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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 21, 2003 Decided August 8, 2003

No. 02-1145

TOM KAPPUS AND LOUISE KAPPUS,

APPELLANTS

v.

COMMISSIONER OF INTERNAL REVENUE,

APPELLEE

Appeal from the United States Tax Court

(No. IRS–16512–99)

Lawrence P. Postol argued the cause and filed the briefs

for appellants.

Frank P. Cihlar, Attorney, U.S. Department of Justice,

argued the cause for appellee. With him on the brief was

Robert J. Branman, Attorney. John A. Nolet, Attorney,

entered an appearance.

 Bills of costs must be filed within 14 days after entry of judgment.

The court looks with disfavor upon motions to file bills of costs out

of time.
2

Before: GINSBURG, Chief Judge, and EDWARDS and GARLAND,

Circuit Judges.

Opinion for the court filed by Circuit Judge GARLAND.

GARLAND, Circuit Judge: Tom and Louise Kappus, United

States citizens living in Canada, appeal from a decision of the

United States Tax Court denying their challenge to a notice

of deficiency in their federal income tax issued by the Commissioner of Internal Revenue. The Kappuses claimed a

credit against their U.S. tax for all of the taxes they paid to

Canada on their Canadian-source income, leaving them with

no U.S. tax liability. The Commissioner argues that section

59(a)(2) of the Internal Revenue Code, 26 U.S.C. § 59(a)(2),

limits the allowable foreign tax credit to 90% of a taxpayer’s

alternative minimum tax liability. The Kappuses counter

that this section violates the terms of a tax treaty between

the United States and Canada. We conclude that, even if the

appellants are correct that the treaty and statute are in

conflict, the statute must prevail under the ‘‘last-in-time’’ rule.

We therefore affirm the judgment of the Tax Court.

I

The parties have stipulated to the relevant facts. Tom and

Louise Kappus are United States citizens who resided and

worked in Canada during 1997. On their 1997 joint federal

income tax return, they reported taxable income of $244,211

and a ‘‘regular’’ income tax liability of $69,410. They then

reduced that liability to zero by applying a foreign tax credit

of $69,410 based on their payment of Canadian income taxes.

See 26 U.S.C. §§ 27(a), 901. In addition to the regular tax,

the Kappuses were subject to the alternative minimum tax

(AMT) imposed by 26 U.S.C. § 55(a).1

 They reported a pre1 The AMT is ‘‘intended to prevent a taxpayer with substantial

income from avoiding significant tax liability through the use of

exemptions, deductions, and credits.’’ Pekar v. Comm’r of Internal

Revenue, 113 T.C. 158, 160 (1999). ‘‘[T]he ‘alternative minimum

tax’ provision requires the recalculation of a taxpayer’s income

under a different set of rules. A tax is then imposed [on that

income] at a graduated rateTTTT’’ United States v. Hill, 506 U.S.
3

credit tentative minimum tax of $61,556. However, they

claimed an AMT foreign tax credit of $61,556, see id.

§§ 55(b)(1), 59(a)(1), reducing their alternative minimum tax

to zero as well. The Kappuses attached a statement to their

joint return in which they claimed that they were not subject

to 26 U.S.C. § 59(a)(2), which provides that the AMT foreign

tax credit may not exceed 90% of a taxpayer’s pre-credit

tentative minimum tax. They claimed that exemption on the

basis of a tax treaty between the United States and Canada.

See Convention Between Canada and the United States of

America with Respect to Taxes on Income and on Capital,

Sept. 26, 1980, U.S.-Can., T.I.A.S. No. 11,087 [hereinafter

‘‘U.S.-Canada Tax Treaty’’ or ‘‘Treaty’’].

On May 28, 1999, the Commissioner sent the Kappuses a

notice of deficiency in their 1997 tax, stating that they should

have paid $6,152. That amount was equal to 10% of their

pre-credit tentative minimum tax as recalculated by the Commissioner,2

 who applied § 59(a)(2)’s 90% cap on the AMT

foreign tax credit. The Kappuses filed a petition with the

Tax Court contesting the Commissioner’s determination.

