next week at its major meeting but it also foreshadows we think how this appeal should be decided indeed the current wells between the two cases are striking and before i go i want to make sure the court did get our submission of the opinion in meal foundation there was ongoing litigation throughout the country about whether these medical residents were subject to fica and the question was was student and the question was did medical residents constitute a student the internal revenue service is position before there was any regulation was that if you were working full time you were not a midst of that with a geisha which some decisions help for the government and some for the taxpayer the government trying to put an issue to regulation saying if you work more than forty hours a week you're a student but just  which courts look at legislative history and chevron step one which courts do not this court in one of the decisions has looked at legislative history for step one in these cases it is nice missed one or two without discussion of x we think that you look silly at the plain terms of the statute where we think legislative history fits in is that if you have a word in the statute let's let's say maybe you had a word student you could look to legislative history rethink to define what did congress have in mind when it used the words student to determine the meaning of a statutory term but i don't think you can look at loose leaf history and say well the statu you're not wrong but in the absence of a regulation before the regulations issued in this case you could courts couldn't trumpery elements from gross income at least two ways one way in favor of tax payer one way in favor of the government  regulations issued i think however brand that says unless the plain terms of the statute are clear it doesn't matter what the legislators said it matters what they wrote down in the strategy and rea one what you seem to be suggesting is once there's a regulation in the picture which of course there are as it often is when you're dealing with chevron issues that step one becomes truncated in a way that justice stevens would not have  history makes clear really meaning then i think your example student means less than forty hours that i think a regulation which took a different interpretation of the meaning of student might not be valid well i'm having a hard and when you read the colony decision by the supreme court decision says well the government wants to tread lightly on all mids and bears down hard on gross income now if you court is ten without looking at the regulation hold for the government because of the settlement read precedent the important part to enter your question is that the supreme court was interpreted the thirty nine code and that was different from the fifty four code in several major respects so we went into in our brief a little bit here but morning sound and reaction and that was if the supreme court said column thirty nine code was ambiguous language was a big us but fifty four code in this instance was unambiguous then you look to see with the changes from the thirty nine code in the fifty four code as we pointed out given our briefing in sound ranch in this in this case it was significant because there was a trade or business exception put in one nine hundred fifty four code that wasn't there and thirty nine and it's important to remember that when the supreme when the fifty four code was inactive with these two addition to train for business and adequate disclosure the appellate court's prior to fifty four had split over the meaning of mids from gross income when you're dealing with a trade or business so that's that that's the supreme court accepted sir calmly even though the fifty four code straightened out the rule post fifty four but also eat and eat but there was a conflict and i think it's important to to put the distinction between thirty nine you didn't have an adequate disclosure provision of the thirty nine you do in the fifty four card so i think there are different parameters that come into play when you're looking at those calmly control this kid it's our position is no it doesn't but the needed and that was i thought your situation in which you were saying you can look at legislative history in there's a chapter in step one senator so i'm having trouble square  case points so judge you like to point out there are some parts of let's say history that support the government's argument about it's not just me to get things out but come back to my question i'm really trying to see exactly what role you think in a phrase well no because gross in the media gross income is not clear the meaning of gross income was not discussed in the legislative history of let's say history was focusing mainly on the word amidst but doesn't that just you know a way of saying that the legislative history saying well not really it's not a diaphanous avail and in some respects you can look through him in some respects and i'm having a really hard time figuring what is the permissible consul i've think the permissible aperture is very small but i don't what i don't believe it doesn't exist at old terms of when you can look at legislative history i do think the key is as brand says the plain terms of the statute or the if the statutes claim it doesn't because it doesn't matter between one and the language of the statute was epic u s cell was forced to look at the legislative history and was also compelled to come up with the answer what does it mean when you're suggesting interpretive choice which is up to the courts in the absence of regulation because it can be one of two ways one of the agencies in the case ambiguity absolutely and i don't think there's any disagreement among any of that broad proposition we're focusing please the court i want to start with one point that's not in dispute here if these regulations did not exist it's clear that a great fine would win this case on the controlling precedent of colony and salmon ranch but even in the face of the final regulation there's three independent reasons why judge allegro should be affirmed first the regulations on their face do not apply here or second the government should not be allowed to use the regulations to reverse a final judgment that was entered against it in this case and then finally the regulations are invalid because they do contradict a clear intent of congress as a stablished and colony and samaranch  because i don't think that the preamble is allowed to contradict the clear term of that applicability