b"March 28, 1979\n\n79-19\n\nMEMORANDUM OPINION FOR THE\nASSOCIATE ATTORNEY GENERAL\nTrading with the Enemy Act (50 U.S.C. App. \xc2\xa7 1 et\nseq.)\xe2\x80\x94Attorney General\xe2\x80\x94Title Claim of the\nCommissioner of Customs\xe2\x80\x94Decision of the\nDirector, Office o f Alien Property, Allowing the\nClaim Reversed\n\nIn October 1978, at the request o f the Attorney General\xe2\x80\x99s Office, we\nreviewed the decision o f the Director o f the Office o f Alien Property o f the\nDepartment o f Justice disposing o f five claims remaining under the\nTrading with the Enemy Act, 50 U .S.C . App. \xc2\xa7 1 et seq.\nWe had no problem with the decisions concerning four o f the claims; the\nDirector\xe2\x80\x99s decision on them was allowed to take effect. However, we be\xc2\xad\nlieved that one claim\xe2\x80\x94Title Claim No. 63801 filed by the Commissioner of\nCustoms\xe2\x80\x94raised substantial legal questions. Because o f these questions,\nand because a reversal o f the Director\xe2\x80\x99s decision on this claim would result\nin the disputed funds (less 5 percent) being paid to private parties rather\nthan to the Treasury, see 50 U.S.C. App. \xc2\xa7\xc2\xa7 39, 2012, we recommended\nthat, pursuant to the regulations o f the Office o f Alien Property, 8 CFR\n\xc2\xa7 502.23, the Attorney General order a review of the Director\xe2\x80\x99s decision\nupholding that claim. By virtue o f the Attorney General\xe2\x80\x99s order to this ef\xc2\xad\nfect, a final decision on this one claim is now required. Pursuant to 28\nU.S.C. \xc2\xa7 510, the Attorney General has delegated that function to you. Id.\nFor the reasons given in the attached proposed decision and summarized\nherein,* we do not believe that the Commissioner o f Customs is entitled to\nfile a claim under the Act. We therefore recommend that you reverse the\ndecision o f the Director and deny the claim filed by the Commissioner o f\nCustoms.\nTitle Claim No. 63801 originated from Custom s\xe2\x80\x99 seizure o f imported\n\n\xe2\x80\xa2 The decision was signed by the Associate A ttorney General on May 8, 1979.\n\n121\n\n\x0csemiprecious and synthetic stones and diamonds in the early 1940s. They\nwere seized for violation o f the customs laws and were turned over to the\nAlien Property Custodian, pursuant to a vesting order issued in 1945, on\nthe ground that they were enemy property; the Custodian later sold them\nfor approximately $1,291,000. Customs later filed a claim for this money,\ncontending that it had proprietary rights in the goods prior to vesting.\nThe Chief Hearing Examiner o f the Office o f Alien Property, an entity\nin this Department and the successor o f the Alien Property Custodian, re\xc2\xad\njected Custom s\xe2\x80\x99 claim, primarily because, in his opinion, Customs lost its\ninterest in the property when it surrendered the goods to the Alien P rop\xc2\xad\nerty Custodian. The Director o f the Office o f Alien Property (now the\nAssistant Attorney General in charge o f the Civil Division, 28 CFR \xc2\xa7 0.47)\nreversed this decision, and allowed Custom s\xe2\x80\x99 claim, on the basis that\nCustoms had an interest in the property cognizable under the Act, an in\xc2\xad\nterest not defeated by either the transfer to the Alien Property Custodian\nor the subsequent sale o f the goods.\nWe believe that another issue not discussed in the Director\xe2\x80\x99s initial deci\xc2\xad\nsion (although briefed in the proceedings and referred to in the Chief\nHearing Examiner\xe2\x80\x99s decision) is determinative here. The remedies pro\xc2\xad\nvided in the Act are exclusive, and the pertinent provision o f the Act\nallows only a \xe2\x80\x9c person\xe2\x80\x9d to file a claim for return o f property. The Com\xc2\xad\nmissioner o f Customs contends that he satisfies this requirement, for the\nreason that the Act defines \xe2\x80\x9c person\xe2\x80\x9d to include a \xe2\x80\x9c body politic\xe2\x80\x9d and that\nthe United States meets this latter definition. We believe, as detailed in the\nproposed decision, that the structure o f the Act, its underlying purposes,\nthe legislative history o f the term \xe2\x80\x9c person,\xe2\x80\x9d and judicial authority lead to\nthe conclusion that the United States is not a \xe2\x80\x9c person\xe2\x80\x9d within the Act and\nthus may not file a claim for return o f property.\nL eon U lm an\n\nD eputy Assistant A ttorney General\nOffice o f Legal Counsel\n\n122\n\n\x0cUNITED STATES DEPA RTM EN T OF JU STIC E\nOFFICE O F T H E ASSOCIATE ATTORNEY GENERAL\nW A SHINGTON , D .C. 20530\n\nIn the Matter of the Commissioner of Customs\nTitle Claim No. 63801\nDecision of the Associate Attorney General\n\nPursuant to the authority vested in the Attorney General by 8 CFR\n\xc2\xa7 502.23, he directed a review o f the initial decision o f the Director, Office\no f Alien Property, with respect to Title Claim No. 63801 filed by the Com \xc2\xad\nmissioner o f Customs under the Trading with the Enemy A ct, as amended,\n50 U.S.C. App. \xc2\xa7 1 et seq. The Attorney General pursuant to 28 U.S.C.\n\xc2\xa7 510 has delegated to me the function o f rendering a decision on the\nclaim. Upon due consideration o f the initial decision o f the Director o f the\nOffice o f Alien Property and the submission o f the Commissioner of\nCustoms, I have concluded that the Commissioner o f Customs is not en\xc2\xad\ntitled to file a claim under section 9(a) o f the Trading with the Enemy Act.\nAccordingly, the decision o f the Director o f the Office o f Alien Property is\noverruled and Title Claim No. 63801 is hereby denied.\nThe factual circumstances underlying the claim are set out in detail in\nthe initial decision o f the Director o f the Office o f Alien Property and\nneed not be repeated at any length here. Briefly, the claim relates to the\nseizure by Customs, for violation o f the customs laws, o f imported semi\xc2\xad\nprecious and synthetic stones and diamonds in the early 1940s. These com \xc2\xad\nmodities were turned over to the Alien Property Custodian pursuant to a\nvesting order issued in 1945 on the ground that they were enemy property;\nthe Custodian later sold them for a total sum o f about $1,291,000.\nCustoms subsequently filed a claim for the proceeds, contending that its\nseizure gave it proprietary rights in the commodities prior to vesting.\nCustoms also relies on the decision in von Clemm v. Smith, 255 F. Supp.\n353 (S.D .N.Y. 1965), aff'd, 363 F. (2d) 19 (2d Cir. 1966), as establishing\nthat the customs laws were, in fact, violated.\nThe Chief Hearing Examiner o f the Office o f Alien Property rejected\nCustoms\xe2\x80\x99 claim, primarily on the basis that Customs lost its interest in the\nproperty due to its surrender o f the commodities to the Alien Property\nCustodian and his subsequent sale o f the goods. The Director o f the Office\nof Alien Property disapproved this decision, and allowed Custom s\xe2\x80\x99 claim,\non the basis that Customs had an interest in the property which was\ncognizable under the Act and which was not defeated by either the transfer\n123\n\n\x0cto the Alien Property Custodian or the subsequent sale o f the goods.\nSection 7(c) o f the Act provides that all property conveyed to or seized\nby the Alien Property Custodian \xe2\x80\x9c shall be held, administered and dis\xc2\xad\nposed o f as elsewhere provided in this A c t.\xe2\x80\x9d 50 U .S.C . A pp. \xc2\xa7 7(c).1 In\nthis proceeding the Commissioner o f Customs has founded his claim\nunder section 9(a) o f the A ct,2 which provides in pertinent part:\nAny person not an enemy or ally o f enemy claiming any interest,\nright, or title in any money or other property which may have been\nconveyed, transferred, assigned, delivered, or paid to the Alien\nProperty Custodian or seized by him hereunder and held by him\nor by the Treasurer o f the United States, or to whom any debt\nmay be owing from an enemy or ally o f enemy whose property or\nany part thereof shall have been conveyed, transferred, assigned,\ndelivered, or paid to the Alien Property Custodian or seized by\nhim hereunder and held by him or by the Treasurer o f the United\nStates may file with the said custodian a notice o f his claim under\noath and in such form and containing such particulars as the said\ncustodian shall require; and the President, if application is made\ntherefor by the claimant, may order the payment, conveyance,\ntransfer, assignment, or delivery to said claimant o f the money or\nother property so held by the Alien Property Custodian or by the\nTreasurer o f the United States, or o f the interest therein to which\nthe President shall determine said claimant is entitled.\nAs is evident from this provision, only a \xe2\x80\x9c person\xe2\x80\x9d is entitled to file a claim\nfor a return o f property. The Commissioner o f Customs contends that he\nsatisfies this requirement, on the ground that section 2(c) o f the Act\ndefines \xe2\x80\x9c person\xe2\x80\x9d to include a \xe2\x80\x9c body politic,\xe2\x80\x9d 50 U.S.C. App. \xc2\xa7 2(c), and\nthat the United States meets this latter definition. I believe that the struc\xc2\xad\nture o f the Act, its underlying purposes, the legislative history o f the\ndefinition o f \xe2\x80\x9c person,\xe2\x80\x9d and judicial decisions interpreting that term all\nrefute this interpretation o f the A c t.3 I thus conclude that the Commis\xc2\xad\nsioner o f Customs is not entitled to file a claim under the Act.\n\n1 The decisions construing this provisions have held that the remedies provided in the Act\nare exclusive. Becker Steel Company v. Cummings, 296 U .S. 74, 79 (1935); La Due & Com\xc2\xad\npany v. Rogers, 259 F. (2d) 905, 908 (7th Cir. 1958).\n: Portions o f the record might suggest that the Commissioner o f C ustom s\xe2\x80\x99 claim is also\nfounded on section 32 o f the Act, 5 U .S.C . A pp. \xc2\xa7 32, which provides for administrative\nrelief to certain classes ineligible under section 9(a). I doubt that the C ustom s\xe2\x80\x99 claim is in fact\nfounded on section 32, in light o f its explicit statem ent in the record that \xe2\x80\x9c Title Claim No.