They argued that § 59(a)(2) was in direct conflict with the

U.S.-Canada Tax Treaty, and that in such a circumstance the

most recent provision must govern under the last-in-time

rule. Although the Treaty went into effect in 1984, two years

before the enactment of § 59(a)(2), the Kappuses contended

that protocols (amendments) to the Treaty ratified in 1995

and 1997 implicitly repealed § 59(a)(2) and represented the

most recent relevant enactments. In response, the government argued that the Treaty and § 59(a)(2) were not in

conflict, and that even if they were, § 59(a)(2) would prevail

as the last in time because nothing in the subsequent protocols conflicted with the statute. The parties stipulated that, if

546, 551 n.3 (1993) (citing 26 U.S.C. § 55). In this case, the parties

agree that the Kappuses’ regular tax was zero and that the AMT

was the only tax owed.

2 The Commissioner determined that the Kappuses’ pre-credit

tentative minimum tax was $61,519, slightly less than the $61,556

reported by the appellants.
4

the legal questions were decided in the Commissioner’s favor,

the Kappuses’ 1997 tax deficiency would amount to $6,152.

On February 13, 2002, the Tax Court issued a final decision

in favor of the Commissioner, holding the Kappuses liable for

income tax in the amount of $6,152. The Kappuses now

appeal to this court. We review the Tax Court’s judgment de

novo because it rests solely on a determination of law. See

Flynn v. Comm’r of Internal Revenue, 269 F.3d 1064, 1068

(D.C. Cir. 2001).3

II

All American citizens are subject to U.S. taxes, regardless

of where they live or earn their income. See 26 C.F.R. § 1.1-

1(b); see also Cook v. Tait, 265 U.S. 47, 56 (1924). Citizens

living and working abroad must therefore report their foreign-source income to the Internal Revenue Service. Taxes

on such income, however, may often be offset under U.S. law

by credits for taxes paid to foreign governments, and are also

subject to limitations imposed by bilateral tax conventions,

such as the U.S.-Canada Tax Treaty.

Article XXIV of that treaty, entitled ‘‘Elimination of Double

Taxation,’’ reads in relevant part:

3 In ruling for the Commissioner, the Tax Court did not rely on

any of the grounds pressed by the parties. Instead, the court ruled

that certain language in one of the protocols to the Treaty expressed the intent of the contracting states to accept amendments

to the Internal Revenue Code made in 1986, including § 59(a)(2).

As a consequence, the court concluded that § 59(a)(2) was not in

conflict with the Treaty and could properly be applied to the

Kappuses. The appellants argue that the language relied on by the

court, which added the words ‘‘of 1986’’ after ‘‘Internal Revenue

Code’’ in Article II of the Treaty, did not have that consequence.

Article II, they maintain, simply identifies the taxes that are subject

to the Treaty; it is Article XXIV that governs the tax credits that

each government must provide. The Commissioner does not defend the Tax Court’s rationale here, and given our resolution of the

case, we need not pass on it.
5

1. In the case of the United States, subject to the

provisions of paragraphs 4, 5, and 6, double taxation

shall be avoided as follows: In accordance with the

provisions and subject to the limitations of the law of the

United States (as it may be amended from time to time

without changing the general principle hereof), the United States shall allow to a citizen or resident of the United

States TTT as a credit against the United States tax on

income the appropriate amount of income tax paid or

accrued to CanadaTTTT

TTT

4. Where a United States citizen is a resident of Canada, the following rules shall apply:

(a) Canada shall allow a deduction from the Canadian

tax in respect of income tax paid or accrued to the

United States in respect of profits, income or gains

which arise TTT in the United States, except that such

deduction need not exceed the amount of the tax that

would be paid to the United States if the resident were

not a United States citizen; and

(b) for the purposes of computing the United States

tax, the United States shall allow as a credit against

United States tax the income tax paid or accrued to

Canada after the deduction referred to in subparagraph (a). The credit so allowed shall not reduce that

portion of the United States tax that is deductible from

Canadian tax in accordance with subparagraph (a).

U.S.-Canada Tax Treaty art. XXIV (italics and underlining

added). The Kappuses contend that under paragraph 4(b),

the United States is required to grant a credit for the entire

amount of the Canadian tax that they paid on the income they

earned in Canada while residing there.

