Document: 479 U.S. 27 107 S.Ct. 347 93 L.Ed.2d 206 Robert E. O'CONNOR, et ux., Petitioners, 85-558v.UNITED STATES. Paul H. COPLIN, 85-559 v. UNITED Jack R. MATTOX, 85-560 Nos. 85-558 to 85-560. Argued Oct. 14, 1986. Decided Nov. 4, Syllabus Section 1 of Article XV the Agreement in Implementation III Panama Canal Treaty provides that Commission and its contractors "are exempt from payment Republic all taxes . on their activities or property." The first sentence § 2 "United States citizen employees shall be any income received as a result work for Commission," second exempts such "from derived sources outside Panama." 3 "shall gifts inheritance personal property, presence which within territory is due solely stay therein persons account with Commission." United spouses, sought refunds collected salaries paid by certain years, contending constitutes an express exemption those both Panamanian taxation. Claims Court agreed, but Appeals reversed. Held: applies only taxes, hence petitioners are not entitled paid. establishes context discussion tax entire Article, so when §§ state exempt" they understood dealing payable Panama. If were interpreted refer well then would also do so, implausible consequence earnings gift taxes. Not limitation accord Executive Branch's consistent application Agreement, has gone unchallenged Pp. 30-35. 761 F.2d 688 (Fed.Cir.1985) affirmed. SCALIA, J., delivered opinion unanimous Court. Carter G. Phillips, Washington, D.C., petitioners. Jerrold J. Ganzfried, respondent. Justice SCALIA petitioners, seek between 1979 1981. We granted certiorari resolve conflicting appellate interpretations international agreement. 474 1050, 106 784, 88 763 (1986). From 1904 1979, exercised sovereignty over surrounding 10-mile-wide Zone under Isthmian Convention, 33 Stat. 2234. On September 7, 1977, signed Treaty, T.I.A.S. No. 10030, was ratified Senate April 17, 1978, took effect October 1, 1979. transferred Zone, gave right operate until December 31, 1999. vehicle administration Commission, Government agency supervised Board nine members, four whom nationals proposed See 22 U.S.C. 3611, 3612; Art. III, 3, 10030 (hereinafter Treaty). "Canal Operation Management," specifies "the rights legal status agencies operating pursuant this governed Article. ." 9. latter agreement, simultaneously see Treaty: Sept. 10031 Agreement), contains provision gives rise present dispute. "Taxation," follows: 4 "1. By virtue subcontractors fees other charges property. 5 "2. dependents Commission. Similarly, 6 "3. sponsor's 7 "4. Coordinating Committee may establish regulations appropriate implementation Article." 8 contend 26 894(a) ("Income kind, extent required treaty obligation States, included gross taxation subtitle"). Cl.Ct. 115 (1984), reversed five-judge panel Federal Circuit. (1985). In substantively identical case, Eleventh Circuit ruled taxpayers. Harris 768 1240 (1985), cert. pending, 85-1011. same issue presented numerous cases still pending lower courts.1 9 agree section XV, confers upon taxes" (emphasis added), exemptions Article—so regard structure similar XVI, most sections speaks generally import duties, duties principally because sets stage fashion referring customs laws added). 10 There some purely textual evidence, albeit subtle, understanding taxes: conferring property displays assumption at issue; otherwise, significant qualification operation more naturally have been set forth explicit ("personal Panama, whose there," etc.) rather than being referred incidentally modifying clause Panama," etc.). And turn reflects fundamental addressed. 11 More persuasive our view overwhelmingly convincing, contextual case limiting Unless one posits ellipsis failing repeat, each section, 1's "in takes meaning utterly no foundation negotiations leading Agreement. For if refers 2, totality must well—with (e.g., bank accounts), While, assert, there might reason why insist inability matched detraction States' sovereign power earnings, conceivable hypothetical "your-sovereignty-for-mine" negotiating strategy escalate into demand yield prerogatives it asking forgo—and imaginable accept escalation, producing immunity unprecedented scope. 12 petitioners' attempts explain these broader consequences need follow interpretation unpersuasive. With argue opening word "similarly" should read incorporate sentence's restriction "income understanding, "simila[r]" Commission-related "derived allows countries non-Commission income. addition unnatural reading context, flatly inconsistent language 2. Contrary tacit assumption, nothing scope A person receiving salary performed in, example, Bogota seem plainly qualify rendering sentence, superfluous. assert reference "within Panama" sufficient demonstrate intended covered. But will readily demonstrate, taxes; comparable 3's "on inheritance." That limited, all, implication alone issue. sum, we find verbal distortions necessary give plausible content, theory, far less tolerable acknowledgement forms basis Government's interpretation. 13 Branch—a factor great weight, Sumitomo Shoji America, Inc. Avagliano, 457 176, 184-185, 102 2374, 2379, 72 765 (1982)—but It undisputed that, clear Branch policy, consistently withheld others similarly situated, Letter John L. Haines, Jr., Deputy General Counsel, David Slacter, Department Justice, Dec. 20, 1982, pp. 2-3, App. 85-504, 85-505, 85-506, 85-507 (CA Fed.), 61-62, had own did object. course conduct parties like contract, evidence meaning. Trans World Airlines, Franklin Mint Corp., 466 243, 259-260, 104 1776, 1786-1787, 80 273 (1984); Pigeon River Improvement, Slide & Boom Co. Charles W. Cox, Ltd., 291 138, 158-161, 54 361, 366-367, 78 L.Ed. 695 (1934). Cf. Uniform Commercial Code 2-208(1) (1978).2 14 contrast following executed IV, relating Armed Forces associated civilian personnel: 15 "(2) Members component, dependents, fees, service facilities XI XVIII provided law, 10032 16 variation phraseology two provisions demonstrates meant bilateral. think not. another matter alteration phrase "Panamanian agreement merely "taxes" other; object former formulation except belief Several reasons, however, justify objection "as law." obvious concern leave future Panama's unilateral control, through amendment domestic law. (To sure, seemingly call deletion agreements III—but perhaps respect steadfastly opposed whole concept exemption, action feared.) surmise covered reasonable prompted fact, made American side's internal drafting, before text even Panamanians. (The law" June 26, draft p. 74, dropped subsequent drafts, id., 77, 81.) occurred knowledge bilateral one—but point proposal supporting speculation, seems us inordinately credible face. 17 attempted reliance elements history unavailing. While correct does favor position sufficiently overcome what court regarded plain taxpayers, certainly taxpayers' affect text. contains, note, single (unhelpful) taxation—a silence can reconciled position, hardly said affirmatively support it. 18 Finally, significance urged strongly "Taxation" Taxation." Of 21 Articles 2—Articles V IX—are limited title subject matter, though application. See, e.g., VII ("Water Rights"); XII ("Entry Departure"); XVI ("Import Duties"). judgment 19 Affirmed. After argued, President law Tax Reform Act 1986, Pub.L. 99-514, 100 2085. 1232(a) provides, relevant part, "all taxable years whether beginning before, on, after date enactment (or imposed year, [for] events Act," construed exempting (in part) resident Internal Revenue 1954 1986." Because properly interpreted, result, rely statute, thus avoid confronting constitutional questions posed retroactive Darusmont, 449 292, 296-301, 101 549, 551-554, 66 513 (1981); Welch Henry, 305 134, 146-151, 59 121, 125-127, 83 87 (1938). contended, here Appeals, answer current question illumined, conclusively determined, February 22, 1985, diplomatic note indicating shares pertains mutual contracting cannot dispositive third-party rights, event inadmissible various grounds. Since sustain without disputes.

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