\n63801 is filed in accordance with section 9(a) o f the T rading with the Enemy A ct.\xe2\x80\x9d\nPreliminary Trial Brief o f the Com missioner o f Custom s at 9. In any event, the text in section\n32 makes clear that only a \xe2\x80\x9c person\xe2\x80\x9d is entitled to file claims under that provision, and thus\nthe conclusion and rationale set forth in the text would apply to claims under section 32 as\nwell as under section 9(a).\n1 Although this issue was discussed in the proceedings before the Chief Hearing Examiner,\nhe only briefly mentioned it in his decision, and the Director did not discuss it at all in her\ndecision.\n\n124\n\n\x0cA.\nIn my view, an examination o f the structure o f the Act and the under\xc2\xad\nlying purposes o f section 9(a) strongly suggests that Congress did not in\xc2\xad\ntend for the United States to be a claimant thereunder. It allows claimants\nto apply to the Alien Property Custodian for a return o f vested property;\nif a claimant does not obtain administrative relief, he is authorized to\nbring suit to obtain a return. This provision was deemed by the Congress\nas \xe2\x80\x9c necessary to preserve and protect innocent claim ants.\xe2\x80\x9d S. Rept. No.\nI l l , 65th Cong., 1st sess. 8 (1917); S. Rept. No. 113, 65th Cong., 1st sess.\n8 (1917). See also H. Rept. No. 85, 65th Cong., 1st sess. 4 (1917). The\ncourts have indicated that, in the absence o f such a remedy, the Act would\nbe o f doubtful constitutionality. Becker Steel Company v. Cummings,\nsupra, at 79.\nThis structure o f section 9(a) hardly seems designed to afford the United\nStates a remedy; rather, these factors suggest that the United States was\nnot to have a remedy under that provision. It seems unreasonable to at\xc2\xad\ntribute an intent on the part o f Congress to allow the United States, in ef\xc2\xad\nfect, to file claims against itself and then to bring suit against itself in\ncourt.4 Not only does this seem to be wasteful o f governmental resources\nwhich could be devoted to other efforts, but the possibility o f one agency\nsuing the Alien Property Custodian would raise constitutional questions\nrelating to a proper case or controversy. See, e.g., United States v. Ease\xc2\xad\nment and Right o f Way, Etc., 204 F.Supp. 837 (E.D. Tenn. 1962); The\nPietro Campanella, 47 F.Supp. 374 (D. Md. 1942) (involving a contro\xc2\xad\nversy arising under the Trading with the Enemy Act); but c f , United\nStates v. Nixon, 418 U.S. 683 , 692-97 (1974).\nTo allow this result would seem particularly unjustified in light o f the\ncongressional intent underlying section 9(a). As noted above, Congress\nprovided for a remedy in section 9(a) because such was necessary to pro\xc2\xad\ntect innocent claimants. Since an agent o f the United States could already\nbe holding the property, it would hardly seem that the interests o f the\nUnited States require the protection afforded by that provision. Concededly, Congress provided that the Alien Property Custodian was to\nmake payments to the United States in certain instances\xe2\x80\x94e.g., the pay\xc2\xad\nment o f taxes, \xc2\xa7 24(b), 50 U.S.C. App. \xc2\xa7 24(b), and the return o f money\npaid by the United States under license, assignment, or sale o f patents,\n\xc2\xa7 27, 50 U.S.C. App. \xc2\xa7 27. While such provisions might suggest that C on\xc2\xad\ngress believed that the interests o f the United States were not fully pro\xc2\xad\ntected by custody o f the property in the hands o f the Alien Property\nCustodian, they also suggest that, where Congress wished to provide for\npayments by the Alien Property Custodian to the United States, it so\n\n4 The courts have made clear that a suit against the Alien Property Custodian is, in effect,\na suit against the United States. See, e.g., Cummings v. Deutsche Bank, 300 U .S. 115, 118\n(1937); Becker Steel Company v. Cummings, supra, at 78.\n\n125\n\n\x0cprovided explicitly.5 I thus do not believe that section 9(a) was intended by\nCongress to afford a remedy to the United States.\nThe fact that the m ajor portion o f the excess funds held by the Alien\nProperty Custodian are to be paid into the W ar Claims Fund, see 50\nU.S.C. A pp. \xc2\xa7\xc2\xa7 39(d), 2012(a), does not alter this conclusion. Since such\nfunds will not be retained by the United States, but rather will be paid to\nprivate parties for war losses, an argument might be made that the inter\xc2\xad\nests o f the United States would be better served if it would take action\nunder section 9(a) so as to retain the funds. However, I would question,\nfirst, whether those interests are any less served by payment to these\nprivate parties than by transfer to the Treasury to serve other purposes.\nCongress has obviously decided that the payments to these private parties\nis in the interest o f the United States, and it is not for the Attorney General\nto question that judgm ent. While it might be argued that Congress could\nonly intend to transm it to those private parties such funds that did not\nbelong to the United States or any other proper claimant, this argument\nappears to me to asssume its own conclusion. If Congress had intended\nsuch a result, it presumably would have explicitly so provided in the same\nway it did in other provisions o f the Act where the United States\xe2\x80\x99 interests\nwere explicitly preserved.\nB.\nThe legislative history o f the term \xe2\x80\x9c body politic\xe2\x80\x9d also supports this\nresult. Initially this term was not included in the definition o f \xe2\x80\x9c person\xe2\x80\x9d\nunder the bill. That omission was the occasion o f the following colloquy\non the House floor:\nMr. LENROOT. Upon this subject o f lienors the bill provides\nthat any person not an enemy having a lien may have a remedy.\nThe word \xe2\x80\x9c person\xe2\x80\x9d is defined in the bill, but what I want to ask\nthe gentleman is this question: In the case o f securities subject to\ntaxation by the State or municipality and upon which they have a\nlien for tax, under the provisions o f this bill the State or\nmunicipality will lose all such taxes, will they not?\nMr. M ONTAGUE. Why does the gentleman think so?\nMr. LENROOT. Because section 14 provides that there shall\n\n1 This view is supported by the Supreme C o u rt\xe2\x80\x99s decision in Davis v. Pringle, 268 U.S. 315\n(1925), where the C ourt held that the U nited States was not a \xe2\x80\x9c person\xe2\x80\x9d for purposes o f a\nprovision in the Bankruptcy Act giving priority to debts \xe2\x80\x9c owing to any person who by the\nlaws o f the States o f the United States is entitled to priority.\xe2\x80\x9d The C o u rt\xe2\x80\x99s reasoning could\nwell apply to this case:\nIt is incredible that after the conspicuous m ention o f the United States in the first place\nat the beginning o f the section and the grant o f a limited priority, Congress should have\nintended to smuggle in a general preference by m uffled words at the end * * *.\nElsewhere in cases o f possible doubt when the Act means the United States it says the\nUnited States. We are o f opinion that to extend the definition o f \xe2\x80\x98person\xe2\x80\x99 here to the\nU nited States would be \xe2\x80\x98inconsistent with the context.\xe2\x80\x99\n\n126\n\n\x0cbe no lien upon any o f this property except as specifically pro\xc2\xad\nvided in the bill. That is in section 9, page 14. The word\n\xe2\x80\x9c person\xe2\x80\x9d as defined in the bill does not include State govern\xc2\xad\nments or municipalities.\nMr. M ONTAGUE. The gentleman may be correct, and the\ndefinition o f \xe2\x80\x9c person\xe2\x80\x9d may not embrace States or political subdi\xc2\xad\nvisions. I incline to believe he is correct and perhaps an am end\xc2\xad\nment should be offered to meet the difficulty. [55 CONG. R ec.\n4847(1917).]\nThe following day this same problem was also addressed:\nMr. W ALSH. Mr. Chairman, I offer the following am end\xc2\xad\nment:\nThe Clerk read as follows:\nPage 25, line 23, after the word \xe2\x80\x9c corporation,\xe2\x80\x9d insert \xe2\x80\x9c or\nState or any political or municipal subdivision thereof.\xe2\x80\x9d\nMr. W ALSH. Mr. Chairman, this amendment is offered\nbecause the word \xe2\x80\x9c person\xe2\x80\x9d used in subsequent sections o f the act\nmay not include a State, city, or town or any other political subdi\xc2\xad\nvision o f the State. It might be that an alien enemy would have\nproperty situated in some State or some political subdivision o f a\nState upon which property the State or the city or town or tow n\xc2\xad\nship might expect to collect State or local taxes, and this am end\xc2\xad\nment to the definition o f the word \xe2\x80\x9c person\xe2\x80\x9d would permit the\nState or a municipal, local, or political subdivision o f a State to\npresent its claim for the taxes assessed on the property to the cus\xc2\xad\ntodian o f such property provided for in this bill and have that\nclaim adjudicated or passed upon and approved and the money\npaid over. The State, city, county, township, or whatever subdivi\xc2\xad\nsion o f the State it might be might have a lien on that property for\ntaxes or for betterments and the like, and under the provisions of\nthe bill it is not clear in my opinion that the word \xe2\x80\x9c person\xe2\x80\x9d as de\xc2\xad\nfined in this paragraph and especially used in the sections follow\xc2\xad\ning would include a city, town, township, or a county or the State.\nI have in mind, for instance, where a person who under the\nprovisions o f this bill would be classed as an alien enemy, owning\na summer estate and that estate being assessed and liable for\ntaxes. I doubt if under the provisions o f the bill the town in\nwhich that estate is situated would be able to file its claim for\ntaxes with the alien property custodian and receive payment\ntherefor.\nMr. M ANN. Will the gentleman yield?\nMr. W ALSH. Yes.\nMr. MANN. Does not the word \xe2\x80\x9c corporation\xe2\x80\x9d include it?\nMr. W ALSH. It would not include a State, and it would not\ninclude some towns in Massachusetts, for instance, which are not\nstrictly incorporated.\n127\n\n\x0cMr. M ANN. They do not have to be incorporated.