The Commissioner counters that paragraph 1 of Article

XXIV subjects the required credit to ‘‘the limitations of the

law of the United States,’’ and that the law applicable to the

appellants’ situation, 26 U.S.C. § 59(a)(2), caps their AMT

foreign tax credit at 90% of their pre-credit tentative minimum tax liability. Section 59(a)(2) states, in relevant part:
6

(2) Limitation to 90 percent of tax.—

(A) In general.—The alternative minimum tax foreign

tax credit for any taxable year shall not exceed the

excess (if any) of—

(i) the pre-credit tentative minimum tax for the

taxable year, over

(ii) 10 percent of the amount which would be the

pre-credit tentative minimum taxTTTT

26 U.S.C. § 59(a)(2). The Kappuses agree that, but for the

Treaty, this provision would have obligated them to pay an

alternative minimum tax equal to 10% of their pre-credit

tentative minimum tax liability, and they acknowledged as

much in the statement they attached to their 1997 return.

Where a treaty and a statute ‘‘relate to the same subject,

the courts will always endeavor to construe them so as to give

effect to both, if that can be done without violating the

language of either.’’ Whitney v. Robertson, 124 U.S. 190, 194

(1888); see Xerox Corp. v. United States, 41 F.3d 647, 658

(Fed. Cir. 1994). The Kappuses contend that harmonization

is not possible here because the Treaty flatly bars the application of § 59(a)(2). As a consequence, they argue that the

Treaty—as the provision that is the last in time—must govern. See infra Part III. The Commissioner contends that

the two can be read in harmony, but that even if they cannot,

it is the statute that is the last in time.

The parties’ dispute over the meaning of the Treaty centers

on Article XXIV. According to the Commissioner’s interpretation, the general obligation imposed by paragraph 1 of that

article, that the United States allow its citizens a credit for

income taxes paid to Canada, is ‘‘subject to the limitations of

the law of the United States’’—the phrase that we have

underlined in the excerpt from the Treaty set out above.

And because § 59(a)(2) is just such a limitation, the Commissioner continues, the Treaty permits its application. The

Kappuses respond that the underlined proviso is itself ‘‘subject to the provisions of paragraphs 4, 5, and 6’’—the phrase

that we have italicized above—because that limitation precedes the underlined proviso and therefore modifies it. And
7

paragraph 4(b), they continue, requires that U.S. citizens who

reside in Canada be fully credited for their Canadian taxes.

In reply, the Commissioner disagrees that the order of the

phrases is controlling, but argues that even if it is, paragraph

4 does not bar the application of § 59(a)(2). In his view, that

paragraph does not impose a substantive obligation on the

United States to grant a tax credit, but rather ‘‘merely

provides rules for determining the order in which deductions

or credits for taxes paid to the other jurisdiction are to be

applied when the same income is subject to tax by both.’’

Appellee’s Br. at 17–18.

The question of whether the Treaty and statute can be

harmonized as the government suggests is an extremely close

one. It is not, however, a question that we need resolve.

The Kappuses concede that, even if their reading of the

Treaty is correct and the Treaty and § 59(a)(2) are in irreconcilable conflict, the statute nonetheless would control their tax

liability if it were the most recent relevant provision. Accordingly, because we conclude in Part III that the statute is in

fact the last relevant provision, we need not further pursue

the search for harmony. See South African Airways v. Dole,

817 F.2d 119, 125–26 (D.C. Cir. 1987) (assuming arguendo the

existence of a conflict between a treaty and a statute, and

resolving the case on the basis of the last-in-time principle);

Jamieson v. Comm’r of Internal Revenue, 70 T.C.M. (CCH)

1372, 1373–74 (Tax Ct. 1995) (holding, in a case prior to the

amending protocols, that § 59(a)(2) prevailed over the U.S.-

Canada Tax Treaty under the last-in-time principle without

determining whether they were in conflict), aff’d, 132 F.3d

1481 (D.C. Cir. 1997).