provision i mean the words of the applicability effected a provision say on their face that the regulation only applies with respect to the period to tax years with respect to which the period for assessing tax was open on or after september twenty fourth two thousand and nine and in fact in the preamble the regulation says this regulation is not reopening close tax year is it's not retroactive and if you look at a snapshot in time at september twenty third two thousand and nine the day before those regulations went into effect the law of this circuit in salmon ranch and colony which senator graham says colony controls the disposition of this case is that pending in the tax court the preamble even says and this was part of our response in our twenty eight day response which is the governor in the preamble says that the regulation applies to any case that's pending in any  jurisdiction only those that are not final within the meaning of seventy four eighty one and as we pointed out in our twentieth response seventy eight seventy four eighty one only controls the issue of finale in tax court decisions proceeding was filed in the court of federal claims in the was a finale as you've identified are different in the court of federal claims because this court wouldn't even have jurisdiction but for the fact that judge labor issued a final judgment and the intermountain court the issue with language in the break but they did have an opportunity that they didn't have an opportunity to yeah they didn't but actually the final regulation is now even stronger i think there's a stronger case that the radius inapplicable now than the temporary break because this final regen is preamble says it's not retroactive and we're not reopening close catchers that's a statement that didn't even exist at the time of the temporary regulation it's closed  because this court didn't merely choose the better of two options saying this court held in salmon ranch that colony controls the disposition of this case and colony made clear that while the words by themselves and the government really hangs that it's had on and there were no regulations and that means fair enough but when you read the rest of the decision judge first as you pointed out three or four times the supreme court makes clear that it was absolutely congress intention that an overstatement of basis didn't constitute an omission from gross income and it wasn't merely that the court looked at legislative history and said we think that congress's intent is clear when we look at these other tools like legislative history the supreme court rejected the government's analysis the supreme court said that we've been unable to find any solid support for the government's position in the legislative history and said to accept the commissioner's interpretation would read the statute more probably even justified and in income cruelty in the tax law we would submit that there was no gap in that case one can't read as as we would argue you can't read the colony case and believe that there was a gap for an agency to fill when you thomas writing for the court starts with looking at the terms of justice thomas even in step one analysis has a subsection devoted to whether one is effectively the legislative history of that stature if you look at section of the as i'm aware there wasn't in the regulatory history was really the background that congress was legislating against when it it when it wrote the law that was then the subject of brand x i'm not aware of any and the justice thomas certainly does not say in  not going to look you know there was a floor debate there was a conference report and we're not going to look at it so our position even as recently as yesterday in mail chief justice roberts speaking for the unanimous court says we begin our step one analysis with the chevron framework and he chevron is as you well know that to congress address the specific issue was there are clear congressional intent and this court in amber message can start which post date brand x and the supreme court in general dynamics which was before brand by ear these are all cases that use legislative history as a tool of statutory construction just like and chevron in the notion that brand x without same so has changed that structure we what a statute means by looking at the edge of history looking at the problems that were attempted to be addressed in the statutory construction absolutely everything else which is exactly what a court does in the absence of regulations and the court will ultimately conclude well you know it's it's a tough call but here's our best call for what the congress must admit and then you're done and there's no shepherd because you decide everything in step one what's what's the difference between what justice stevens was suggesting is the way to get at the question versus what a court would do the ordinary case when there was no regulation legislative history cannot be used to contradict the clear just done that with your expressiveness it be pleased to see you're right but again going back to colony and salmon ranch i don't think you can look at colony and conclude that this is one of those cases even though there was no regulation there when colony well that legislative history together we think it led the supreme court to say omit only it means leave out what through all of the floor debate and other legislative history and said when you put all that legislative history together we think i think so but i think there's something else that we're losing about brand x which is a very significant overstatement by the government about what grant brand x was doing brand x was not a case where the f had lost the judgment below and was trying to regulate its way out of the adverse judgment entered against it there is something incredibly troubling about what the government is trying to do here with this regulation that is even more troubling than many of big difference is the regulation was issued prior to the litigation just like in may there was litigation out there and treasury issued a regulation but it's it's not accurate in the government's twenty eight j when they suggest i just want to assure the court it's clear it wasn't the mayo case that prompted the regulation in this instance we have a final judgment from judge allegro and the government here on appeal is now putting the regulation forward in there's something particularly troubling here we got up to this court in mid two thousand and eight just a few months after salmon ranch and the government asked this