\nMr. W ALSH. Well, there is a doubt about it applying to such\ncorporations.\nMr. MANN. Municipal corporation.\nMr. W ALSH. Municipal corporation is not included in the\ndivision.\nMr. MANN. It says corporation.\nMr. W ALSH. But the word corporation as used in the bill, as I\nhave stated, especially in subsequent sections, would, 1 am in\xc2\xad\nclined to believe be interpreted to mean that it applied only to\nbusiness or commercial corporations and not to municipal or\npolitical corporations. This amendment would clear up the\ndoubt. Certainly after the property got into the custody o f the\nTreasury o f the United States or into the custody o f this alienproperty custodian, if there was any doubt about whether it in\xc2\xad\ncluded a political subdivision o f a State and it meant the payment\no f money, the doubt probably would be resolved against the per\xc2\xad\nson: that is to say, the State, county, city, or town that was\nclaiming payment. Certainly it would seem these taxes should not\nbe lost to the State or localities levying them.\nMr. ELSTON. The gentleman is trying to particularize and\ncover all possible stages. Why can not you say corporation, body\npolitic, or municipal? That would cover everything. If you said\nbody politic it would cover it all.\nMr. W ALSH. Well, Mr. Chairm an, I ask unanimous consent\nto withdraw my amendm ent and substitute therefor, in line 23,\npage 25, the words \xe2\x80\x9c or body politic\xe2\x80\x9d after the word \xe2\x80\x9c corpora\xc2\xad\ntio n ,\xe2\x80\x9d in view o f the suggestion o f my learned friend, the gen\xc2\xad\ntleman from California [Mr. E l s t o n ].\nThe CHAIRM AN. The gentleman from Massachusetts asks\nunanimous consent to modify his amendm ent to the extent\nstated. Is there objection?\nThere was no objection.\nMr. M ILLER o f M innesota. Does the gentleman think that a\nState is a body politic?\nMr. W ALSH. I do not know what else it is if it is not a body\npolitic.\nThe CHAIRM AN. The Clerk will report the amendm ent as\nmodified.\nThe Clerk read as follows:\nPage 25, line 23, after the word \xe2\x80\x9c corporation,\xe2\x80\x9d insert \xe2\x80\x9c or\nbody politic.\xe2\x80\x9d\nThe CHAIRM AN. The question is on the amendm ent.\nMr. M ILLER o f M innesota. Mr. Chairm an, I desire to make\nan inquiry about this term \xe2\x80\x9c body politic\xe2\x80\x9d o f the gentleman from\nMassachusetts [Mr. W a l s h ]. I have no doubt but that in a very\n128\n\n\x0cgeneral sense a body politic consists o f any body or group of indi\xc2\xad\nviduals grouped together for governmental political purposes.\nThat is old language that used to be current a hundred years ago\nor more. It has practically disappeared from the textbooks and\nfrom the decisions, and in a strictly technical sense I question\nwhether a State is a body politic, as States are organized now as\nparts o f the Federal Government. Why not leave it as it was\noriginally?\nMr. ELSTON. It is not intended to refer to States within the\nUnited States at all?\nMr. M ILLER o f Minnesota. Oh, I understand so. Why not\nleave that \xe2\x80\x9c or corporation, commercial or municipal\xe2\x80\x9d ?\nMr. W ALSH. Does the gentleman desire an answer from me?\nMr. M ILLER o f Minnesota. I am propounding my inquiry to\nthe distinguished gentleman from Massachusetts.\nMr. W ALSH. Mr. Chairman, in answer to the inquiry pro\xc2\xad\npounded by the gentleman from Minnesota, I would say that I\nthink a State is a body o f citizens upon whom are conferred cer\xc2\xad\ntain rights by the Congress o f the United States in pursuance of\nthe Constitution o f the United States. They are given certain\nduties to perform and are subject to certain liabilities, and cer\xc2\xad\ntainly that political division could be construed to be a body\npolitic just as much as a city which might be incorporated within a\nState, by and under the constitution o f that State, the citizens of\nwhich should be given certain rights and privileges and would be\nsubject to certain liabilities. The State would include the city and\nthe city would be a body politic, certainly; and I think the State\nwould be a body politic, perhaps raised to the \xe2\x80\x9c nth \xe2\x80\x9d power. Has\nthe gentleman from Illinois [Mr. M a n n ] completed the search he\ndesired to make?\nMr. M ILLER o f Minnesota. Does not the gentleman think the\nlanguage would be improved if he were to strike out the word\n\xe2\x80\x9c o r,\xe2\x80\x9d before the word \xe2\x80\x9c corporation,\xe2\x80\x9d and say \xe2\x80\x9c corporation,\nmunicipal corporation, or State\xe2\x80\x9d ? Then there would not be any\ndoubt about it.\nThe CHAIRM AN. The time o f the gentleman from Minnesota\nhas expired.\nMr. WALSH. Mr. Chairman, inasmuch as the modified\namendment has been seconded by a member o f the committee, I\nwill ask the gentleman from Virginia whether the chairman will ac\xc2\xad\ncept the amendment?\nMr. M ONTAGUE. Mr. Chairman, the amendment is agreeable\nto me.\nThe CHAIRM AN. The question is on the amendment offered\nby the gentleman from Massachusetts.\nThe amendment was agreed to. [55 C o n g . R e c . 4917-18\n(1917).]\n129\n\n\x0cIn my view, the genesis and entire focus o f this debate was the question\nwhether the states or political subdivisions thereof would be able to pre\xc2\xad\nsent claims to the Alien Property Custodian. In the end, the House\namended the term \xe2\x80\x9c person\xe2\x80\x9d to include a \xe2\x80\x9c body politic\xe2\x80\x9d so as to allow for\nthis result; and the term was included in the statute as enacted. As such, I\nbelieve it would go beyond Congress\xe2\x80\x99 intent to include the United\nStates\xe2\x80\x94which was not mentioned at all in the debate\xe2\x80\x94within the term\n\xe2\x80\x9c body politic.\xe2\x80\x9d\nThe Commissioner o f Customs has raised several objections to such a\nconclusion. He argues, first, that the United States has been called a\n\xe2\x80\x9c body politic\xe2\x80\x9d in the case law, see United States v. Maurice, 26 Fed. Case\nNo. 15,747 (D. Va. 1823), see also, United States v. Tingey, 30 U.S. 115,\n128 (1831), and the United States must thus be deemed to be such under\nthe Trading with the Enemy Act. He also refers to a definition in Black\xe2\x80\x99s\nLaw Dictionary 222 (4th ed. 1968) defining body politic as \xe2\x80\x9c a social com \xc2\xad\npact by which the whole people convenants with each citizen, and each\ncitizen with the whole people, that all shall be governed by certain laws for\nthe com m on good,\xe2\x80\x9d and, alternatively, as a \xe2\x80\x9c state or nation or public\nassociations.\xe2\x80\x9d Here, however, the determinative question is congressional\nintent; while the existing case law or accepted definitions might afford\nsome basis for interpreting what Congress meant, the debate on the House\nfloor\xe2\x80\x94which focussed on the states and municipalities and did not men\xc2\xad\ntion the United States at all\xe2\x80\x94is a much surer guide to what Congress in\xc2\xad\ntended by the term \xe2\x80\x9c body politic.\xe2\x80\x9d\nThe Commissioner also points to the debate on the House floor as sup\xc2\xad\nporting his contention that the United States is a body politic. He first\nstates that the phrase \xe2\x80\x9c State or any political or municipal subdivision\nth e re o f\xe2\x80\x99 was originally suggested in the House, but was withdrawn in\nfavor o f the term \xe2\x80\x9c body politic.\xe2\x80\x9d He also refers to the fact that Represent\xc2\xad\native Elston said it would \xe2\x80\x9c cover everything,\xe2\x80\x9d and that Representative\nMiller stated that he had \xe2\x80\x9c no doubt but that in a very general sense a body\npolitic consists o f any body or group o f individuals grouped together for\ngovernmental political purposes.\xe2\x80\x9d While these aspects o f the debate,\ntaken alone, might suggest a broad interpretation o f the term body politic,\nI believe any such interpretation would ignore the underlying genesis and\nfocus o f the debate\xe2\x80\x94i.e., the claims o f the States and smaller political\nentities.\nC.\nThe judicial decisions in this area further support my conclusion. In\nUnited States v. Securities Corporation General, 4 F. (2d) 619, 622 (D.C.\nCir. 1925), a ff\xe2\x80\x99d, 269 U.S. 283 (1925), the court responded to the conten\xc2\xad\ntion that the United States was entitled to satisfy war claims against Ger\xc2\xad\nmany out o f the funds held by the Alien Property Custodian:\nIt is nowhere provided in the act that enemy funds in the pos\xc2\xad\nsession o f the defendants may be subjected to the payment o f\n130\n\n\x0cclaims due the United States. N or do we think that the United\nStates is a \xe2\x80\x9cperson, \xe2\x80\x9d as mentioned in section 9 o f the act, or such\na party as can take advantage o f the provisions thereof. . . .\nThe fund has been set aside by the act for the satisfaction o f such\nclaims as may be legally brought against it by claimants other\nthan the United States. The United States has relinquished any\ninterest it may have had in the fund in favor o f creditors o f the\nenemy, in this instance the German government. [Emphasis\nadded.]\nIn an unreported decision, Judge Faris o f the Eastern District o f Missouri\nresponded in the same way to a similar contention:\nBy section 9 o f the act it was enacted, however, that the money\naccruing from such confiscations might be used in paying debts\ndue by the Imperial German Government to loyal citizens o f the\nUnited States. It is then, obviously, only upon the theory that the\nUnited States is a person, within the meaning o f section 9 o f the\nact, that such a view can stand fo r a minute. I think this is so ob\xc2\xad\nviously erroneous, as I have already briefly attem pted to point\nout, that the m atter needs no further exposition* * *.\nAgain, this fund was, absent section 9, the property o f the\nUnited States for any use to which the United States wished to\ndevote it. The very fact that this section was enacted proves that\nthe word \xe2\x80\x9cperson\xe2\x80\x9d in the act does not include the United States.