III

When a statute conflicts with a treaty, the later of the two

enactments prevails over the earlier under the last-in-time

rule. The rule and its rationale were articulated by the

Supreme Court in Whitney v. Robertson:

By the constitution, a treaty is placed on the same

footing, and made of like obligation, with an act of
8

legislation. Both are declared by that instrument to be

the supreme law of the land, and no superior efficacy is

given to either over the otherTTTT [I]f the two are

inconsistent, the one last in date will control the otherTTTT If the country with which the treaty is made is

dissatisfied with the action of the legislative department,

it may present its complaint to the executive head of the

government, and take other measures as it may deem

essential for the protection of its interestsTTTT The duty

of the courts is to construe and give effect to the latest

expression of the sovereign will.

124 U.S. at 194–95 (emphasis added); see Breard v. Greene,

523 U.S. 371, 376 (1998) (‘‘[A]n Act of Congress TTT is on a

full parity with a treaty, and TTT when a statute which is

subsequent in time is inconsistent with a treaty, the statute to

the extent of conflict renders the treaty null.’’ (internal quotation marks omitted)). The question for us, therefore, is which

of the two—the Treaty or the statute—is the ‘‘latest expression of the sovereign will.’’ Whitney, 124 U.S. at 195.

At first glance, this is not a difficult question to answer.

The Treaty was signed by the United States and Canada on

September 26, 1980, and entered into force on August 16,

1984, when it—along with its first two protocols—was ratified

by the U.S. Senate. Section 59(a)(2), on the other hand, did

not go into effect until two years later, as part of the Tax

Reform Act of 1986, Pub. L. No. 99-514, 100 Stat. 2085, 2336–

37.

Although § 59(a)(2) did not specifically address the relationship between its requirements and those of applicable tax

treaties, Congress clarified that relationship shortly thereafter. As part of the Technical and Miscellaneous Revenue Act

of 1988 (TAMRA), Pub. L. No. 100-647, 102 Stat. 3342,

Congress passed the following provision, now codified as 26

U.S.C. § 7852(d)(1):

(d) Treaty Obligations.—

(1) In general.—For purposes of determining the relationship between a provision of a treaty and any law of

the United States affecting revenue, neither the treaty
9

nor the law shall have preferential status by reason of

its being a treaty or law.

The Senate report on TAMRA made clear that this provision

was intended to codify the last-in-time principle as applied to

tax treaties and statutes. See S. REP. NO. 100-445, at 316–28

(1988). And another section of TAMRA expressly stated that

specified amendments made by the Tax Reform Act, including § 59(a)(2), were intended to apply notwithstanding any

inconsistent treaty obligations:

(2) Certain Amendments to Apply Notwithstanding

Treaties.—The following amendments made by the [Tax]

Reform Act [of 1986] shall apply notwithstanding any

treaty obligation of the United States in effect on the

date of the enactment of the Reform Act:

TTT

(B) The amendments made by title VII of the Reform

Act [of which § 59(a)(2) was a part] to the extent such

amendments relate to the alternative minimum tax

foreign tax credit.

TAMRA, § 1012(aa)(2) (codified at 26 U.S.C. § 861 note); see

S. REP. NO. 100-45, at 319. TAMRA thus made it crystal clear

that Congress intended the 90% cap on the AMT foreign tax

credit to supercede any preexisting treaty obligation with

which it conflicted.

As the Kappuses conceded at oral argument, had the

matter ended with TAMRA, § 59(a)(2) would plainly have

prevailed over the Treaty. Cf. Jamieson, 70 T.C.M. at 1373–

74 (holding that, as of the 1987 tax year, § 59(a)(2) superceded the U.S.-Canada Tax Treaty under the last-in-time principle). The appellants argue, however, that the ratification of

two subsequent protocols to the Treaty in 1995 and 1997 had

the effect of re-establishing the Treaty (as amended) as the

latest expression of the sovereign will. See Protocol Amending the Convention Between the United States of America

and Canada with Respect to Taxes on Income and on Capital,

Mar. 17, 1995, S. TREATY DOC. NO. 104-4 (1995) [hereinafter

‘‘Third Protocol’’]; Protocol Amending the Convention Between the United States of America and Canada with Respect
10

to Taxes on Income and on Capital, July 29, 1997, S. TREATY

DOC. NO. 105-29 (1997) [hereinafter ‘‘Fourth Protocol’’].

