United States Court of Appeals 

for the Federal Circuit ______________________ 

MASSACHUSETTS MUTUAL LIFE INSURANCE 

COMPANY, on its own behalf, AND 

MASSACHUSETTS MUTUAL LIFE INSURANCE 

COMPANY, as successor to CONNECTICUT 

MUTUAL LIFE INSURANCE COMPANY,

Plaintiff-Appellee

v.

UNITED STATES,

Defendant-Appellant

______________________ 

2014-5019

______________________ 

Appeal from the United States Court of Federal 

Claims in No. 1:07-cv-00648-MBH, Judge Marian Blank 

Horn.

______________________ 

Decided: April 9, 2015

______________________ 

BERNARD JOHN WILLIAMS, JR., Skadden, Arps, Slate, 

Meagher & Flom LLP, Washington, DC, argued for plaintiff-appellee. Also represented by DAVID W. FOSTER, ALAN 

J. SWIRSKI, PAUL MCLAUGHLIN. 

ARTHUR THOMAS CATTERALL, Tax Division, United 

States Department of Justice, Washington, DC, argued 
2 MASSACHUSETTS MUTUAL LIFE INS v. US

for defendant-appellant. Also represented by ROBERT 

WILLIAM METZLER, TAMARA W. ASHFORD. 

______________________ 

Before LOURIE, MOORE, and O’MALLEY, Circuit Judges.

O’MALLEY, Circuit Judge. 

The government appeals a judgment of the United 

States Court of Federal Claims in favor of Massachusetts 

Mutual Life Insurance Company (“MassMutual”) and 

Connecticut Mutual Life Insurance Company (“ConnMutual”). The Court of Federal Claims ruled that MassMutual and ConnMutual were legally authorized to deduct 

policyholder dividends from their 1995, 1996, and 1997 

tax returns in the year before the dividends were actually 

paid. See Mass. Mut. Life Ins. Co. v. United States, 103

Fed. Cl. 111 (2012). The parties agree that both companies may deduct the policyholder dividend payments at 

some point. They dispute the timing of the deductions,

however; they debate whether the deductions may be 

taken in the year the insurance companies guaranteed

the dividends, or may only be taken the following year—

when the dividends were actually distributed to the 

policyholders. 

The government contends that, because the liability to 

pay the dividends at issue is contingent on other events, 

such as a policyholder’s decision to maintain his or her

policy through the policy’s anniversary date, the liability 

has not been established in the year the dividends were 

determined. Because a liability must be fixed before it 

can be deducted, the government argues that MassMutual

and ConnMutual could not deduct their obligations until 

the following year. Even if the liability was fixed, the 

government alleges that these payments still could not 

have been deducted until the year they were actually paid

because the dividends did not qualify as rebates or refunds, which would meet the recurring item exception to 
MASSACHUSETTS MUTUAL LIFE INS v. US 3

the requirement that economic performance or payment 

occur before a deduction may be taken. 

Because we find that MassMutual’s and ConnMutual’s policyholder dividends were fixed in the year the 

dividends were announced, that the dividends in question 

are premium adjustments, and that premium adjustments are rebates, thereby satisfying the recurring item 

exception, we affirm.

BACKGROUND

Under the tax code, one can elect to recognize revenues and liabilities using different accounting methods, 

such as the “cash receipts and disbursement method” and 

the “accrual method.” See 26 U.S.C. § 446(c). If a taxpayer uses the accrual method, which life insurance companies usually employ,1 an expense can be deducted in the 

year in which the liability is incurred, as opposed to the 

year in which it is paid. In order to determine if a liability has accrued during a taxable year, one must determine if the liability satisfies the “all events” test and if 

economic performance or payment of the liability has 

occurred. 26 U.S.C. § 461(h)(1),(4); see also United States 

v. Gen. Dynamics Corp., 481 U.S. 239, 243 n.3 (1987). 

The liability satisfies the “all events” test when “all events

have occurred which determine the fact of liability and 

the amount of such liability can be determined with 

reasonable accuracy.” 26 U.S.C. § 461(h)(4). If all three 

1 See 26 U.S.C. § 811(a) (“All computations entering 

into the determination of the taxes imposed by this part 

[upon life insurance companies] shall be made [] (1) under 

an accrual method of accounting, or (2) to the extent 

permitted under regulations prescribed by the Secretary, 

under a combination of an accrual method of accounting 

with any other method permitted by this chapter.”).

 
4 MASSACHUSETTS MUTUAL LIFE INS v. US

conditions are satisfied, the expense may be deducted 

before it is paid.

There are exceptions to this general principle, however. For example, if the liability is “recurring in nature 

and the taxpayer consistently treats items of such kind as 

incurred in the taxable year in which [the all events test 

is met],” then a taxpayer may deduct it during any taxable year wherein the all events test is met, if the liability 

“is not a material item, or the accrual of such item in the 

taxable year in which the requirements of [the all events 

test] are met results in a more proper match against 

income than accruing such item in the taxable year in 

which economic performance occurs.” 26 U.S.C. 

§ 461(h)(3). Further, economic performance with respect 

to that liability must “occur[] within the shorter of—a 

reasonable period after the close of such taxable year, or 

8 1/2 months after the close of such taxable year.” Id. 

Therefore, if a taxpayer can demonstrate that economic 

performance will occur within a certain time frame in the 

next taxable year, that the liability is recurring, and 

either that the item is immaterial or that the accrual of 

the liability in a particular taxable year results in a better 

matching of the deduction with the income to which it 

relates (“the matching requirement”), the liability can be 

treated as incurred during that taxable year. Id.; 26 

C.F.R. § 1.461-5.

Under Treasury Regulations, certain liabilities are 

deemed to meet the matching requirement without further consideration. These liabilities include rebates and 

refunds. 26 C.F.R. § 1.461-5(b)(5)(ii) (“In the case of a 

liability described in paragraph (g)(3) (rebates and refunds) . . . of § 1.461-4, the matching requirement . . . 

shall be deemed satisfied.”). 

A. Disputed Insurance Policies

MassMutual is a mutual life insurance company 

based in Massachusetts. In 1996, MassMutual merged 
MASSACHUSETTS MUTUAL LIFE INS v. US 5

with ConnMutual, with MassMutual emerging as the 

surviving entity.2 For tax purposes, MassMutual was an 

accrual basis taxpayer for the relevant tax years of 1995, 

1996, and 1997 and, before the merger, ConnMutual was 

also an accrual basis taxpayer for the 1995 tax year.