\n[Emphasis added.] [Mercantile Trust Co. v. White, printed in\nRecord at 32-37, Hicks v. Mercantile Trust Company, 269 U.S.\n283 (1925).]\nWhile these decisions dealt with a different issue than the one presented\nhere, the courts clearly believed that the United States was not a person en\xc2\xad\ntitled to assert claims under section 9(a).\nThe Commissioner notes that the Supreme C ourt, in reviewing these\ndecisions, did not adopt the rationale that the United States was not a\n\xe2\x80\x9c person\xe2\x80\x9d within section 9(a). Rather, the C ourt said:\nEven assuming, notwithstanding Davis v. Pringle, 268 U.S. 315,\n318, that the United States is a \xe2\x80\x9c person\xe2\x80\x9d given the right to sue by\n\xc2\xa7 9, there is no reservation o f priority in the Act, or o f a right to\nintermeddle in the private suit o f another, or o f any advantage\nthat it might have retained as captor o f the fund. W hether from\nmagnanimity or forgetfulness, it has assumed the position o f a\ntrustee for the benefit o f claimants and has renounced the power\nto assert a claim except on the same footing and in the same way\nas others, if at all. [White v. Mechanics Securities Corporation,\n269 U.S. 283, 301 (1925).]\nThe Supreme C ourt\xe2\x80\x99s reference to Davis v. Pringle, a case in which the\nCourt held that the United States was not a \xe2\x80\x9c person\xe2\x80\x9d within the meaning\no f the Bankruptcy Act, could suggest that the Court entertained these\nsame doubts under the Trading with the Enemy Act. In any event, the\n131\n\n\x0cCourt certainly said nothing to refute the lower courts\xe2\x80\x99 opinions on this\nsubject, and the fact that it chose an alternate rationale cannot mean that\nthe lower courts\xe2\x80\x99 decisions are deprived entirely o f their force or per\xc2\xad\nsuasive weight. I thus believe that these decisions may legitimately be\nrelied on in support o f my conclusion that the United States is not entitled\nto file a claim under section 9(a).\nD.\nOne aspect o f the Act might suggest a conclusion different than that\nreached here. Section 24(a) o f the Act provides in part:\nT he Alien Property Custodian is authorized to pay all taxes (in\xc2\xad\ncluding special assessments), heretofore or hereafter lawfully\nassessed by any body politic against any money or other property\nheld by him or by the Treasurer o f the United States under this\nAct * * *. [50 U .S.C . App. \xc2\xa7 24(a).]\nEven though this provision refers only to taxes assessed by a \xe2\x80\x9c body\npolitic,\xe2\x80\x9d Congress intended that it would \xe2\x80\x9c permit the Alien Property\nCustodian to pay all lawful taxes.\xe2\x80\x9d H. Rept. No. 1565, 67th Cong., 4th\nsess., 6 (1923). Indeed, the provision has been interpreted to impose a duty\non the Alien Property C ustodian to pay Federal income taxes. 33 Op.\nA .G . 511 (1923). This provision could thus suggest that Congress deemed\nthe United States to be a \xe2\x80\x9c body politic\xe2\x80\x9d under the Act.\nI doubt, however, whether this is actually the case, at least with respect\nto situations involving claims o f the United States. As we have discussed\nabove, the structure and underlying purposes o f the Act, its legislative\nhistory, and judicial decisions all indicate that the United States is not a\nperson within section 9(a). I do not believe that Congress\xe2\x80\x99 action on an en\xc2\xad\ntirely different topic, and occurring at a separate tim e,6 is sufficient to\nalter the thrust o f these authorities which directly bear on the question\npresented here.\nMoreover, it is not entirely clear that Congress itself focused on this\nissue in enacting section 24(a). This section appears to have been drawn\nfrom a similar provision in the sundry civil appropriation act for fiscal\nyear 1919. Act o f July 1, 1918, ch. 113, 40 Stat. 646. The term \xe2\x80\x9c body\npolitic\xe2\x80\x9d in this latter provision was obviously not affected by any o f the\nfactors discussed above, and as such may well have been meant to include\nthe United States. The same provision was then inserted, apparently with\xc2\xad\nout much deliberation, into the Trading with the Enemy Act. Even though\nCongress may thus have intended for this provision to encompass the\nUnited States, Congress does not appear to have given much thought as\nto how this provision would operate in the context o f this latter Act,\n\n\xe2\x80\x98 While the T rading with the Enemy Act (including section 9) was originally enacted in\n1917, the provisions relating to taxes were first inserted into the Act in 1923. See Act of\nMarch 4, 1923, ch. 285, \xc2\xa7 2, 42 Stat. 1516.\n\n132\n\n\x0cparticularly in light o f that A ct\xe2\x80\x99s definitions and Congress\xe2\x80\x99 intent under\xc2\xad\nlying them.\nThis point is supported by subsequent congressional action. In 1928\nCongress added section 24(b), 50 U.S.C. App. \xc2\xa7 24(b), to the Act, which\nprovides in part:\nIn the case o f income, war-profits, excess-profits, or estate taxes\nimposed by any Act o f Congress, the am ount thereof shall,\nunder regulations prescribed by the Commissioner o f Internal\nRevenue with the approval o f the Secretary o f the Treasury, be\ncom puted in the same m anner (except as hereinafter in this sec\xc2\xad\ntion provided) as though the money or other property had not\nbeen seized by or paid to the Alien Property Custodian, and shall\nbe paid as far as practicable, in accordance with subsection (a) of\nthis section.\nThe amendment was first suggested in the House o f Representatives; its\nsponsor stated that \xe2\x80\x9c this amendment is simply to clear up a doubt and\nprotect the Government in the matter o f taxation.\xe2\x80\x9d 69 C o n g . R ec. 903\n(1927) (remarks o f Representative Green). [Emphasis added.]\xe2\x80\x99 While the\nlegislative history does not reveal the \xe2\x80\x9c doubt\xe2\x80\x9d which occasioned this\namendment, it does not seem unreasonable to speculate that it may have\narisen due to the limited nature o f the term \xe2\x80\x9c body politic\xe2\x80\x9d in the Act.\nSince the provision in section 24(a) is otherwise quite broad, and since sec\xc2\xad\ntion 24(b) provides for the payment o f taxes in accordance with section\n24(a) \xe2\x80\x9c as far as practicable,\xe2\x80\x9d it would seem that section 24(b) does little to\nachieve its purpose o f protecting \xe2\x80\x9c the Government in the m atter o f taxa\xc2\xad\ntion\xe2\x80\x9d except by specifically including the United States\xe2\x80\x99 taxes within the\nAct. As such, the fact that Congress thought such action was necessary\nwould support my conclusion that the United States is not a body politic\nunder the Act.\nFor the reasons discussed above, I do not believe that the Commissioner\no f Customs was entitled to file a claim under section 9(a) o f the Act. I\ntherefore overrule the decision o f the Director o f the Office o f Alien P rop\xc2\xad\nerty and deny Title Claim 63801.\nDated: May 8, 1979.\n/ s / M ic h a e l J . E g a n\n\nAssociate A ttorney General\n\n\xe2\x80\x99 Provisions added in the Senate went beyond this statem ent o f intent, see S. Rept. 273,\n70th Cong., 1st sess., 34 (1928), but nothing was said in the Senate to cast doubt on this\noriginal purpose.\n\n133\n\n\x0c"


b'Applicability of the Service Contract Act to\nVolunteer Workers at the National Oceanic\nand Atmospheric Administration\nPursuant to 28 U.S.C. \xc2\xa7 512, the Office of Legal Counsel has jurisdiction to resolve a legal\ndispute between the Departments of Commerce and Labor where the request for the\nopinion was made by the General Counsel of Commerce under authority delegated from\nthe Secretary of Commerce.\nThe Service Contract Act prohibits contractors operating the National Oceanic and\nAtmospheric Administration library from using voluntary, uncompensated employees.\nCommerce may petition the Secretary of Labor for an exemption to permit the use of vol\xc2\xad\nunteer employees under the NOAA contract\n\nJuly 31, 1989\nM e m o r a n d u m O p in io n\n\nfor t h e g en er a l\n\nD epartm ent\n\nof\n\nC ounsel\n\nC om m erce\n\nThis letter responds to Robert H. Brumley\xe2\x80\x99s request o f June 10,1988 for\nthe opinion o f this Office as to the applicability o f the Service Contract\nA ct ( \xe2\x80\x9cSCA\xe2\x80\x9d or \xe2\x80\x9cAct\xe2\x80\x9d) to a contract to operate the National Oceanic and\nAtmospheric Administration ( \xe2\x80\x9cNOAA\xe2\x80\x9d) library in part by using voluntary,\nuncompensated help to perform tasks that fall within the type of services\notherwise covered by the Act. For the reasons set forth below, we con\xc2\xad\nclude that the Act applies to such contracts and that the contractor or\nsubcontractor may not use volunteer employees to perform tasks associ\xc2\xad\nated with operating the library.\n\nI. Background\nCongress enacted the Service Contract Act in 1965 \xe2\x80\x9cto provide labor\nstandards for the protection o f employees o f contractors and subconrtactors [sic] furnishing services to or performing maintenance service for\nFederal agencies.\xe2\x80\x9d S. Rep. No. 798, 89th Cong., 1st Sess. 1 (1965). The Act,\nas codified at 41 U.S.C. \xc2\xa7\xc2\xa7 351-358, implements this goal by requiring con\xc2\xad\ntractors and subcontractors on contracts greater than $2,500 to pay\nworkers at least the minimum wage. Section 351(a)(1) provides:\n(a )\nEvery contract (and any bid specification therefor)\nentered into by the United States or the District of Columbia\n264\n\n\x0cin excess o f $2,500, except as provided in section 356 o f this\ntitle, whether negotiated or advertised, the principal pur\xc2\xad\npose o f which is to furnish services in the United States\nthrough the use o f service employees, shall contain the\nfollowing:\n(1) A provision specifying the minimum monetary\nwages to be paid the various classes o f service employ\xc2\xad\nees in the performance o f the contract or any subcon\xc2\xad\ntract thereunder, as determined by the Secretary, or his\nauthorized representative, in accordance with prevailing\nrates for such employees in the locality .... In no case\nshall such wages be lower than the minimum specified in\nsubsection [351](b) o f this section.