The Third and Fourth Protocols, which consisted of

amendments to specific provisions of the original treaty, did

not address § 59(a)(2) at all. Nor did they amend paragraphs 1 or 4 of Article XXIV, the provisions at issue in this

case. Nonetheless, the Kappuses argue that the protocols effectively supercede § 59(a)(2) because any protocol to an international convention, regardless of the protocol’s content,

implicitly reaffirms the signatories’ commitment to the entire

underlying treaty. Thus, the appellants contend that we

should regard the entire U.S.-Canada Tax Treaty as having

been re-adopted in full when the Third and Fourth Protocols

were ratified, and that the re-adopted treaty trumps

§ 59(a)(2) under the last-in-time rule.4

This argument, which the appellants characterize as ‘‘the

doctrine of implied repeal,’’ Appellants’ Br. at 33; see Reply

Br. at 26, runs headlong into a contrary canon of construction:

that ‘‘repeals by implication are not favored, and are never

admitted where the former can stand with the new act.’’

4 In their opening brief, the Kappuses did not contend that either

protocol explicitly amended any relevant paragraph of the Treaty,

instead relying solely on their theory of implied reaffirmation.

Appellants’ Br. at 39. In their reply brief, however, the appellants

additionally relied on the Third Protocol’s amendments to other

paragraphs that they deemed ‘‘closely linked’’ to the relevant paragraphs, paragraphs 1 and 4. But the Kappuses did not explain how

the amended provisions affected their tax liability, and because the

argument was not raised until their reply brief, the Commissioner

did not have an opportunity to offer his views on these issues.

‘‘Considering an argument advanced for the first time in a reply

brief TTT is not only unfair to an appellee, but also entails the risk of

an improvident or ill-advised opinion on the legal issues tendered.’’

McBride v. Merrell Dow & Pharms., Inc., 800 F.2d 1208, 1211 (D.C.

Cir. 1986) (citation omitted). Accordingly, ‘‘we generally will not

entertain arguments omitted from an appellant’s opening brief and

raised initially in his reply brief,’’ and we will not diverge from that

general rule today. Id. at 1210; see City of Waukesha v. EPA, 320

F.3d 228, 241 n.10 (D.C. Cir. 2003).
11

South African Airways, 817 F.2d at 126 (internal quotation

marks omitted).5

 In Johnson v. Browne, the Supreme Court

expressly applied this canon to the interpretation of treaties:

‘‘[A] later treaty will not be regarded as repealing an earlier

statute by implication, unless the two are absolutely incompatible and the statute cannot be enforced without antagonizing

the treaty.’’ 205 U.S. 309, 321 (1907) (citation omitted).6

 In

this case, the protocols plainly are not ‘‘absolutely incompatible’’ with § 59(a)(2) because their text neither bars its application nor modifies any treaty provision that bars it. We

therefore cannot read the protocols as implicitly reviving

original treaty provisions that the Kappuses agree had, for

purposes of U.S. law, been superceded by § 59(a)(2).7

Finding nothing in U.S. law to support their claim that the

protocols implicitly repeal the intervening statute, the Kappuses insist that it is based on a well-settled principle of

international law. But they cite no such principle. Instead,

the appellants point to Article 40(5) of the Vienna Convention

on the Law of Treaties, May 23, 1969, 1155 U.N.T.S. 331,

which, they contend, stands for what they regard as an

analogous proposition, namely ‘‘that a nation not previously a

party to [a] treaty, but which ratifies a subsequent protocol,

5 See Chew Heong v. United States, 112 U.S. 536, 549 (1884)

(holding that one statute will never be read to repeal another absent

‘‘positive repugnancy TTT, and even then the old law is repealed by

implication only pro tanto, to the extent of the repugnancy’’ (internal quotation marks omitted)).

6 See Xerox Corp., 41 F.3d at 658 (‘‘[T]acit abrogation of prior law

will not be presumed and, unless it is impossible to do so, treaty and

law must stand together in harmony.’’).