Mutual life insurance companies, such as MassMutual, operate for the benefit of their policyholders, and do 

not have a separate group of shareholders. These companies typically offer policyholders two types of insurance 

plans: participating and non-participating policies. A 

participating policy is an insurance policy that is eligible 

to receive a portion of any distribution of the company’s 

yearly surplus, while a non-participating policy is ineligible to receive such a share. 

A mutual insurance company often will conservatively 

set premiums for its policyholders to ensure that the 

company will have sufficient funds to pay all benefits, 

even under extreme circumstances. This amount typically exceeds the funds necessary to cover the company’s 

operating expenses and contractual obligations, resulting 

in a surplus. At the end of each year, the company will 

calculate the portion of its total surplus, known as the 

divisible surplus, which it will return to the participating 

policyholders in the form of policyholder dividends or a 

credit towards the policyholder’s next insurance premium. 

This figure is approved by the company’s board of directors when set and is then distributed to policyholders the 

following year.

2 Unless otherwise noted in the opinion, a discussion of MassMutual includes both MassMutual and 

ConnMutual, since the two parties merged in 1996, and 

essentially were treated as the same entity by the parties 

and by the Court of Federal Claims.

 
6 MASSACHUSETTS MUTUAL LIFE INS v. US

For most participating plans, including MassMutual’s,

dividends are only payable to those policyholders whose 

policies are in force as of the anniversary date of the

policy. A policy is considered in force if the premium for 

the policy has been paid through its anniversary date. 

Under the Tax Code, such policyholder dividends are 

deductible from a life insurance company’s gross income. 

26 U.S.C. § 801(b). Specifically, Section 808(c) permits 

life insurance companies to deduct these payments in “an 

amount equal to the policyholder dividends paid or accrued during the taxable year.” 26 U.S.C. § 808(c). In 

1995, MassMutual implemented a policy of guaranteeing 

a minimum amount of dividends (“guaranteed dividends”)

it would pay the following year to a defined class of eligible policyholders—those with post-1983 policies.3 The 

board of directors determined the guaranteed dividend 

each year, and passed resolutions memorializing this 

figure. MassMutual believed that this guarantee would 

fix the expense, such that the dividend would be considered accrued for tax purposes, because so long as there 

was at least one member of the defined class known by 

December 31 of the taxable year, it was certain that the 

entire guaranteed dividend would be paid the following 

year. In other words, because the guaranteed payment 

was guaranteed to an entire class of policyholders on a 

pro rata basis, if even one class member was eligible for 

receipt of a dividend, that class member would receive the 

3 There is a distinction between pre- and post-1983 

policies, because the tax implications for pre-1983 policies 

differ because of a statutory change implemented in 1984. 

This change, however, does not impact the policies at 

issue here. For a more detailed explanation of the tax 

consequences related to pre-1983 policies, see Mass. Mut. 

Life Ins. Co. v. United States, 103 Fed. Cl. at 115–16

(2012) and 26 U.S.C. § 808(f). 

 
MASSACHUSETTS MUTUAL LIFE INS v. US 7

entire guaranteed amount. Because at least one such 

class member could be identified by December 31 in each 

year the guarantees were set, MassMutual believed its 

payment liability was thus established, regardless of the 

number of policyholders who might ultimately share in 

that guarantee. ConnMutual adopted a similar policy in 

1995. 

In light of this new policy, during the relevant tax 

years of 1995, 1996, and 1997, MassMutual (and

ConnMutual for 1995) deducted from its tax refunds the 

portion of the guaranteed dividend that would be paid by 

September 15 of the next year in the year the dividend 

was guaranteed, believing this deduction complied with 

the Tax Code and Internal Revenue Service (“IRS”) regulations. See 26 U.S.C. § 461(h)(3)(A)(ii); 26 C.F.R. 

§ 1.461–5(b)(ii) (“Economic performance with respect to 

the liability occurs on or before the earlier of (A) [t]he date 

the taxpayer files a timely . . . return for that taxable 

year; or (B) [t]he 15th day of the 9th calendar month after 

the close of that taxable year.”). 

For example, MassMutual claimed it could deduct

$118,975,383 from its 1995 taxes, after it determined in 

late 1995 that its guaranteed dividend for 1996 would be 

$185 million. To arrive at this figure, MassMutual first 

calculated the dividends it expected to pay the class of 

eligible policyholders, multiplied this amount by 85% to 

account for the possibility that some policies might lapse, 

and then determined how much of this figure, i.e., the 

guaranteed dividend, would be paid by September 15, 

1996. Thus, although the guaranteed dividend for 1996, 

was $185 million, MassMutual only deducted

$118,975,383 from its 1995 taxes, instead of waiting to 

deduct the entire guaranteed dividend from its 1996 

taxes.

For each disputed year, MassMutual disclosed to the 

relevant state regulators that it would pay guaranteed 
8 MASSACHUSETTS MUTUAL LIFE INS v. US

amounts to a class of participating policyholders, and 

each year the regulators had no objections. MassMutual

did not, however, actually disclose the amount of the 

guarantees to the state insurance regulators and did not 

disclose the guarantee to its policyholders or its sales

force. For its guarantee in 1995, ConnMutual did disclose 

the guaranteed dividend in a footnote in its annual 

statement, but ConnMutual did not disclose the terms of 

the guarantee or that it would apply only to post-1983 

policies. Like MassMutual, ConnMutual also disclosed to 

the state regulators that it would pay the guarantees and 

the regulators did not object. For each of the disputed 

years, the actual payment of dividends exceeded the 

guaranteed dividend by several million dollars—in 1996, 

the actual payment for both MassMutual and ConnMutual exceeded the guaranteed amount by $37.8 million; in 

1997, the actual payment exceeded the guaranteed 

amount by $44.7 million; and in 1998, the actual payment 

exceeded the guaranteed amount by $55.1 million.

B. Court of Federal Claims Proceedings

In September 2007, MassMutual filed an action in the 

Court of Federal Claims on behalf of itself and ConnMutual to recover funds allegedly overpaid to the IRS for the

1995, 1996, and 1997 tax years. The dispute over the 

deductions arose after an IRS audit, in connection with 

which the IRS proposed adjustments to MassMutual’s tax 

returns for 1995, 1996, and 1997 and ConnMutual’s 1995 

tax return, in part, because it found that MassMutual and 

ConnMutual could not deduct any portion of the guaranteed dividends in the year before the dividends were paid. 