court to hold this case in a ban swipe it was closely related to salmon ranch the issue was the same and the and the government said like the chevron step one case meaning i understood there was no regulation but the court i believe felt that congress did answer the question it may not have the answered it just with the word image in isolation but when you put omission from gross in come in context and you look at the legislative history i believe the colony supreme court said congress has answered this question and then it would reject it the government's interpretation which is the same interpretation at and use by the government today and in the final regulation as contrary to that intent and i think that's what salmon ranch concluded as well the one hundred fifty four language is identical to the one nine hundred thirty nine language that salmon ranch and salmon ranch says the disposition  evaluate what's before the court is does an overstatement of basis constitute an omission from gross income and omission from gross income is the identical language even though there were other subsections provided that did not persuade the salmon ranch court i mean those provisions were in front of the cases in which judges gavel has not come down yet but that you will because the trial judges gavel has come down even though the case is still fully open on appeal and may find its way to supreme court so you say it's anomalous but i wonder if the anomaly isn't in the fact that your client would be the adventitious beneficiary of  after the regulation a few responses a number one the taxpayers have the right to either file this kind of case in the tax court federal district court for the federal court of claims and there are consequences with doing that that the taxpayer has to put forward the dollars in dispute when they decide to file the suit in this court and we would submit that the fact that we were timely in bringing this lawsuit and got a final judgment from the from of the court of federal claims actually should have consequences the notion that a private litigant only gets a pyrrhic victory when it has litigation against a government agency and the government agency can change the rules of the game midstream but on appeal the predicate for this question of course is that the government is entitled to change the rules midstream the only question is where the stream comes to an end you say again by chevron deference to its regulations in your case two things at just seems to me to be a q but two things the government in the preamble makes this isn't to say that finale is measured within the meaning of seventy four eighty one i won't repeat the argument but seventy four eighty one that's the government talking in the preamble to the government said if a case is final for purposes of seventy four eighty one not final for seventy forty one of this regulation can apply and i pointed out earlier the government would be violating another statute of congress sixty two twenty six g if it were to say we're going to ignore the but there's a different rule if anality in the federal district a federal court of claims than there is in the tax court and to try to apply it here but the other problem and i was speaking about this with judge post a minute ago it is troubling that the government here is trying to seek a tactical advantage by having had this case held in abeyance for more than a year because the reality is we would have certainly been briefed argued and possibly decided had our case just gone trucking along in july two thousand and eight and we would have gotten a decision just like salmon ranch for that matter after salmon ranch was decided and the government had to forty five being window to petition for a rehearing the government asked for another thirty days because the solicitor general needed to decide whether or not he was going to petition for rehearing on bond and then during that extra thirty days the government issues this regulation and i would submit that in this court both in salmon ranch and hearing what i care about is obviously this case the government is trying to gain a tactical advantage by its delay of the case and in that instance we would have begun we would be final like salmon ranch but for the fact that we had this period where we were put on ice when the government said we just want to same resources and not have to do more breathing why word for word the government says and that motion because the outcome of salmon ranch may be dispositive this case and there ma nothing more to do and of course that's not the case the private litigant now is basically litigating a second case up in the federal circuit because the government changed the rules it s it's right but at the time that they said that the government was actually working on this regulation project and never suggested to the court what of the taxpayer that we might be impacted and we might have a loss of some of our rights of the case would change in some with the thirty nine code and what it looked to see the bill of congress have in mind they had in mind leaving out hiding the ball congress and in fifty four address that very point with the adequate disclosure provision that it inserted into the fifty four code so that it made it much harder for you to hide the ball and that's really the point of why this regulation is reasonable because in basis over statement situations where you don't adequately just scopes disclose you are highly on the ball if you look at the tax returns in this case there's no way to figure out from the fa we think we think brand x is a discussion of where the regulation controls is certainly not completely consistent with footnote nine of chefs and we think the only where the legislati says the regulation is valid and the only way the regulation cannot be cannot be valid is if but words of the statute can only be interpreted one way and if the words of snagit only be treated one way the room for a regulation and in this case there are the words clearly can be read several ways and i come down to the fact that again it's not just the word omits the concept of gross income in the internal revenue code and if the government's interpretation of when does the six year statute kick in is right then we will in this case and the other case so we don't think there's anything untoward you know i wish i controlled the treasury department i don't i'm regulations when the issue regulations and the government was considering do we take this issue the supreme court without regulations i mean there