to cover any liability in the record they had to deal with problems of their buells problem or a problem i have one or another question before you sit down and and so what was the expectation pretax profit the greater the pretax profit the the the tax credit serves the purpose of pretax cut profit but what we also codified there must be some expectation of the tax there was but what they had to do is once they got the digester company creating excess methane what our clients were trying to do was we were going to go to the facilities and establish stations they're using compressed natural gas to fuel municipal vehicles so if i would you have titled resulting i think you transferred all title to underlying corms village well the goal would be to create the facilities that ok you would agree that there was there was at least you know on its face some consideration right whether it was meaningful consideration or not is really the question  no no i wouldn't agree with that so you would we would agree that there was that some of the digester operators gave them somebody was eight thousand nine hundred and fifty dollars total for th forty million gallons of mixtures but that was that wasn't consideration for anything it was window dressing for for tax credits to to make it try to give it the appearance of the sale  thousand dollars in order to get them to take those mixtures off their hands what the reality is that each year was not selling mixtures it was buying disposal services  sure you know my my friend on the other side talked about the basque station but what was dispositive there was that the transfer it wasn't a gratuitous transfer it was that the other person paid something it didn't  credits like this is to incentivize new nascent technologies i mean congress recognized that those those companies wouldn't be profitable or certainly wouldn't be profitable for some period of  time yeah that's right that's right and it's not a position that they had too bad to make a profit on the sales of this but congress did put limits on the credit and one of the limits that put was that you actually have to sell mixture and  these transactions they're just they're they're not sales there was no transfer of property in exchange for a price there was a receipt of services in exchange for a price  elements become fungible i mean once you start the digestion process you can't tell the difference whether this percentage wants to a c r with that percentage or somebody go yeah that's right at least thinking to show that that growing has been sold or that they're going that particular green has been so all that happens in a show means that you sold off grain in a certain price twenty five percent of that belongs to me wh question something like at work here well because here is the situation they're not relieved of their duty to to substantiate their claims and part in part of the cool part of the plane you're talking about n the way that at least the w r a did their operations it would be impossible to to know how much of their product was actually resulted in engine purposes oh well we've got our position isn't that it was that it never did our position is that they can't substantiate the amount that was and that's their burden they don't have the burden of proof yes we would say that does be because the that the credit is based on the amount and so they put in forty gallons of substance but  argument that they're entitled to some lesser amount of the credit their position is that all forty million gallons that is where they're entitled to a fifty cent per gallon credit and so that they were entitled to all twenty million dollars based on all forty million gallons being sold for uses fuel translate to saying that they had to have a reasonable belief that the amount of fuel created was was going to correspond in any meaningful way to that to the amount transfer d well so on the on the question of substantiation it's still it's an issue of well what was the basis for for saying that they reasonably believed that it was going to be that all forty million gallons were going to d there's no no basis in the record for them to say that even if even if you count all of the substances from different suppliers that the w r e brought in basically about half of it was ultimately used to generate significant is that it is that the only is that it didn't use the taxable fuel that made it a mixture so a alternative fuel make sure consists of alternative fuel mixed with taxable fuel which in this case was diesel and when congress created back credit it simultaneously created a credit same zero dollars fifty cents per gallon for using alternative fuel that's not mixed in doing it that well but the alternative fuel credit however is limited strictly to uses in it for vehicles so you can if you're using alternative fuel by itself plain alternative fuel a c r knew that they would the government would pay them nothing to use forty million gallons of these corn still and so forth in an anaerobic digester because that isn't i use and so one of the principles that he did mid that the only reason they added this tiny percentage of diesel fuel was to generate tax credits and he said quote it has a splash of diesel fuel in it so we can generate tax credits mixture can claim the credit for any uses fuel but pure alternative fuel only gets credit only qualifies if its use the vehicle fuel they would have set up that regime unless they intended that the whole mixture would be used as fuel taxable fuel and the alternative fuel that are in the mixture and in this case it is undisputed that the diesel fuel in their mixtures did nothing in the process you put you put their mixtures with diesel fuel in there and you get out some mild gas and digest eight and you get out the diesel fuel it passes through unaltered it contributes nothing to the production of energy it was totally sup and so what what really then has applied but he c r what what the incentive is was for them to waste forty thousand gallons of diesel fuel because that's the only difference taxable fuel and so and i appreciate sort of your confusion because why the congress set it up that way is not clear but they very definitely did set it up that  to you have to move it to claim of the alternative fuel mixture credit you have to mix you have to mix your alternative fuel whether in this case with the biomass or whether it's there were other times like certain types of natural gas and so the one thing i want to mention is this is a volumetric credit based on the number of the number of gallons of alternative fuels that have been mixed in so the government's net energy requirement would require that we calculate the output and that's not what's required by the code it's a volume metric credit based on the alternative fuels if the congress had wanted to make it and that production of energy measure alternative fuel sold is fifty six dollars times a gallon if the if the congress had wanted to make it on energy output then they know how to do that even in section six thousand four hundred and twenty six for the alternative fuels provision for fuels that are used  automobiles they nature the credit bad the b t u content it's in the statute in the same exact statute six thousand four hundred and twenty six they know how to measure a credit energy output and they didn't choose to measure the credit here by energy output so your honor all we have to know is have a reason to believe that the fuels are being used to produce energy however we can show that the fuels were consumed in the production of energy and we believe the record shows that clinton thank you