These adjustments resulted in an alleged underpayment 

of taxes for the relevant years. To correct the deficiencies, 

MassMutual made the necessary payments under protest, 

and subsequently filed a claim with the IRS for a refund 

for both it and ConnMutual. At the time of its complaint, 

the IRS had yet to take action on MassMutual’s claim and 

had partially disallowed a refund to ConnMutual.
MASSACHUSETTS MUTUAL LIFE INS v. US 9

During the proceedings, the parties did not dispute 

whether MassMutual could deduct the payments, only

when any of the guaranteed dividends could be deducted. 

Generally, the government believed that MassMutual 

could not deduct dividends in the year the guaranteed 

dividend was calculated, but instead, had to wait until the 

next year, when the guaranteed dividend was actually 

paid, because MassMutual had not satisfied the “all 

events” test for the liability. The parties agreed that the

timing question could be resolved if the following two 

issues were addressed: (1) whether, in the years they were 

adopted, the resolutions to pay the guaranteed dividend 

fixed MassMutual’s liability to pay the declared guaranteed minimum amounts in the following year; and (2) 

whether MassMutual’s policyholder dividends are rebates, refunds, or similar payments under 26 C.F.R. 

§ 1.461-4(g)(3), which qualify for the recurring item 

exception under 26 C.F.R. § 1.461-5(b)(5)(ii).

A trial was held in December 2009, and following extensive post-trial briefing, the Court of Federal Claims

issued its decision in January 2012, finding in favor of 

MassMutual. 

With respect to the first issue, the government initially disputed the existence of an actual obligation to pay the 

dividend. It argued that the guarantees were revocable

because the guarantees were not disclosed to the policyholders and were unlikely to be enforced by a regulator. 

Mass. Mut. Life Ins. Co., 103 Fed. Cl. at 138. Even if such 

a liability existed, the government argued that it was not 

fixed, because it was contingent upon at least one policy 

being in force on its anniversary date, which could only be 

determined in the year when the dividend was paid.

In dismissing the government’s arguments, the Court 

of Federal Claims explained that there was no apparent 

requirement that a policyholder be aware of the dividend

in order for a company to deduct the expense. Id. Fur-
10 MASSACHUSETTS MUTUAL LIFE INS v. US

ther, there was nothing to suggest that an expense must 

be irrevocable to accrue as a liability. Id. at 139. Additionally, in this case, MassMutual had informed state 

regulators of these dividends, the state regulators approved the dividends, and there was evidence that the 

regulators had authority to enforce the dividend guarantees if that were necessary. Even if state regulators could 

not have enforced the dividend guarantees, the Court of 

Federal Claims found that this did not prevent MassMutual from establishing the fact of liability because a 

liability need not be legally enforceable to be fixed under 

the “all events” test. Id. at 140.

As to whether the dividends were contingent upon an 

event that must occur before the duty to pay a dividend 

arises, the Court of Federal Claims found that there was a 

group of policyholders who were already eligible to receive 

dividends in each year during which the guaranteed 

dividends were determined, because these individuals had 

paid their premiums through the next anniversary. Id. at 

135. Because only the passage of time stood between the 

guarantees and the receipt of a dividend by these individuals, the liability was fixed at the time the guaranteed 

dividends were approved by the board of directors. While

the government alleged that this finding was not dispositive because MassMutual’s typical practice was to pay a 

dividend only if the policyholders had paid premiums for 

the two previous policy years, the court found this argument to be unsupported by the evidence. Because it was 

clear from the record that the lapse rates for policies were

low, the Court of Federal Claims determined that it was

unlikely the one year policies relied upon would have 

lapsed and thus been ineligible for dividends. Id. at 135–

36. 

Furthermore, the Court of Federal Claims noted that

there was also a small group of existing policies where the 

premiums were no longer due—so called paid-up policies. 

Id. at 136. These paid-up policies were certain to receive 
MASSACHUSETTS MUTUAL LIFE INS v. US 11

a dividend, because there was no risk that these policies 

would lapse as the policyholders never had to pay another 

premium on their policies. Thus, MassMutual was 

already obligated to pay these policyholders. Accordingly, 

the Court of Federal Claims concluded that the liability 

was fixed.

With respect to the second question, the parties 

agreed that rebates and refunds satisfy the matching 

requirement, but disputed whether MassMutual’s guaranteed dividends qualified as rebates or refunds. Because 

there was no general definition for the term rebate or 

refund in the Tax Code or the applicable Treasury Regulations, the Court of Federal Claims considered the ordinary meaning of the terms, industry usage, dictionary 

definitions, and testimony presented at trial, in order to 

determine if the disputed guarantees were rebates or 

refunds. Id. at 155–166. In light of this evidence, it 

concluded that the dividends were a return of premiums 

paid by the policyholders, and, thus, should be treated as 

rebates or refunds. Id. at 166. Accordingly, the Court of 

Federal Claims held that MassMutual’s deductions qualified under the recurring item exception, because its 

dividends satisfied the matching requirement. 

Lastly, the government alleged that the guarantees 

lacked economic substance because there was no non-tax 

business purpose for setting them. The Court of Federal 

Claims rejected this contention, explaining that the 

purpose of the economic substance doctrine is to prevent 

taxpayers from taking improper deductions, which was 

not the case here. Id. at 170. Because the dispute was 

only with respect to the timing of the deduction, the Court 

of Federal Claims concluded that the typical economic 

substance analysis was inapplicable in this case, and that 

there was no other reason to preclude MassMutual from 

deducting the guaranteed dividends in the years in which 

they were calculated. Id. at 173.
12 MASSACHUSETTS MUTUAL LIFE INS v. US

Because MassMutual’s deductions were fixed in the 

year the dividends were determined and the guaranteed 

dividends were rebates, the Court of Federal Claims 

concluded that MassMutual was entitled to a refund for 

its and ConnMutual’s overpayment of taxes in 1995, 1996, 

and 1997. Id. at 173–74.

The government timely appealed this decision. The 

court has jurisdiction to review the Court of Federal 

Claims’ final judgment under 28 U.S.C. § 1295(a)(3).