\n41 U.S.C. \xc2\xa7 351(a)(1).\nSection 351(b) mandates that in no circumstances shall wage levels fall\nbelow the national statutory minimum wage:\nNo contractor who enters into any contract with the\nFederal Government the principal purpose o f which is to\nfurnish services through the use o f service employees and\nno subcontractor thereunder shall pay any o f his employ\xc2\xad\nees engaged in performing work on such contracts less\nthan the m inim um wage specified under section 206(a)(1)\no f title 29.\nId. \xc2\xa7 351(b)(1) (emphasis added). \xe2\x80\x9cService employee\xe2\x80\x9d is defined in the\nAct as \xe2\x80\x9cany person engaged in the performance o f a contract entered\ninto by the United States and not exempted under section 356 o f this\ntitle, whether negotiated or advertised, the principal purpose o f which is\nto furnish services in the United States ... and ... include[s] all such per\xc2\xad\nsons regardless of any contractual relationship that may be alleged to\nexist between a contractor or subcontractor and such persons." Id. \xc2\xa7\n357(b) (emphasis added).1 The Act prescribes penalties for noncompli\xc2\xad\nance ranging from payment o f compensation due underpaid employees\nto cancellation o f the contract. 41 U.S.C. \xc2\xa7 352(a).\nThe rationale for this unqualified approach to fair labor standards\nunder the SCA was that service contracts represented \xe2\x80\x9cthe only remain\xc2\xad\ning category o f Federal contracts to which no labor standards protections\n1\n\nThe legislative history o f the SCA elaborates somewhat on this definition. According to the House\n\nReport, \xe2\x80\x9c\xe2\x80\x98Service em ployee\xe2\x80\x99 means guards, watchmen, and any person engaged in a recognized trade or\ncraft or other skilled mechanical craft, or in manual labor occupations, and any other em ployee for\nwhom experience in such occupations is the paramount requirement \xe2\x80\x9d H.R Rep. No. 948, 89th Cong., 1st\nSess. 5 (1965); see also S. Rep. N o 798 at 2.\n\n265\n\n\x0cappl[ied].\xe2\x80\x9d H.R. Rep. No. 948, 89th Cong., 1st Sess. 1 (1965). Congress was\nconcerned with preventing contractors from undercutting their competi\xc2\xad\ntors for government service contracts by reducing labor costs. As the\nHouse Report explained:\nThe Federal Government has added responsibility in this\narea because o f the legal requirement that contracts be\nawarded to the lowest responsible bidder. Since labor costs\nare the predominant factor in most service contracts, the\nodds on making a successful low bid for a contract are\nheavily stacked in favor o f the contractor paying the lowest\nwage. Contractors who wish to maintain an enlightened\nwage policy may find it almost impossible to compete for\nGovernment service contracts with those who pay wages to\ntheir employees at or below the subsistence level. When a\nGovernment contract is awarded to a service contractor\nwith low wage standards, the Government is in effect sub\xc2\xad\nsidizing subminimum wages.\nId. at 2-3.\n\nThe current disagreement between the Department o f Commerce\n( \xe2\x80\x9cCommerce\xe2\x80\x9d) and the Department o f Labor ( \xe2\x80\x9cLabor\xe2\x80\x9d) arose when\nCommerce received a contractor\xe2\x80\x99s proposal to use voluntary, uncom\xc2\xad\npensated employees to perform tasks covered by the Service Contract\nA ct in operating the NOAA library. Commerce initially determined that\nthe A ct did not apply to such a contract.2 Labor then advised\nCommerce by letter that the Act covered such contracts.3 In reply,\nCommerce advised Labor that it had complied with Labor\xe2\x80\x99s interpreta\xc2\xad\ntion o f the SCA in awarding the NOAA contract. Commerce added,\nhowever, that its compliance required it to pay an additional $140,164\nin the contract price, and that it intended to raise the issue with the\nDepartment o f Justice.4 On June 10, 1988, Commerce requested an\nopinion from this Office, stating that it believes Labor\xe2\x80\x99s position on this\nissue to be in error and that \xe2\x80\x9cit is likely that this question will arise on\nother procurements or in the course o f recompetition o f [the NOAA\nlibrary contract].\xe2\x80\x9d5\n\n2Memorandum for William Matuszeski, Director, O ffice o f A-76 Activities, NOAA, from James K White,\nAssistant General Counsel fo r Finance and Litigation, Department o f Commerce (Nov. 16, 1987).\n3 Letter fo r J. Curtis Mack, II, Acting Administrator, NOAA, from Paula V Smith, Administrator, Wage\nand Hour Division, Department o f Labor (D ec. 7, 1987) Smith reiterated this position in a letter to Mack\ndated January 22, 1988.\n4 Letter fo r Paula V. Smith, Administrator, Wage and Hour Division, Department o f Labor, from William\nE Evans, Under Secretary, N O AA (Apr 15, 1988)\n6\n\nLetter fo r Charles J. Cooper, Assistant Attorney General, O ffice o f Legal Counsel, from Robert H\n\nBrumley, General Counsel, Department o f Com m erce at 2 (June 10, 1988).\n\n266\n\n\x0cII. Discussion\nA. Jurisdiction\n\nThe authority of the Attorney General to resolve this dispute between\nthe Departments o f Commerce and Labor is well-established. By law,\n\xe2\x80\x9c[t]he head o f an executive department may require the opinion o f the\nAttorney General on questions o f law arising in the administration o f his\ndepartment.\xe2\x80\x9d 28 U.S.C. \xc2\xa7 512.6 Here, there is no doubt that the question\npresented \xe2\x80\x94 whether Commerce, consistent with the SCA, can enter into\na contract for the operation o f the NOAA library that provides for the use\no f voluntary services \xe2\x80\x94 \xe2\x80\x9caris[es] in the administration o f [the Commerce]\ndepartment.\xe2\x80\x9d See, e.g., Applicability of the Davis-Bacon Act to the\nVeterans Administration\xe2\x80\x99s Lease of Medical Facilities, 12 Op. O.L.C. 89,\n91 n.4 (1988) ( \xe2\x80\x9c[Interpretation o f statute that will affect contracts\nentered into by department is a legal question \xe2\x80\x98arising in the administra\xc2\xad\ntion o f the department\xe2\x80\x99 within meaning o f ... 28 U.S.C. 512.\xe2\x80\x9d).7\nThe Solicitor o f Labor challenges our jurisdiction to entertain\nCommerce\xe2\x80\x99s request for an opinion under 28 U.S.C. \xc2\xa7 512 on the grounds\nthat, inter cilia, Commerce\xe2\x80\x99s request was not made by the Secretary o f\nCommerce and addressed to the Attorney General. Letter for John O.\nMcGinnis, Deputy Assistant Attorney General, Office o f Legal Counsel,\nfrom Monica Gallagher, Associate Solicitor, Fair Labor Standards\nDivision, Department o f Labor at 2-4 (July 14, 1989).8 This argument,\nhowever, completely ignores the fact that agency heads execute many o f\ntheir important functions through delegation. A written request\naddressed from the General Counsel o f Commerce to the Assistant\nc In addition to the statutory authonty set forth in 28 U.S C. \xc2\xa7 512, Executive Order N o 12146, 3 C.F.R.\n409 (1979), confers authonty on the Attorney General to resolve disputes between executive agencies\nExecutive Order No. 12146 provides in pertinent part\n1-4 Resolution o f Interagency Legal Disputes\n1-401. Whenever two or more Executive agencies are unable to resolve a legal dispute\nbetween them, including the question o f which has junsdiction to administer a particular\nprogram or to regulate a particular activity, each agency is encouraged to submit the dispute\nto the Attorney General\n1-402 Whenever two or more Executive agencies w hose heads serve at the pleasure o f the\nPresident are unable to resolve such a legal dispute, the agencies shall submit the dispute to\nthe Attorney General pnor to proceeding in any court, except where there is a specific statu\xc2\xad\ntory vesting o f responsibility for a resolution elsewhere\n7 By statute, the NOAA is \xe2\x80\x9cunder the jurisdiction and subject to the control o f the Secretary o f\nCom m erce " 15 U S C \xc2\xa7 1511(a)\n8The Solicitor o f Labor also contends that w e have no jurisdiction to respond to Com m erce\xe2\x80\x99s request\nunder Executive Order No. 12146 Executive Order No. 12146, however, augments the authority co n \xc2\xad\nferred on the Attorney General under 28 U.S.C. \xc2\xa7 512 by, among other things, em powenng the Attorney\nGeneral to address questions raised by executive agencies not within one o f the executive departments.\nSee Memorandum for the Secretary o f Housing and Urban Development, from Charles J Cooper,\n\nAssistant Attorney General, O ffice o f Legal Counsel at 6 & n 1 (Aug 6, 1987) Because w e conclude that\nw e have jurisdiction to entertain Commerce\xe2\x80\x99s request under 28 U S C \xc2\xa7 512, w e need not address the\nscope o f our authority under Executive Order N o 12146\n\n267\n\n\x0cAttorney General for the Office o f Legal Counsel may be entertained\nunder section 512.9\nB. Applicability o f the Service Contract Act to Volunteer Workers\n\nWe believe that the SCA applies to the contract at issue here because,\nalthough the Act does not expressly advert to volunteer workers, the\nplain meaning o f the Act\xe2\x80\x99s unqualified proscription o f subminimum\nwages does not admit o f any such exception.\nThe statutory command in the SCA is simple and direct: \xe2\x80\x9cNo contrac\xc2\xad\ntor ... shall pay any o f his employees ... less than the minimum wage.\xe2\x80\x9d\n41 U.S.C. \xc2\xa7 351(b)(1). The Senate Report accompanying the bill put the\nmatter just as starkly: \xe2\x80\x9cPersons covered by the bill must be paid no less\nthan the prevailing rate in the locality as determined by the Secretary,\nincluding fringe benefits as an element o f the wages. No less than the\napplicable minimum wage provided in the Fair Labor Standards Act, as\namended, can be paid.\xe2\x80\x9d S. Rep. No. 798 at 2.10\nCommerce contends that \xe2\x80\x9cthe Act is not intended to apply to prohibit\nvolunteer services\xe2\x80\x9d apparently because the Act is silent with respect to\nvolunteer workers, and both the Act and its implementing regulations\nimplicitly refer to the payment o f classes o f \xe2\x80\x9cwage earning employees.