7 The canon disfavoring repeals by implication may be viewed as a

special application of the rule discussed in Part II—that statutes

and treaties should be harmonized if possible. See Whitney, 124

U.S. at 194; Xerox Corp., 41 F.3d at 658. The best way to

harmonize § 59(a)(2) with the protocols is to assume that the latter

were not intended to repeal the former. That means reading the

protocols as doing nothing more than amending the provisions of

the original treaty that they specifically address.
12

automatically becomes TTT a party to the entire treaty as

amended by such protocol.’’ Appellants’ Br. at 36.8

There are a number of problems with this contention.

First, the language of the Vienna Convention does not state

the proposition put forward by the appellants: that a nation

that ratifies a protocol becomes party to the original treaty.

Rather, it states the converse: that a nation that ratifies the

original treaty after a protocol has gone into effect is bound

by the protocol as well as the treaty.9

 Second, Article 40 of

the Convention applies only to multilateral treaties, not to

bilateral treaties like the U.S.-Canada Tax Treaty. Id. art.

40(1). Finally, the proposition proffered by the appellants at

8 The United States has signed but not ratified the Vienna

Convention. See United Nations Treaty Collection, Multilateral

Treaties Deposited With the Secretary-General, http://untreaty.un.

org/english/bible/englishinternetbible/partI/chapter23/chapter23.asp.

9 See Vienna Convention, art. 40(5) (‘‘Any State which becomes a

party to the treaty after the entry into force of the amending

agreement shall, failing an expression of a different intention by

that State: (a) be considered a party to the treaty as amended; and

(b) be considered as a party to the unamended treaty in relation to

any party to the treaty not bound by the amending agreement.’’).

In the Korean Air Lines Disaster case, the court did hold that the

Republic of Korea had in effect joined a treaty that it had never

signed, the Warsaw Convention, by signing its Hague Protocol. In

re Korean Air Lines Disaster of September 1, 1983, 664 F. Supp.

1463, 1469 (D.D.C. 1985), opinion adopted, 829 F.2d 1171, 1173

(D.C. Cir. 1987), aff’d sub nom. Chan v. Korean Air Lines, Ltd., 490

U.S. 122 (1989). The court did not rely on the Vienna Convention

or on general principles of international law, however, but rather on

the history of the Hague Protocol and the language of its Article

XXIII, which read: ‘‘Adherence to this Protocol by any State which

is not a Party to the Convention shall have the effect of adherence

to the Convention as amended by this Protocol.’’ Id. The protocols

at issue in the instant case do not contain such language, nor do

their ratification histories indicate an intent to reaffirm the unamended provisions of the Treaty. See, e.g., S. EXEC. REP. NO. 104-

19 (Aug. 10, 1995) (discussing the Third Protocol); S. EXEC. REP. NO.

105-12 (Oct. 30, 1997) (discussing the Fourth Protocol).
13

best concerns the obligations of states that have joined a

protocol without joining the underlying treaty. But it says

nothing about the situation at issue here—where both states

were parties to the original treaty, where a subsequent

legislative enactment superceded a provision of that treaty,

and where thereafter the same two parties entered into a

protocol amending different provisions of the original treaty.

Whatever merits the proffered proposition may have for

situations that fall within its terms, it does not apply to this

case, and it certainly cannot overcome the Supreme Court’s

instruction that ‘‘[r]epeals by implication are never favored.’’

Johnson, 205 U.S. at 321.

We do not mean to suggest that a protocol may never

effectively reenact an underlying treaty, but only that we may

not construe one as implicitly doing so when the effect is to

abrogate an intervening statute. Of course, in a particular

case, the language and drafting history of a protocol may

evidence the parties’ intention to recommit themselves to

their preexisting treaty obligations. But there is no such

evidence here. Accordingly, because the latest expression of

the United States’ sovereign will on the subject of the Kappuses’ foreign tax credit is 26 U.S.C. § 59(a)(2), that statute

prevails over the Treaty, and we are obligated to enforce it.

IV

We conclude that, to the extent they are in conflict, section

59(a)(2) of the Internal Revenue Code prevails over the

provisions of the U.S.-Canada Tax Treaty. The judgment of

the Tax Court upholding the Commissioner’s notice of deficiency in the appellants’ 1997 income tax is therefore

Affirmed.