DISCUSSION

Whether a taxpayer has satisfied the “all events” test 

is a question of law that we review de novo. See In re 

Harvard Indus., Inc., 568 F.3d 444, 450 (3d Cir. 2009); 

United States v. O’Cheskey, 310 F. App’x 726, 734 (5th 

Cir. 2009); Interex, Inc. v. Comm’r, 321 F.3d 55, 58 (1st 

Cir. 2003); Gold Coast Hotel & Casino v. United States, 

158 F.3d 484, 487 (9th Cir. 1998). The interpretation of a 

regulation is also a question of law that is reviewed de 

novo. Gose v. U.S. Postal Serv., 451 F.3d 831, 836 (Fed. 

Cir. 2006); see also Am. Express Co. v. United States, 262

F.3d 1376, 1382–83 (Fed. Cir. 2001). Any fact finding by 

the Court of Federal Claims is sustained unless it is 

clearly erroneous. AT&T Co. v. United States, 307 F.3d 

1374, 1377 (Fed. Cir. 2002). “A finding is ‘clearly erroneous’ when although there is evidence to support it, the 

reviewing court on the entire evidence is left with the 

definite and firm conviction that a mistake has been 

committed.” United States v. U.S. Gypsum Co., 333 U.S. 

364, 395 (1948). 

On appeal, the government again challenges the timing of the deductions, claiming that the guaranteed dividends were not fixed in the year that the dividends were 

set by the board, and that these payments were not 

rebates. It does not contest the Court of Federal Claims’ 

ruling regarding the economic substance of the deduction.
MASSACHUSETTS MUTUAL LIFE INS v. US 13

A. Existence of Obligations

As an initial matter, the government again contests 

whether the dividend guarantees give rise to true obligations that can be deducted. If there is no obligation, it is 

irrelevant whether such an obligation is fixed. 

The government alleges that MassMutual’s disclosures to state regulators do not change the reality that

these promises were revocable, because MassMutual 

never informed the policyholders of these dividends. To 

support its position, the government relies on New York 

Life Insurance Co. v. United States, which also addressed 

the timing of participating policyholder dividend deductions. 724 F.3d 256 (2d Cir. 2013). 

There, New York Life Insurance Company (“New York 

Life”) argued that it could deduct two types of dividends, 

annual dividends and minimum liability dividends, both 

of which it considered accrued in the tax year before the 

dividends were actually paid. Id. at 257. Regarding the

annual dividends, New York Life’s practice was to credit 

an individual policyholder’s account before, but no more 

than thirty days before, the policy’s anniversary date. Id. 

at 259. This credit would be generated if a “policyholder 

had paid all the premiums necessary to keep the policy in 

force through its anniversary date. New York Life did not 

actually pay the dividend, however, until the ‘the Credited 

Policy’s anniversary date.’” Id. Because the credit date 

for January policies fell within the prior year, New York 

Life deducted these credits in the year before the dividend 

was paid. 

New York Life’s minimum liability dividend arose 

from its decision to also offer termination dividends, 

which are dividends paid to a policyholder when he or she 

ends a policy. New York Life understood that it could 

hypothetically pay an annual dividend, a termination 

dividend, or both an annual dividend and a termination 

dividend, to an individual policyholder in one year. New 
14 MASSACHUSETTS MUTUAL LIFE INS v. US

York Life then calculated the annual dividends and 

termination dividends that it anticipated it would pay in 

the following year. Surmising that it would pay at least 

the lesser of the annual or termination dividend to eligible 

policyholders, New York Life deducted the lesser amount 

in the tax year before any dividend was paid. 

Upon review, the Second Circuit disagreed with New 

York Life’s practices, finding that such deductions were 

improper because they failed to meet the “all events” test. 

For the annual dividends, the Second Circuit determined 

that the obligation to pay the annual dividends depended 

upon the individual policyholder retaining his or her 

policy through the policy’s anniversary date. Id. at 263. 

Because the decision to maintain the policy through the 

anniversary date would not occur before the close of the 

prior tax year, New York Life’s obligation to pay the 

annual dividend could not accrue when the individual 

policyholder accounts were credited the year before. 

Additionally, the Second Circuit concluded that there was 

no basis for New York Life’s minimum liability dividend 

deduction, because New York Life was under no obligation to pay the termination dividend when a policyholder 

ended his or her policy. Id. at 266. Without an actual 

requirement to pay these dividends, the Second Circuit 

concluded it was irrelevant that New York Life’s board of 

directors passed an “irrevocable” board resolution approving such a payment, since “a board’s resolution cannot 

convert a voluntary expense into an accrued liability for 

federal income tax purposes.” Id. at 267. Accordingly, the 

Second Circuit concluded New York Life’s deductions 

were improper. 

The government’s argument is largely premised on 

the idea that MassMutual had no obligation to pay its 

eligible policyholders a dividend, absent its board of 

directors’ resolution to pay a dividend, which was the case 

in New York Life with respect to the termination dividends. Unlike New York Life, however, the policies at 
MASSACHUSETTS MUTUAL LIFE INS v. US 15

issue here stated that MassMutual and ConnMutual

would pay dividends to eligible policyholders. Mass. 

Mutual Life Ins. Co., 103 Fed. Cl. at 114 (“A sample 

MassMutual participating policy, included as a Joint 

Exhibit, stated: ‘Each year we determine how much 

money can be paid as dividends. This is called divisible 

surplus. We then determine how much of this divisible 

surplus is to be allocated to this [participating] policy.’”); 

see also Joint Appendix 139 (“While this [ConnMutual]

Policy is in force, except as extended term insurance, we 

will credit it with dividends. Dividends are based on such 

shares of the divisible surplus (if any) as we may apportion at the end of each Policy Year.”). While MassMutual 

and ConnMutual ultimately would determine the portion 

of the guarantee eligible policyholders would receive

based on the size of the surplus and the number of policyholders who were eligible for the payments, policyholders 

had a contractual expectation nonetheless that they 

would receive a policyholder dividend. For these reasons, 

we find the government’s assertion that New York Life

forecloses a finding that the disputed guarantees are 

actual obligations unpersuasive. 