\xe2\x80\x9d\nLetter for Charles J. Cooper, Assistant Attorney General, Office o f Legal\nCounsel, from Robert H. Brumley, General Counsel, Department o f\nCommerce at 1 (June 10, 1988). In our view, although the Act does not\nmention volunteer workers per se, the plain meaning o f the statutory\nscheme that Congress has adopted does not permit such an exception.\nThe SCA clearly directs that, with respect to \xe2\x80\x9cany contract with the\nFederal Government the principal purpose o f which is to furnish services\nthrough the use o f service employees,\xe2\x80\x9d no contractor \xe2\x80\x9cshall pay any o f his\nemployees engaged in performing work on such contracts less than the\nminimum wage specified under section 206(a)(1) o f title 29 [the Fair\nLabor Standards Act].\xe2\x80\x9d 41 U.S.C. \xc2\xa7 351(b)(1).11 In turn, the term \xe2\x80\x9cservice\n\n9The General Counsel o f Commerce has been delegated broad authority to \xe2\x80\x9cappear[] on behalf o f the\nSecretary\xe2\x80\x991in legal proceedings and to \xe2\x80\x9cprepar(e) ... all papers relating to matters on which the opinion\no f the Attorney General is desired" Department o f Commerce, DOO No. 10-6 \xc2\xa7\xc2\xa7 4.01(3), (5 ) (July 3,\n1963). Th e Assistant Attorney General fo r the Office o f Legal Counsel has been charged with, among\nother things, \xe2\x80\x9c rendering informal opinions and legal advice to the various agencies o f the G overnm ent"\n28 C.F.R. \xc2\xa7 0.25(a) (1989); see also 28 U.S.C. \xc2\xa7 510.\n10See also H R. Rep No 948 at 4 ( \xe2\x80\x9cNo contractor holding a service contract shall pay any o f his em ploy\xc2\xad\nees perform ing the w ork on such contracts less than the minimum w age specified by section 6 (A ) 1 o f the\nFair Labor Standards A ct o f 1938.").\n11The command in the Fair Labor Standards Act, which covers employers providing contract services\nthat are not covered by the SCA, is equally direct\nNotwithstanding the provisions o f section 213 o f this title (excep t subsections (a )(1 ) and ( f )\nthereof), every em ployer providing any contract services (other than linen supply services)\nunder a contract with the United States or any subcontract thereunder shall pay to each o f\nContinued\n\n268\n\n\x0cemployee\xe2\x80\x9d is defined in relevant part as meaning \xe2\x80\x9c any person engaged in\nthe performance of a contract entered into by the United States and not\nexempted ... and ... inelude[s] all such persons regardless o f any con\xc2\xad\ntractual relationship that may be alleged to exist between a contractor\nor subcontractor and such persons." Id. \xc2\xa7 357(b) (emphasis added); see\nalso 29 C.F.R. \xc2\xa7\xc2\xa7 4.113, 4.150, 4.155.\nCommerce does not explain, nor can we discern, how an exception for\nvolunteer workers can be carved out o f this broad definition o f \xe2\x80\x9cservice\nemployee\xe2\x80\x9d without doing violence to the plain meaning o f the Act. Under\nsection 357(b), a \xe2\x80\x9cservice employee\xe2\x80\x9d is defined as any person who per\xc2\xad\nforms work on a service contract entered into by the United States.\nFurthermore, section 357(b) expressly provides that the nature o f an\nemployee\xe2\x80\x99s contractual relationship with his or her employer has no bear\xc2\xad\ning on the employee\xe2\x80\x99s covered status for purposes o f the Act.\nAccordingly, we do not see any basis for ignoring the plain meaning o f the\nAct and interpreting it as implicitly applying only to wage-earning\nemployees, particularly in light o f the maxim o f statutory construction\nthat \xe2\x80\x9cremedial labor statutes like the Service Contract Act are to be lib\xc2\xad\nerally construed.\xe2\x80\x9d Menlo Service Corp. v. United States, 765 F.2d 805, 809\n(9th Cir. 1985).\nIndeed, as the Solicitor o f Labor points out, construing the SCA in this\nmanner could potentially invite a range o f abuses: \xe2\x80\x9cpermitting the use o f\n\xe2\x80\x98volunteers\xe2\x80\x99 removes equality from the competitive bidding process and\nencourages contractors, if they wish to be low bidder, to replace their\nemployees with \xe2\x80\x98volunteers\xe2\x80\x99 or to induce their employees to accept some\nform o f \xe2\x80\x98volunteer\xe2\x80\x99 status.... These results are contrary to the intention o f\nCongress in enacting the SCA to increase the protection o f workers in the\nservice industry and to discourage contractors from reducing the com\xc2\xad\npensation o f workers.\xe2\x80\x9d Letter for John 0. McGinnis, Deputy Assistant\nAttorney General, Office o f Legal Counsel, from Monica Gallagher,\nAssociate Solicitor, Fair Labor Standards Division, Department o f Labor\nat 7-8 (July 14, 1989).\nFinally, we note that the use of volunteer workers under the SCA \xe2\x80\x94\nsuch as Commerce proposes with respect to the NOAA library contract\n\xe2\x80\x94 may be considered on a contract-by-contract basis pursuant to a\nrequest for a variance or exemption from the Act\xe2\x80\x99s minimum wage\nrequirements in accordance with the standards set forth in 41 U.S.C. \xc2\xa7\n353(b) and the regulations at 29 C.F.R. \xc2\xa7 4.123(b). See Letter for John O.\nMcGinnis, Deputy Assistant Attorney General, Office o f Legal Counsel,\n\nn (. continued)\nhis employees whose rate o f pay is not governed by the Service Contract A ct o f 1965 .. or to\nwhom subsection (a )(1 ) o f this section is not applicable, wages at rates not less than the\n[minimum wage] rates provided fo r in subsection (b ) o f this section\n29 U.S.C. \xc2\xa7 206(e)(1).\n\n269\n\n\x0cfrom Monica Gallagher, Associate Solicitor, Fair Labor Standards\nDivision, Department of Labor at 8 (July 14, 1989).12 Accordingly, the\nSecretary o f Commerce may petition the Secretary o f Labor for an\nexemption to permit the use o f volunteer employees under the NOAA\ncontract.\n\nIII. Conclusion\nOur review o f the Service Contract Act and its legislative history per\xc2\xad\nsuades us that the Act does not permit the implication o f an exemption\nfor contracts that provide for services rendered by volunteer employees.\nCommerce remains free, of course, to petition the Secretary o f Labor for\nan exemption specifically relating to the NOAA contract.\nWILLIAM P. BARR\nAssistant Attorney General\nOffice o f Legal Counsel\n\n12\n\nA ccording to the Solicitor, Commerce has neither requested such an exemption nor provided Labor\n\nwith the information necessary to evaluate such a proposal. Id. at 8-9 & n 6\n\n270\n\n\x0c'


b'Effect of Appropriations for Other Agencies and Branches on\nthe Authority to Continue Department of Justice Functions\nDuring the Lapse in the Department\xe2\x80\x99s Appropriations\nWhere Congress has provided appropriations for the legislative branch, the Department of Justice may\ncontinue to provide testimony at hearings and perform other services related to funded functions\nof the legislative branch during a lapse in funding for the Department, if the participation o f the\nDepartment is necessary for the hearing or other funded function to be effective.\nSimilarly, those functions of the Department o f Justice that are necessary to the effective execution\nof functions by an agency or department o f government that has current fiscal year appropriations,\nsuch that a suspension of the Department\xe2\x80\x99s functions during a lapse in its own appropriations\nwould prevent or significantly damage the execution of those funded functions, may continue\nduring the Department\xe2\x80\x99s funding lapse.\n\nDecember 13, 1995\nM e m o r a n d u m O p in io n f o r t h e A t t o r n e y G e n e r a l\n\nDuring the recent appropriations lapse we prepared for you a memorandum on\nthe authority of the Department to participate in congressional hearings that were\nheld during an appropriations lapse. See Participation in Congressional Hearing\nDuring an Appropriations Lapse, 19 Op. O.L.C. 301 (1995). This memorandum\nis intended to update that earlier memorandum in light of subsequent congressional\nenactments, particularly the Act providing appropriations for the legislative branch\nduring the current fiscal year.\nIn his 1981 opinion, Attorney General Civiletti concluded that functions and\nactivities could continue during a funding hiatus when authorization for their\ncontinuation was a valid inference from other funding decisions of the Congress.\nAuthority for the Continuance of Government Functions During a Temporary\nLapse in Appropriations, 5 Op. O.L.C. 1, 5 (1981). Attorney General Civiletti\nidentified as one o f the categories of activities that may continue during a lapse\nthose functions that are \xe2\x80\x9c authorized by necessary implication from the specific\nterms of duties that have been imposed on, or authorities that have been invested\nin\xe2\x80\x9d an agency. Id. He explained that this category includes unfunded functions\nthat enable other funded functions to be executed. The primary example o f this\nis social security benefits. Attorney General Civiletti opined that, although those\nwho administer the Social Security benefit program are paid out of annual appro\xc2\xad\npriations that could lapse, they could continue to administer Social Security\nbecause the benefit itself is paid out o f a permanent appropriation. Id. at 5 n.7.\nIn our recent memorandum to you, we applied this principle to Department\nof Justice participation in congressional hearings:\n\n337\n\n\x0cOpinions o f the Office o f Legal Counsel in Volume 19\n\nThe Department\xe2\x80\x99s officers and employees may also participate\nin a hearing despite an appropriations lapse if authority for such\nparticipation arises by necessary implication from another specific\nstatutory duty or duties. See 5 Op. O.L.C. at 3-5. In the context\nof congressional hearings, this exception permits the Department\nto participate where there is express authority or an express and\nspecific appropriation for the hearing itself, and the Department\xe2\x80\x99s\nparticipation is necessary for the hearing to be effective, even\nthough there is no specific authority or appropriation available for\nthe Department to participate. This exception also operates where\nthere is express authority for a specific Department official to\nparticipate \xe2\x80\x94 such as might arise from a subpoena\xe2\x80\x94 but no express\nauthority for support or assistance o f the witness. The Department\nwould regard support and assistance to the otherwise authorized\nparticipation as being justified by necessary implication. This\napproach follows from the well-settled practice with respect to\nSocial Security. See 5 Op. O.L.C. at 5 n.7.