good morning and brief the reason the cornell trust called the cornell trustees that's the very brief that the cornell trust has filed this appeal is because the trial court failed to follow this court's clear admonition in its two thousand to six decision in caltech industries at the court of federal claims is required to follow the precedent of the supreme court our court in our predecessor court the court of claims in overview there are three sets of a political precedents from these three courts that the trial oblique failed to follow in this decision the first of the three sets of a political precedence or other numerous decisions that have followed the so called the cain rule of statutory construction from the supreme court's venerable decision and eight hundred fifty seven in brown vs duquesne the supreme court explicitly reaffirmed this rule in one nine hundred eighty three and its bob jones university decision which was an exempt organization tax case and as a supreme court stated this brown vs duquesne rule it is a well established canon of statutory construction that a court should go beyond the literal language of a statute if reliance on that language would defeat the plain purpose of the statute the vibran six and again it is a well established canon of statutory construction that a court should go beyond the literal language of the statute if reliance in that language would defeat the plain purpose of the statute this court two of the judges on this panel were involved in the decision which unfortunately i overlooked when i briefed but it's the white versus department of justice decision at three twenty eight fed thirteen sixty one well how about this defeat i mean you're dealing with an unfair competition purpose right correct how would that defeat the purpose of the clear language of the statute to include things other than unfair competition or not require that as a threshold certainly the sections relating to exempt organizations set of a code five zero one through five fourteen or specifically enacted to go ahead and benefit europe were going as ations the only restrictions in those sections were to go ahead and stop any rules here's what's permitted and here's what's not permit correct the clearly the language of the statute yes your honor so you're arguing that we should interpret that clear language to say once you meet all of those criteria the government also has to demonstrate that there's unfair competition in order for those provisions to apply yes it was ition yes or no your honor because you look at the mischief will which this court went ahead and the two members of this panel which were involved in the c and g transmission veba decision that looked at what the underlying statutory purpose was and that particular decision which was issued just in the late two thousand and nine and that decision the court found associations looked at what the purpose was and there was a tax only if that statutory purpose was triggered if not the tax would not be a pleasurable and that's the instance we have here where you focus on a articulated hypothetically i think it's somewhat true is that this is going to ensure that everybody is going to have affordable health care so what the courts would only apply for the administrators would only apply the specific provisions in the statute with the gloss that unless it saves money or provides for people health care we're not going to enforce any of those provisions i just want to see i'm having a hard time understanding your purpose argument and how it's the language of the statute i think there's a difference between of the case we have here today and the health care act the health care act was the first time there was a comprehensive federal legislation with respect to health care benefits for the citizens of our country in sharp contrast section five fourteen was in addition to the tax code in the very first tax code in one thousand nine hundred sixty five bill remember correctly exempt organizations  charitable organizations were exempt from the tax code and therefore when five twelve before which is the statutory section at issue here when it was in the act of one nine hundred sixty nine it was fifty years  after the code was inactive and it was only specifically to stop the particular abuse where is the texas are the health care was to go ahead and provide a benefit for everybody in the country the analogy or analogous situation would be is if there were abuses five years from now with respect to the new health code or health care legislation then you would go ahead and apply the bob jones university rationale of the duquesne rule because as a that decision and again in your dissent your honor that the majority was applying the bob jones university and specifically cited the bob jones university decision that the majority was looking at what was the underlying purpose of the statute that was a personal case it was a tax case but in that decision the court the majority went beyond the literal language of the statute to look at what with the underlying purpose to see if in fact that statu were to be applied in the particular facts before the court and also in further the caltech industries case which is a very broad decision of course in two thousand and six where this court said it was a judicial tool to go ahead and go beyond the literal language of the tax code in order to affect the tax code purpose that decision the judicial tool specific in the context the tax code was used in the j trading decision which was issued just three months ago by the circuit and five ninety eight fed third thirteen seventy two so to come back to your honor's question there is specific instances where the literal compliance with the tax code was not inforced by this court because the underlying purpose of the specific section of the tax code would be not effected assuming we were to agree with you why on the margin finance securities here which the court has concluded possess the characteristics required to constitute a trade or business why isn't the unfair competition competition purpose served because you're preventing unpopular competition with securities investing by an exempt organization is not the conduct of a trader business the supreme court and burnett decisions starting in one nine hundred thirty two there are approximately ten said that investing including margin investing is not a trade or business importantly your honor in this in this case it's court level it was undisputed operative facts that the cornell trust did not engage succeed we did not gain any competitive advantage by its investment activity including margin investing over any other buyer or seller in the securities market and further was an undisputed are part of fact of the trial level that the cornell trust margin investing had an effect too positive in pro competition effects on the securities markets there is no case that says your honor that there is that it dition to the facts that are before are disputed facts of the before this case the stipulated facts if you will by implication there  no printed decision that says margin investing by an exempt organization is the conduct of unfair trading business the only reason we're here in this court your honor is simply because marge invest in courses debt finance which then triggers a section five twelve before and the of course this appeal centered on is that the the the literal language of that statute to be applied to this to this particular case so so the first set of  claims is was there is a was there a clear statutory or is there a clear is that story purpose to the unrelated business income tax the answer is clearly yes in the trilogy of decisions by the us supreme court the court stated  with all clarity particularly in the mirror as our american bar and dominant case in one thousand nine hundred six that the undisputed purpose of the unrelated business income tax was to prevent tax exempt organizations from completing competing unfairly again there was in the midst there was a mischief that was in one thousand nine hundred fifty five supreme court decision in commissioner b clay b brown which under the existing tax code gave exempt organizations a competitive edge which congress very swiftly legislatively overruled in appeal but it was only because the findings of fact by the trial court in that decision and in fact the u s supreme court discussed at some length the the a v test without disapproval then we have to look in that context