The government also alleges that MassMutual’s disclosure of the dividend guarantees to state regulators was 

merely an empty gesture. Because some dividend was

virtually guaranteed each year, it contends that the 

disclosure to the regulators of a guaranteed dividend was 

meaningless. The government neglects to discuss the 

evidence on the record that the state regulators did have 

the authority to enforce MassMutual’s guarantees. Absent an argument that this finding was clear error, the 

court will not disturb the Court of Federal Claims’ determination that the government’s enforceability concerns 

did not prevent the guaranteed dividends from being fixed 

in the year in which MassMutual calculated the guaranteed dividends.
16 MASSACHUSETTS MUTUAL LIFE INS v. US

B. Fixation of Liability

The government also argues that MassMutual can only deduct the guaranteed dividend in the tax year in 

which the dividends were paid and cannot deduct them in 

the year the guaranteed dividend was determined, because a condition precedent to the payment guarantee—

i.e., that the policies remain in force as of the anniversary 

date—may not be satisfied. It correctly explains that the 

“all events” test, in part, requires that a liability first be 

firmly established, because one cannot deduct a liability 

that is contingent or contested. See Gen. Dynamics, 481 

U.S. at 243–44 (“Nor may a taxpayer deduct an estimate 

of an anticipated expense, no matter how statistically 

certain, if it is based on events that have not occurred by 

the close of the taxable year.”); United States v. Hughes 

Properties, Inc., 476 U.S. 593, 600 (1986) (“[T]he Court’s 

cases have emphasized that ‘a liability does not accrue as 

long as it remains contingent.’”) (quoting Brown v. Helvering, 291 U.S. 193, 200 (1934)). The government’s assertion that MassMutual’s obligation to pay the guaranteed 

dividends is contingent on an event that cannot be determined until the year the dividends are paid is factually 

incorrect, however. 

The government’s argument concerns the requirement 

that a policy still be in force before a dividend is paid to a 

policyholder. Because it is unknown whether a policyholder will surrender his or her policy before its anniversary date, the government contends that the obligation to 

pay the dividend is contingent upon an event that would 

not occur until the next year, and is therefore not fixed. 

Again, the government cites heavily to New York Life to 

bolster its contention. The government’s reliance on New 

York Life is misplaced.

While the present case is similar to New York Life in 

the sense that both cases involve policyholder dividend 

deductions, the facts of this case dictate a different out-
MASSACHUSETTS MUTUAL LIFE INS v. US 17

come than the one reached in New York Life. In guaranteeing a certain amount of dividends each year for its 

policyholders, MassMutual promised an entire class of 

policyholders that they would be entitled to the guaranteed payments on a pro rata basis. On the other hand, 

New York Life made such guarantees on an individual 

basis. See New York Life, 724 F.3d at 259 (explaining 

that the company’s practice was to credit an individual 

policyholder’s account with the dividend before the policy’s anniversary date and deduct these credits from its 

gross income, before the dividends were actually paid to 

policyholders in the following year). While the government attempts to equate the two fact patterns, the difference between the two is significant.

Only in one instance will an individual policyholder’s 

choice to end the insurance policy early affect the company’s obligation to pay the dividend—the case presented in 

New York Life. Because MassMutual guaranteed the 

dividend to a class of policyholders, an individual’s decision to terminate his or her policy does not affect MassMutual’s obligation to pay a dividend to the remaining 

members of the class of policyholders. Rather, it affects 

only how much MassMutual would pay the remaining 

members of the class. So long as there is at least one 

member of the class remaining, the guaranteed dividend 

would be paid. At the end of each disputed taxable year, 

there were thousands of paid-up post-1983 policies with 

no risk of lapse, thus MassMutual was obligated to pay at 

least this group of policyholders. And by its declaration to 

pay a guaranteed dividend to the class of eligible policyholders, MassMutual was obligated to pay at least this 

group the guaranteed amount.

While the composition of the class could change 

throughout the year, this does not change the outcome of 

this case, because not knowing the ultimate recipient of 

the payment does not prevent a liability from becoming 

fixed. Hughes Properties, 476 U.S. at 601; Wash. Post Co. 
18 MASSACHUSETTS MUTUAL LIFE INS v. US

v. United States, 405 F.2d 1279, 1284 (Ct. Cl. 1969) (explaining that “when a ‘group liability’ is involved, it is the 

certainty of the liability which is of utmost importance . . . 

and not necessarily . . . the identity of the payees.”). So 

long as an obligation is not subject to some event that 

must occur for a liability to become due, then the liability 

is considered fixed. Gen. Dynamics, 481 U.S. at 244. In 

this case, the only uncertainty at the end of the year in 

which the guarantees were determined was who would

ultimately make up the group of policyholders—there was 

no question that MassMutual had passed an absolute 

resolution to pay the guaranteed dividend and that at 

least some policyholders were already qualified recipients 

of that guarantee. Accordingly, the liability to pay the 

guaranteed dividend became fixed in the year in which 

the board of directors adopted the guaranteed dividend 

resolutions and at least some number of policyholders had 

paid-up premiums for their policies, facts which the Court 

of Federal Claims determined existed for each of the tax 

years in question. 

C. Definition of Rebate

The government also argues that the Court of Federal 

Claims erred in finding that MassMutual’s guaranteed 

dividends were rebates. Specifically, the government 

alleges that the IRS’s interpretation that these types of 

payments are not rebates is controlling and should be

given deference. Even without deference, the government 

alleges that the IRS’s interpretation of Treasury Regulation § 1.461-4(g)(3) should prevail in light of the surrounding language of the regulation, and the legislative and 

regulatory history. 

When construing a regulation, the court applies the 

same interpretative rules it uses when analyzing the 

language of a statute. See Tesoro Haw. Corp. v. United 

States, 405 F.3d 1339, 1346 (Fed. Cir. 2005) (“We construe 

a regulation in the same manner as we construe a stat-
MASSACHUSETTS MUTUAL LIFE INS v. US 19

ute . . . .”). Accordingly, it is appropriate to first consider 

the “plain language [of the regulation] and consider the 

terms in accordance with their common meaning.” Lockheed Corp. v. Widnall, 113 F.3d 1225, 1227 (Fed. Cir. 

1997). In doing so, the court considers “the text of the 

regulation as a whole, reconciling the section in question 

with sections related to it.” Lengerich v. Dep’t of Interior, 

454 F.3d 1367, 1370 (Fed. Cir. 2006) (citing Reflectone, 

Inc. v. Dalton, 60 F.3d 1572, 1577–78 (Fed. Cir. 1995)). If 

the regulatory language is clear and unambiguous, then 

no further inquiry is usually required. Roberto v. Dep’t of 

the Navy, 440 F.3d 1341, 1350 (Fed. Cir. 2006). 