\n19 Op. O.L.C. at 303.\nBy enacting the legislative branch appropriations bill, the Congress has now\ndecided that the funded activities of the legislative branch for the current year\nshould proceed (and the President has concurred). Should the Department again\nexperience a funding lapse, that specific decision by the Congress to fund its own\nactivities in the context of a funding lapse for other components of government\nwill support an implication similar to the one drawn in the case of Social Security.\nAccordingly, the Department may continue activities such as providing testimony\nat hearings if \xe2\x80\x9c the Department\xe2\x80\x99s participation is necessary for the hearing to be\neffective.\xe2\x80\x9d Id. The Department would also be authorized to perform other services\nthat bear a similar relation to other funded functions of the legislative branch.\nA similar implication can also be supported by the specific decisions that Con\xc2\xad\ngress has made to fund other agencies and departments of government so that\ntheir functions are to continue during a funding lapse.1 To the extent that any\no f the Department\xe2\x80\x99s functions are necessary to the effective execution of functions\nby an agency that has current fiscal year appropriations, such that a suspension\no f the Department\xe2\x80\x99s functions during the period of anticipated funding lapse would\nprevent or significantly damage the execution of those funded functions, the\nDepartment\xe2\x80\x99s functions and activitives may continue. Although, as Attorney Gen1 Since the last appropriations lapse, seven fiscal year 1996 appropriations bills have been enacted* Military\nConstruction, Pub. L. No. 104-32, 109 Stat. 283 (1995); Energy and W ater, Pub. L. No. 104-46, 109 Stat. 402\n(1995); A griculture, Pub. L. No. 104-37, 109 Stat. 299 (1995); Transportation, Pub. L. No. 104-50, 109 Stat. 436\n(1995); Treasury. Postal, Pub. L. No. 104-52, 109 StaL 468 (1995); Defense, Pub. L. No. 104-61, 109 Stat. 636\n(1995); Legislative Branch, Pub. L. No. 104-53, 109 Stat. 514 (1995). O ther actions o f the Congress may also\nsupport such an implication; for example, a m ulti-year appropriation under circumstances in which Congress was\naw are that perform ance o f the function or activity would necessarily span fiscal years.\n\n338\n\n\x0cE ffect o f A pprop ria tio n s f o r O ther A gencies a n d B ranches on th e A u th o rity to C ontinue D epartm ent\no f Ju stic e F unctions D uring the L apse m the D epartm ent\xe2\x80\x99s A ppropriations\n\neral Civiletti noted, it could be argued that the failure to appropriate funds for\nthe Department\xe2\x80\x99s activities expresses a congressional conclusion that the execution\nof activities of other agencies that have otherwise been funded should nevertheless\neither be suspended or significantly damaged by virtue o f the lack of funding\nfor the Department, we conclude, consistent with Attorney General Civiletti\xe2\x80\x99s\ntreatment of Social Security, that the decision to fund those other activities in\nthis fiscal year \xe2\x80\x9c substantially belies this argument,\xe2\x80\x9d 5 O.L.C. at 5 n.7, and that\nthe view presented here constitutes the better interpretation.\nWALTER DELLINGER\nAssistant Attorney General\nOffice o f Legal Counsel\n\n339\n\n\x0c'


b'January 31, 1978\n\n78-91\n\nMEMORANDUM OPINION FOR THE COUNSEL\nTO THE PRESIDENT\nFederal Reserve Board\xe2\x80\x94 Vacancy With the Office of\nthe Chairman\xe2\x80\x94 Status of the Vice Chairman (12\nU.S.C. \xc2\xa7\xc2\xa7 242, 244)\n\nYou have requested us to consider the status o f the chairmanship of the\nFederal Reserve Board in the event that the President\xe2\x80\x99s nominee has not been\nconfirmed as Chairman by January 31, 1978, the date on which the incum\xc2\xad\nbent\xe2\x80\x99s term expires. We have considered three possible resolutions of this\nquestion and have reached the following conclusions: First, the incumbent\ncannot hold over and continue to exercise the powers o f the office as de fa c to\nChairman; second, under relevant statutory authority, the Vice Chairman is\nonly authorized to preside in the C hairm an\xe2\x80\x99s absence although an argument\ncould be made that the Vice Chairman possesses inherent authority to assume\nthe duties o f the Chairman when a vacancy has occurred. Such an approach, in\nour opinion, is of doubtful legality. Third, in light of the limited authority of the\nVice Chairm an, we believe that it is necessary for the President to designate\none o f the Board members as acting Chairman.\n\nI. Holdover Chairman\nSection 242 of Title 12, U .S. Code, provides that \xe2\x80\x9c one [member of the\nFederal Reserve Board] shall be designated by the President as chairman and\none as vice chairman o f the Board to serve as such for a term o f four years.\xe2\x80\x99\xe2\x80\x991\nThe statutory assurance that \xe2\x80\x9c m em bers\xe2\x80\x9d whose terms have expired should\nserve \xe2\x80\x9c until their successors are appointed and qualified,\xe2\x80\x9d 12 U .S.C . \xc2\xa7 242\ndoes not address the continuance in office o f the Chairman qua Chairman and\ntherefore, is inapplicable under these circum stances. Thus, the Chairm an\xe2\x80\x99s\n\xe2\x80\x98The 1977 am endm ents to the Federal Reserve A ct, 91 Stat. 1387 (not yet applicable), require\ndesignation o f the Chairm an to be accom panied by the advice and consent o f the Senate; they also\nalter the way in which the 4-year term is to fun, but are not otherw ise o f significance to the question\nat hand.\n\n394\n\n\x0cterm expires by operation of law after the statutory term has run. B adger v.\nUnited States, 93 U.S. 599, 601 (1876). There the court stated:\nWhen this four years comes round, [the officer\xe2\x80\x99s] right or power to\nperform the duties o f the office is at an end, as completely as if he had\nnever held the office . . . . W hether a successor has been elected, or\nwhether he has qualified, does not enter into the question. [Id. at\n601.]\nBecause the incumbent is not entitled to continue to exercise his powers absent\nreappointment, see 11 Op. Atty. Gen. 286 (1865), a vacancy in the position\nresults.2\n\nII. Inherent Authority of the Vice Chairman\nSection 244 of Title 12 provides that the Vice Chairman is to \xe2\x80\x9c preside\xe2\x80\x9d at\nBoard meetings in the \xe2\x80\x9c absence\xe2\x80\x9d o f the Chairman but does not otherwise\nspecify his duties. The term \xe2\x80\x9c absence\xe2\x80\x9d normally connotes a failure to be\npresent that is temporary in contradistinction to the term \xe2\x80\x9c vacancy\xe2\x80\x9d caused, for\nexample, by death of the incumbent or his resignation. With regard to\nnumerous other agencies Congress has directed that the Vice Chairman is to\nserve in the event o f the Chairm an\xe2\x80\x99s absence or incapacity or as a result of a\nvacancy in the office o f the Chairman. See, e .g ., 16 U.S.C. \xc2\xa7 792 (1976)\n(Federal Power Commission); 42 U .S.C . \xc2\xa7 2000e-4 (1976) (Equal Employ\xc2\xad\nment Opportunity Commission). Arguably, since Congress could have done the\nsame here, the absence o f such language must be regarded as meaningful.\nA review o f the legislative history o f \xc2\xa7 244 reveals no discussion of this\npoint. See H. Rept. No. 150, 73d Cong., 1st sess. (1933); H. Rept. No. 254,\n73d Cong., 1st sess. (1933); S. Rept. No. 77, 73d Cong., 1st sess. (1933). It is\nlikely that the problem was not even considered since the change to a fixed\nterm, and the resulting possibility of a vacancy in the chairmanship, did not\noccur until 2 years later. See 49 Stat. 705 (1935).3\nIt might be contended that no great significance should be attached to this\nspecification o f very limited duties. Instead, it could be argued that it would be\nreasonable to assume that Congress did not mean to preclude the Vice\nChairman from exercising what might be regarded as an inherent function o f his\n2Counsel for (he Federal Reserve Board has suggested that the incumbent could continue to serve\nas a de facto officer whose actions will be given legal effect with regard to innocent third parties\nwho have assumed such actions to be authorized. See. Waite v. City o f Santa Clara, 184 U .S. 302,\n323 (1902). Such will not be the case, however, where the defects in the o fficer\'s title are so\nnotorious as to make those relying on his acts chargeable with knowledge thereof. 63 Am. Jur. 2d.\nOfficers holding over \xc2\xa7 507 (1972). Because the expiration o f the incum bent\'s term is a w ell-known\nfact it would appear that even innocent third parties could not claim lack o f knowledge in this case.\nMoreover, intentional reliance on this stop-gap doctrine is ill-advised where more effective steps\ncan be taken to assure that the chairm anship is legally and continuously filled.\n3O riginally, service as \xe2\x80\x9c governor\xe2\x80\x9d and \xe2\x80\x9c vice governor\xe2\x80\x9d was at the pleasure o f the President and\nwas not limited by the specification o f a fixed term. See 38 Stat. 260, 42 Stat. 620; see also 48 Stat.\n167 (Chairman and Vice Chairm an). No problem o f succession was created since a m em ber could\nhold office until his successor had been qualified, at which time the President could designate the\nnew m em ber as Chairm an.\n\n395\n\n\x0coffice and temporarily assuming the duties o f the chairmanship whenever that\noffice is vacant.4 In light of the statute\xe2\x80\x99s clear language, however, we believe\nthat this contention should not control and that a third altemative-designation\nby the President o f an acting Chairman, is preferable.