whether the two you thank you may it please the court my name is jennifer rubin and i represent the government in this case with me at counsel's table is texas vision in turn andrew tyler the question in this case is should the court apply the plain language internal revenue code sections five fourteen and five twelve before or ignore that plain language if if the plain language applies everyone in the case agrees that the income from tax payers margin finance securities would be subject to the unrelated business end of the question is is that was that the principle or main purpose which i think maybe the government agrees that it was a major purpose passing these provisions and the second question think two points the first thing is the actual law that was passed is the text of section five fourteen and to read in an unfair competition requirement and essentially to bring over the case law and requirements for sections five in addition to satisfy everything we've said here you also have to satisfy the fair competition as taxpayers argument both today and in its briefs make clear it is essentially attempting to bring over the active trader business test from section five eleven to thirteen and apply it five fourteen a section five fourteen b one makes clear nothing is tax under five fourteen if it's already taxed as an act of trade or business under sections five eleven thirteen and so we don't see how there's any income that would be captured by section five or team if in fact you were to adopt the test that is being argued by the taxpayer here because if it's already in amended in one nine hundred sixty nine to expand the category of the unit that was initially put in place and by fourteen and so you would actually if anything perhaps even reduce the coverage of five fourteen buying corporations unfair competition statute and and generally applying it it would instead so people now that we've done this we're going to look into legislative history and not just look at the legislative history but a limit ourselves to extremely clear statements made in the committee report about the cases that  if we assume even if we ignore all the different statements of purpose that are found was in the legislative history behind section five fourteen and there are a number of them including protecting revenue sources preventing  report and statements in there into the primary the primary source of legislation as opposed to the legislation that's actually passed by congress there's no proof that anybody who voted on this law actually even looked at the committee report and the spring court is actually argued against looking actually many reports because of the very nature of the and they may be inaccurate or may to that how the language is construed right yes but only where there is an extremely clear public policy issue and in many of these cases you're talking about situation there where there was maybe an unclear term or term that th law that on its face could be applied just domestically or also to foreign property and courts now we're going to require a clear statement that congress intended to go beyond the nation's bounds this is a specific cont is simply not a pluggable here the second case that he cites is bob jones university where the courts as well we are going to read this to say that the concept of charity in the tax code incorporates certain common law standards of charity including the concept that you can't have a charity or term organization that is violating clear public policy and in this instance the clear public policy is extraordinarily clear namely the policy against racial discrimination there's nothing like that here there's really as as as was essentially conceded there's really no argument that there was any that there's some while ation of the principle that you don't like unfair competition by saying treat tax otherwise tax exempt and cities the same as other investors so that if your gaging in debt financed investing that debt financed investing is going to be taxed just as if you were any other organization and that that that shows why these cases that are being cited here are completely the opposite of what their they actually stand for and they don't stand for the concept that if a particular application fails to it dance the alleged statutory purpose then you should not apply that to the application rather it stands for the concept that if it actually undermines as a substantial public policy or the purpose of law it basically it's the same principle that this court has applied throughout cases such as in time times time x v i i which is if the statutory language is clear you apply it unless it's actually observed there's nothing absurd here about the concept that congress might say we don't want to privilege  financed income and that is precisely what's happened here the way the congress is structured this is that it gives tax exemptions to only certain types of charitable contributions or membership fees investments from contributions and income generated through the tax exempt function otherwise congress has taken steps with nine hundred fifteen one nine hundred sixty nine so it will not go into privilege other forms of income including from active trade or business or including from that financed property and that is very clearly stated in the text of these laws and very clearly stated in the structure of these laws moreover even if you were to look at legislative history which we believe but if the court were to look at legislative history legislative history here actually supports the concept the congress the liberally intended to adopt the broad definition of finance property that it did adopt and did an act into law if preceded by brown and that in particular there were concerns that you had a charitable organizations a small number of them attempting to increase their income not by using  contributions but by using debt financing that this was specifically a problem if you look at the house and senate committee reports a reference one of the wing concerns that were raised in this this proceeding back row which is that the shift of security as well as an exception to the the passive exclusions from section five eleven to thirteen and really just before your time with you is there any difference is there any major difference or even a minor difference similar to trust decorations and that is actually not true of fact that it was stipulated in the court below be engaged in the exact same practice of margin financing really taxing broker who are thieves commissions and through the exact same margin lender bear stearns who received interest it was exactly the same and what's the status of this question in other circuits so they all agree or is there something in the third it's their third circuit opinion that seems to be contrary i think circuit there is a discussion about unfair competition in there but ultimately that was a margin finance securities case this was the elliott knit where case and just like every other case it is dealt with it is termed the five fourteen at the point mean there's only been a total of nine cases including this one that have actually interpreted section five fourteen as opposed to the large number of cases dealing with five eleven to thirteen sided by taxpayer every single case every single one of them that has had the opportunity throughout this country there it's a very clear and it would be completely contrary to each of these cases it would be a conflict with them to determine that the plain language does not apply here  part tells you that a little over two minutes yes thank you there are three reasons with respect that this court would not be able to follow the second circuit decision in your two thousand and the u n h trust case first the second circuit does not have its own cane rule decision such as this court's cultic industries jade trading or white v d o j decisions upon which the second circuit could rely the second reason is the second circuit does not have its own american college physicians decision regarding the singular policy of the you've hit upon which if the second circuit could rely third and most importantly the second circuit does not have the d a b test upon which it the second circuit could rely on the bottom line is that these three sets of federal circuit precedents in which the second circuit does not have should cause this court to reach the opposite conclusion regarding an exempt organizations merging invest in income thank you thank