If the language is ambiguous, then the court must 

typically defer to the agency’s interpretation of the regulation. Auer v. Robbins, 519 U.S. 452, 461–62 (1997);

Gose, 451 F.3d at 836 (“As a general rule, we must defer 

to an agency’s interpretations of the regulations it promulgates, as long as the regulation is ambiguous and the 

agency’s interpretation is neither plainly erroneous nor 

inconsistent with the regulation.”) (citing Gonzales v. 

Oregon, 126 S. Ct. 904, 914 (2006) (“An administrative 

rule may receive substantial deference if it interprets the 

issuing agency’s own ambiguous regulation.”)); see also 

Christensen v. Harris Cnty., 529 U.S. 576, 588 (2000) (“In

Auer, we held that an agency’s interpretation of its own 

regulation is entitled to deference. But Auer deference is

warranted only when the language of the regulation is

ambiguous.”) (citations omitted). Deference can even be 

afforded to an agency’s interpretation when that interpretation is advanced in a legal brief. See Chase Bank USA, 

N.A. v. McCoy, 131 S. Ct. 871, 881 (2011) (explaining that 

the deference granted in Auer was to an agency’s interpretation that was presented in an amicus brief submitted by the agency at the Supreme Court’s invitation). 

But such deference is not always afforded to an agency’s interpretation of its own regulation. “Deference is 

undoubtedly inappropriate, for example, when the agen-
20 MASSACHUSETTS MUTUAL LIFE INS v. US

cy’s interpretation is ‘plainly erroneous or inconsistent 

with the regulation.’” Christopher v. SmithKline Beecham 

Corp., 132 S. Ct. 2156, 2166 (2012) (quoting Auer, 591 

U.S. at 461). It is also unwarranted when there is “reason 

to suspect that the interpretation does not reflect the 

agency’s fair and considered judgment on the matter in 

question.” Auer, 519 U.S. at 462. Such a reason exists

“when the agency’s interpretation conflicts with a prior 

interpretation, or when it appears that the interpretation 

is nothing more than a convenient litigating position, or a 

post hoc rationalization advanced by an agency seeking to 

defend past agency action against attack.” Christopher, 

132 S. Ct. at 2166–67 (quotations and citations omitted).

1. Interpretation of “Rebates, Refunds, and Similar 

Payments” 

When deciding how to construe the terms “rebate, refund, and similar payments” in Treasury Regulation 

§ 1.461-4(g)(3), the Court of Federal Claims determined 

that there was no general definition for the term rebate or 

refund in the Treasury Regulations; rather, the only 

definitions in the regulations for rebates and refunds were 

for very specific contexts, not at issue in this case. Because “neither the Tax Code nor the Treasury Regulations 

provide a specific definition for rebate or refund applicable to this case,” the Court of Federal Claims decided to 

apply basic statutory interpretation principles, including 

reliance on dictionary definitions, to determine the correct 

interpretation of refunds and rebates in the context of 

Treasury Regulation § 1.461-4(g)(3). Mass Mut. Life Ins. 

Co., 103 Fed. Cl. at 155. It ultimately concluded that

MassMutual’s policyholder dividend payments qualified

as rebates, refunds, or similar payments. Id. at 166.

As previously discussed, the matching requirement of 

Treasury Regulation § 1.461-5(b)(5)(ii) can be satisfied by 

rebates or refunds as described in Treasury Regulation 

§ 1.461-4(g)(3), which states:
MASSACHUSETTS MUTUAL LIFE INS v. US 21

(3) Rebates and refunds. If the liability of a taxpayer is to pay a rebate, refund, or similar payment to another person (whether paid in property, 

money, or as a reduction in the price of goods or 

services to be provided in the future by the taxpayer), economic performance occurs as payment 

is made to the person to which the liability is 

owed. This paragraph (g)(3) applies to all rebates, 

refunds, and payments or transfers in the nature 

of a rebate or refund regardless of whether they 

are characterized as a deduction from gross income, an adjustment to gross receipts or total 

sales, or an adjustment or addition to cost of goods 

sold. In the case of a rebate or refund made as a 

reduction in the price of goods or services to be 

provided in the future by the taxpayer, “payment” 

is deemed to occur as the taxpayer would otherwise be required to recognize income resulting 

from a disposition at an unreduced price. See Example 2 of paragraph (g)(8) of this section. For 

purposes of determining whether the recurring 

item exception of § 1.461-5 applies, a liability that 

arises out of a tort, breach of contract, or violation 

of law is not considered a rebate or refund.

26 C.F.R. § 1.461-4(g)(3).

The Treasury Regulations provide no applicable definition for the terms “rebate, refund, or similar payment.” 

When terms are undefined, the court may consider the 

definitions of those terms in order to determine their 

meaning. See Xianli Zhang v. United States, 640 F.3d 

1358, 1364 (Fed. Cir. 2011) (“Dictionary definitions can 

elucidate the ordinary meaning of statutory terms.”); Am. 

Express Co., 262 F.3d at 1381 n.5 (“It is appropriate to 

consult dictionaries to discern the ordinary meaning of a 

term not explicitly defined by statute or regulation.”). 
22 MASSACHUSETTS MUTUAL LIFE INS v. US

At the time the disputed regulation was adopted in 

1992, Black’s Law Dictionary defined the term “rebate” as 

a “[d]iscount; deduction or refund of money in consideration of prompt payment. A deduction from a stipulated 

premium on a policy of insurance, in pursuance of an 

antecedent contract. A deduction or drawback from a 

stipulated payment, charge, or rate . . . not taken out in 

advance of payment, but handed back to the payer after 

he has paid the full stipulated sum . . . .” BLACK’S LAW 

DICTIONARY 1266 (6th ed. 1990). It also defined “refund” 

as “[t]o repay or restore; to return money in restitution or 

repayment; e.g. to refund overpaid taxes; to refund purchase prices of returned goods.” Id. at 1281. 

Reviewing these definitions, it is clear that the term 

rebate encompasses a return of a portion of the original 

life insurance premium to a policyholder in the form of a 

policyholder dividend, also known as a premium adjustment. The IRS Code itself supports such an interpretation, by defining “premium adjustment” in the context of 

insurance as “any reduction in the premium under an 

insurance or annuity contract which (but for the reduction) would have been required to be paid under the 

contract.” 26 U.S.C. § 808(d). Additionally, this construction comports with this court’s own understanding of 

policyholder dividends. See John Hancock Servs., Inc. v. 

United States, 378 F.3d 1302, 1303 (Fed. Cir. 2004) (“Policyholder dividends are price rebates that the company can 

deduct from its taxable earnings.”); Principal Mut. Life 

Ins. Co. v. United States, 295 F.3d 1241, 1242 (Fed. Cir. 

2002) (“Mutual life insurance companies give premium 

rebates to their policyholders.”); CUNA Mut. Life Ins. Co. 

v. United States, 169 F.3d 737, 738 (Fed. Cir. 1999) (“Life 

insurance companies traditionally rebate to their policy 

holders, as excessive charges, part of the premiums paid 

and deduct these payments from their income.”). 

The government argues, nevertheless, that the surrounding language in § 1.461-4(g) and in the related 
MASSACHUSETTS MUTUAL LIFE INS v. US 23

Treasury Regulation § 1.461-4, which describes the recurring item exception, do not support this interpretation. 

Reflectone, 60 F.3d at 1577–78 (citing Beecham v. United 

States, 511 U.S. 368, 372 (1994) (“The plain meaning that 

we seek to discern is the plain meaning of the whole 

statute, not of isolated sentences.”)). For example, the 

government cites to language in § 1.461-4(g) that explains 

a rebate or refund can be “an adjustment to gross receipts 

or total sales,” “an adjustment or addition to cost of goods 

sold,” or “a reduction in the price of goods or service to be 

provided in the future by the taxpayer.” It contends that 

such language is inapplicable in this case. But contrary 

to the government’s argument, this language actually

supports the conclusion that a premium adjustment—an 

adjustment to the initial cost of insurance—is a rebate. 

The government also cites to § 1.461-4(g)(5), which 

discusses insurance, warranty, and service contracts, to 

support its conclusion that policyholder dividends are not 

rebates. Treasury Regulation § 1.461-4(g)(5) states that

“[i]f the liability of a taxpayer arises out of the provision 

to the taxpayer of insurance, or a warranty or service 

contract, economic performance occurs as payment is 

made to the person to which the liability is owed.” Because this section refers explicitly to insurance, the government contends that, if refunds and rebates were to 

cover policyholder dividends, there would likewise be a 

specific reference to such dividends in § 1.461-4(g)(3). 

What the government neglects to mention is that there 

are no specific references made to the types of refunds 

included in § 1.461-4(g)(3); the failure to include a particular reference to policyholder dividends, thus, is not 

surprising. There is nothing in the regulations the government references that conflicts with the construction of 

rebate adopted by the Court of Federal Claims. 

Additionally, the government asserts that its interpretation is supported by both legislative and regulatory 

history, because there was no mention of policyholder 
24 MASSACHUSETTS MUTUAL LIFE INS v. US

dividends as rebates in either the discussion of the statute 

which statutorily established the economic performance 

requirement, the Deficit Reduction Act of 1984, or the IRS 

regulations related to that act. While the government is 

correct that policyholder dividends are not referenced in 

the House Conference Report on the Deficit Reduction Act 

of 1984 or by the IRS, only one type of rebate or refund is 

ever referenced with specificity—utility refunds, which 

are given to natural gas utilities when they have been 

overcharged by their suppliers. See H.R. Conf. Rep. No. 

98-861, at 876 (1984) (discussing that with the changes to 

26 U.S.C. 461(h) requiring economic performance, commentators argued that the statute should be interpreted 

to allow “a utility [to] deduct [natural gas supplier] refunds in the year the refund was included in the income of 

the utility, provided that the refunds are passed through 

to consumers within a reasonable period of time in the 

following taxable year”); 57 Fed. Reg. 12411, 12416, T.D. 

8408 (Apr. 9, 1992) (noting that “the final regulations 

[relating to the economic performance requirement did] 

not provide any special rules for natural gas suppliers or 

other public utilities”). The discussion of one very specific

type of refund does not create an inference that policyholder dividends in the form of premium adjustments

should not be considered “rebates, refunds, or similar 

payments,” especially when adopting such a construction 

would conflict with the plain and ordinary meaning of the 

contested terms. 

Here, the plain and ordinary meaning of the terms rebate and refund include premium adjustments distributed 

to policyholders in the form of dividends. While the 

government also complains that the Court of Federal 

Claims’ analysis is flawed for giving undue weight to 

industry usage, and ignoring the actual nature of policyholder dividends, which could be also seen as a return of 

equity and not merely a price rebate, on the record before 

us, we find these arguments unpersuasive. The Court of 
MASSACHUSETTS MUTUAL LIFE INS v. US 25

Federal Claims thoroughly considered these questions 

and we see no error in the manner in which it did so. The

government’s final argument is that the IRS’s interpretation of the regulation should be afforded deference. 

Because the terms are unambiguous, the court need not 

consider whether it should defer to the IRS’s interpretation of the regulation. Even if we were to conclude that 

the regulation is ambiguous, moreover, for the reasons 

explained below, we decline to afford deference to the 

IRS’s interpretation in this case.

2. Deference to the IRS’s interpretation of 

§ 1.461-4(g)(3) 

The court first notes that the government did not present a deference argument to the Court of Federal Claims. 

As a general principle, appellate courts do not consider 

issues that were not clearly raised in the proceeding 

below. Hormel v. Helvering, 312 U.S. 552, 556 (1941); see

San Carlos Apache Tribe v. United States, 639 F.3d 1346, 

1354–55 (Fed. Cir. 2011) (“Because the [litigant] did not 

raise this argument before the Court of Federal Claims, it 

is waived on appeal.”). “Only rarely will an appellate 

court entertain” a novel argument raised for the first time 

on appeal. Karuck Tribe of Cal. v. Ammon, 209 F.3d 

1366, 1379 (Fed. Cir. 2000); see Singleton v. Wulff, 428 

U.S. 106, 121 (1976) (“The matter of what questions may 

be taken up and resolved for the first time on appeal is 

one left primarily to the discretion of the courts of appeals, to be exercised on the facts of individual cases.”).

While the government argues that the doctrine of 

waiver is inapplicable here because the Court of Federal 

Claims raised the deference issue sua sponte in its opinion, the government mischaracterizes the court’s discussion of deference. In considering how to define rebates 

and refunds, the Court of Federal Claims first considered 

whether 26 U.S.C. § 461(h)(3), the statute which discusses

the recurring item exception, explained what type of 
26 MASSACHUSETTS MUTUAL LIFE INS v. US

transactions met the exception. In finding it did not, the 

Court of Federal Claims next considered if Treasury 

Regulation § 1.461-5, which address the matching requirement of §461(h)(3), was a reasonable and consistent 

interpretation of the statute. If the regulation was consistent with the aim of the statute, then the court could 

rely upon it in determining if policyholder dividends 

satisfied the matching requirement. Mass Mut. Ins. Co., 

103 Fed. Cl. at 151 (“Treasury regulations are entitled to 

great deference, and must be sustained unless unreasonable and plainly inconsistent with the revenue statutes.”

(quoting CUNA Mut. Life Ins. Co., 169 F.3d at 742)). The 

Court of Federal Claims never discussed whether the 

IRS’s interpretation of Treasury Regulation § 1.461-4(g)(3) 

was entitled to deference; it only considered whether the 

IRS’s statutory interpretation was reasonable. Accordingly, the court will not excuse the government’s failure to 

raise the Auer deference argument below.

Assuming arguendo that the government did not 

waive its deference argument, deference would not be 

warranted here. The government asserts that the IRS’s 

interpretation of Treasury Regulation § 1.461-4(g)(3) to 

exclude policyholder dividends as rebates or refunds— 

which was advanced for the first time in this litigation— 

should be afforded deference. It cites to two IRS Field 

Service Advisories to support its contentions that the IRS 

has considered the question carefully, and that its ultimate interpretation “reflect[s] the agency’s fair and 

considered judgment on the matter in question,” and was

not merely created for litigation purposes. Auer, 519 U.S. 

at 462. 

The two IRS Field Service Advisories cited by the government do not take any position as to how policyholder 

dividend liabilities should be classified, however. See IRS 

Field Service Advisory, 1994 WL 1865978 (Apr. 28, 1994) 

(“Given that, in theory, policyholder dividends may represent in part a return on equity and in part a price ad-
MASSACHUSETTS MUTUAL LIFE INS v. US 27

justment, we believe that the policyholder dividend liabilities at issue are appropriately classified as § 1.461-4(g)(7) 

‘other liabilities,’ § 1.461-4(g)(3) ‘rebates and refunds,’ or 

some combination of the two.”); IRS Field Service Advisory, 1998 WL 1984267 (Aug. 24, 1998) (“Although we 

believe it is possible to characterize the liability to pay 

policyholder dividends either as a rebate or as an ‘other’ 

liability, we characterize the liability as a rebate for 

purposes of this advice.”). “While agency positions articulated in litigation briefs may be entitled to deference, such 

deference is earned only if the brief represents the agency’s considered position and not merely the views of 

litigating counsel.” Abbott Labs. v. United States, 573 

F.3d 1327, 1333 (Fed. Cir. 2009) (emphasis added).

In this case, there is no evidence that the IRS’s present interpretation reflects such contemplation. Am. 

Signature, Inc. v. United States, 598 F.3d 816, 827 (Fed. 

Cir. 2010) (“Where the agency’s interpretation seeks to 

advance its litigating position, deference is typically not 

afforded to the agency’s position announced in a brief. 

But, where the agency is not advancing its litigating 

position, deference may be afforded [to] an agency’s 

position articulated in its brief.”) (citation omitted); compare Adair v. United States, 497 F.3d 1244, 1252 (Fed. 

Cir. 2007) (declining to afford deference to OPM’s regulatory interpretation in part because there was no indication that the opinion had been circulated through OPM), 

and Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 212 

(1988) (“[W]e have declined to give deference to an agency 

counsel’s interpretation of a statute where the agency 

itself has articulated no position on the question . . . .”), 

with Long Island Care at Home, Ltd. v. Coke, 551 U.S. 

158, 163–64, 171 (2007) (explaining there was no reason 

to suspect the agency’s interpretation did not reflect its 

fair and considered judgment because it had considered 

revising its interpretation at least three times over the 

course of 15 years but had declined to make a change). 
28 MASSACHUSETTS MUTUAL LIFE INS v. US

Without any other evidence that the IRS had thoughtfully 

considered its position, “[t]o defer to the agency’s interpretation in this circumstance would seriously undermine the 

principle that agencies should provide regulated parties 

‘fair warning of the conduct [a regulation] prohibits or 

requires.’” Christopher, 132 S. Ct. at 2167 (quoting Gates 

& Fox Co. v. Occupational Safety & Health Review 

Comm’n, 790 F.2d 154, 156 (D.C. Cir. 1986) (Scalia, J.)). 

Accordingly, if the court had found the regulatory language ambiguous, the IRS’s interpretation of § 1.461-

4(g)(3) to exclude policyholder dividends still would not 

have been entitled to deference.

D. MassMutual’s Dividends

The last remaining question is whether MassMutual’s 

disputed dividends were premium adjustments and not a 

distribution of profits. See 26 U.S.C. § 808(b) (“[T]he term 

‘policyholder dividend’ includes—(1) any amount paid or 

credited . . . where the amount is not fixed in the contract 

but depends on the experience of the company or the 

discretion of the management, (2) excess interest, (3)

premium adjustments, and (4) experience-rated refunds.”) 

In concluding that MassMutual’s policyholder dividends 

qualified as a refund or rebate, the Court of Federal 

Claims cited evidence that the company itself considered 

these dividends as a return of a portion of the premium 

and the fact that none of MassMutual’s policyholder 

dividend deductions were treated as a return of equity by 

the IRS under 26 U.S.C. § 809.4 In the absence of any 

evidence that the dividends in question were in fact a 

return of equity, there is no reason to disturb the Court of 

4 This section of the Tax Code, since repealed by the 

Pension Funding Equity Act of 2004, established a statutory scheme “for calculating the portion of the policyholder dividends that a mutual company could deduct.” John 

Hancock Servs., 378 F.3d at 1303.

 
MASSACHUSETTS MUTUAL LIFE INS v. US 29

Federal Claims’ factual finding that these dividends were 

“in the nature of the price rebates.” Mass Mut. Life Ins. 

Co., 103 Fed. Cl. at 163.

CONCLUSION

Accordingly, we affirm the Court of Federal Claims’ 

finding that MassMutual’s claimed deductions relating to 

its guaranteed dividends for the 1995, 1996, and 1997 tax 

years, and ConnMutual’s claimed deduction relating to its 

guaranteed dividend for the 1995 tax year, are allowable.

AFFIRMED