\n\nIII. Presidential Designation of an Acting Chairman\nThe Vacancy Act, 5 U .S.C . \xc2\xa7\xc2\xa7 3345-3348 (1976), which limits Presidential\nauthority to fill Executive branch vacancies on a temporary basis under certain\ncircumstances, by its terms applies only to executive departments and therefore\nnot to the Federal Reserve Board. We have consistently taken the position that\nthe President possesses inherent authority to make temporary appointments\nnecessary to ensure the continuing operation of the Executive branch. Although\nno court has squarely addressed the point, the Court o f Appeals for the District\nof Columbia in W illiams v. Phillips, 482 F.(2d) 669 (D .C. Cir. 1973) seemed\nto regard this theory as plausible.5\nSuch power has most often been exercised with respect to Executive branch\nagencies rather than independent regulatory bodies that have under certain\ncircumstances, see, H um phrey\'s E xecutor v. U nited States, 295 U.S. 602\n(1935), been protected from Presidential control. Where it has deemed\ninsulation from such control necessary, Congress has, however, provided that\nindependent regulatory bodies should choose their own temporary chairm en.6\nCongress has not limited the President\xe2\x80\x99s authority with regard to the Federal\nReserve Board in such a fashion; nor has it otherwise clearly specified the\nprocedure to be used in handling a vacancy in the chairmanship. Under such\ncircumstances, action by the President would appear to be appropriate. His\ndiscretion in selecting a temporary Chairman is not confined by the statutory\nscheme. It is therefore our view that he is free to select the Vice Chairman or\nsome member to serve in this capacity.\n\nIV. Conclusion\nBecause o f his limited term, the present Chairman may not hold over in\noffice and continue to perform his official functions. In light of the specific\n4Som e support for this position may be gained from the past practice o f the Federal Reserve\nBoard. A ccording to the Counsel for the C hairm an, vacancies occurred in both the office of\nChairm an and that o f Vice Chairm an early in 1948. On February 3, 1948, the Board met and\nelected the form er Chairm an as Chairm an pro tempore. He served until the new Chairm an had been\ndesignated and qualified. In follow ing this procedure, the Board appears to have adopted the\napproach outlined in 12 U .S .C . \xc2\xa7 244, albeit that the pertinent language speaks o f "a b se n c e "\nrather than \xe2\x80\x9c v acan c y ." ( \xe2\x80\x9c In the absence o f the chairm an and the vice chairm an, the Board shall\nelect a m em ber to act as chairm an pro tem p o re.\xe2\x80\x9d )\n\xe2\x80\x99Since the President has already subm itted the nam e o f the nom inee to the Senate for\nconfirm ation, no problem o f the sort at issue in the Phillips case\xe2\x80\x94 use o f the tem porary\nappointm ent pow er to avoid the necessity for Senate confirm ation\xe2\x80\x94 is presented here.\n6A lthough the President is charged with designating the Chairm an o f the Federal Com m unica\xc2\xad\ntions C om m ission, see 47 U .S .C . \xc2\xa7 155(a) (1976), the Com m ission itself is authorized to choose an\nacting Chairm an should that becom e necessary. Id.\n\n396\n\n\x0cstatutory limitation concerning service during the Chairm an\xe2\x80\x99s \xe2\x80\x9c absence \xe2\x80\x9d the\nbetter view is that the Vice Chairman may not, under his statutory authority,\nautomatically serve as Chairman during a temporary vacancy in the office of\nthe Chairman. In the absence of any statutorily prescribed mechanism for\nfilling vacancies, the President may designate one of the members of the Board\nto serve as acting Chairman until such time as the nominee has been confirmed.\nLarry A . H\n\nammond\n\nD eputy A ssistant A ttorney G eneral\nOffice o f L egal Counsel\n\n397\n\n\x0c'


b'Disclosure of Tax Division Files for Purposes of\nGeneral Accounting Office Audit\nUnder 31 U.S.C. \xc2\xa767 and 26 U.S.C. \xc2\xa76103, the Tax Division of the Departm ent of\nJustice may disclose to the General Accounting Office (GAO) case files containing tax\nreturns and related information for the purpose o f and to the extent necessary in\nG A O \xe2\x80\x99s audit of Internal Revenue Service operations.\n\nJanuary 13, 1981\nM EM ORANDUM OPIN IO N FO R T H E ASSISTA N T A TTO R N EY\nG E N ER A L, TAX D IV ISIO N\nThis responds to your request for the opinion of this Office as to\nwhether it is permissible for you to disclose to the General Accounting\nOffice (GAO) your files concerning certain tax cases. On October 17,\n1979, the Chairman of the Subcommittee on Commerce, Consumer, and\nMonetary Affairs of the House Committee on Government Operations\nrequested the Comptroller General to review the activities o f the Inter\xc2\xad\nnal Revenue Service (IRS) with respect to tax protester activities. The\nreview is designed to assess the nature and scope o f the tax protester\nproblem and to evaluate the actions taken by the IRS in dealing with\nthat problem. As part of its review, G A O has requested that the Tax\nDivision of the Department of Justice furnish its files with respect to 16\ntest cases involving alleged \xe2\x80\x9cvow of poverty\xe2\x80\x9d protester schemes. Pros\xc2\xad\necution has been declined in eight cases and authorized in the others.\nYour inquiry relates specifically to your files, each of which you state\ncontains tax returns and return information.1 We believe that the Tax\nDivision is permitted to disclose such material to GAO under the\nprovisions of 31 U.S.C. \xc2\xa7 67 and 26 U.S.C. \xc2\xa7 6103.\nI. Background\nThe Tax Reform Act of 1976 enacted into law 26 U.S.C. \xc2\xa7 6103,\nwhose principal purpose is to establish \xe2\x80\x9ca general rule that tax returns\nand return information are to be confidential and not subject to disclo\xc2\xad\nsure except as specifically provided by statute.\xe2\x80\x9d House Committee on\nWays and Means, 94th Cong., 2d Sess., Summary of the Conference\n1 We are informed that GAO does not seek grand jury material, whose disclosure is governed by\nFed. Rule Crim. Proc. 6(e).\n\n41\n\n\x0cAgreem ent on the Tax Reform Act of 1976 (H.R. 10612), 43 (Comm.\nPrint 1976). Under 26 U.S.C. \xc2\xa7 6103(a), no officer or employee of the\nUnited States is permitted to \xe2\x80\x9cdisclose any return or return information\nobtained by him . . . in connection with his service as such an officer\no r an employee . . . .\xe2\x80\x9d The term \xe2\x80\x9creturn\xe2\x80\x9d is defined as any part of a\n\xe2\x80\x9ctax or information return, declaration of estimated tax, or claim for\nrefund . . . . \xe2\x80\x9d \xc2\xa7 6103(b)(1). T h e term \xe2\x80\x9creturn information\xe2\x80\x9d is defined as\n\xe2\x80\x9ca taxpayer\xe2\x80\x99s identity, the nature, source, or amount o f his income,\npayments, receipts, deductions, exemptions, credits, assets, liabilities, net\nw orth, tax liability, tax withheld, deficiencies, overassessments, or tax\npayments, w hether the taxpayer\xe2\x80\x99s return was, is being, or will be\nexamined or subject to other investigation or processing . . . .\xe2\x80\x9d\n\xc2\xa7 6103(b)(2).\nSection 6103 contains a number of limited exceptions to the general\nrule of confidentiality. T he exception relevant for purposes of the\npresent inquiry appears in \xc2\xa7 6103(i)(6). That provision states, in perti\xc2\xad\nnent part, that \xe2\x80\x9cupon written request by the Comptroller General of the\nU nited States, returns and return information shall be open to inspec\xc2\xad\ntion by, o r disclosure to, officers and employees of the General A c\xc2\xad\ncounting Office for the purpose of, and to the extent necessary in,\nmaking\xe2\x80\x94(i) an audit of the Internal Revenue Service . . . which may\nbe required by section 117 o f the Budget and Accounting Procedures\nA ct of 1950 (31 U.S.C. 67) . . . .\xe2\x80\x9d The relevant provision of 31 U.S.C.\n\xc2\xa7 67 in turn empowers the Com ptroller General to \xe2\x80\x9cmake, under such\nrules and regulations as he shall prescribe, audits of the Internal Reve\xc2\xad\nnue Service.\xe2\x80\x9d It authorizes G A O representatives to inspect returns and\nreturn information \xe2\x80\x9c [f]or the purposes of, and to the extent necessary\nin,\xe2\x80\x9d making those audits. G A O representatives are also permitted access\n\xe2\x80\x9c to all other books, accounts, financial records, reports, files, papers,\nthings, and property belonging to or in use by the Internal Revenue\nService . . . .\xe2\x80\x9d 31 U.S.C. \xc2\xa7 67(d) (Supp. I 1977).\nF o r present purposes, the principal questions are (1) whether the\nG A O \xe2\x80\x99s requested examination of Tax Division files would be \xe2\x80\x9cfor the\npurpose of, and to the extent necessary in, making an audit of the\nInternal Revenue Service\xe2\x80\x9d; and (2) whether \xc2\xa7 6103(i)(6) contemplates\ndisclosure by any agency having lawful possession of returns and return\ninformation. W e believe that the answer to both questions is in the\naffirmative.\nII. Discussion\nUnder \xc2\xa7 6103(i)(6), returns and return information may be disclosed\nto the G A O only \xe2\x80\x9cfor the purpose of, and to the extent necessary in,\xe2\x80\x9d\nmaking an audit o f the IRS. This provision was enacted to carry out a\ngeneral congressional goal o f \xe2\x80\x9cpermit[ting] the G A O to independently\nconduct management audits to review IRS administration of the tax\n42\n\n\x0claws.\xe2\x80\x9d H.R. Rep. No. 480, 95th Cong., 1st Sess. 6 (1977). The provision\nresolved a longstanding dispute between GA O and IRS with respect to\nG A O \xe2\x80\x99s authority to examine IRS files. The legislation was designed to\nenable the \xe2\x80\x9cG A O . . . [to] serve as a means o f identifying alleged IRS\nabuses and weakness,\xe2\x80\x9d id., for Congress believed, that \xe2\x80\x9cas a consequence\nof [its] refusal [to allow inspection], IRS\xe2\x80\x99 . . . management practices\nand administration of the tax laws have not been as efficient as they\notherwise would have been.\xe2\x80\x9d Id. at 7. Congress thus intended \xe2\x80\x9cthat the\nGAO examine returns and individual tax transactions only for the\npurpose of, and to the extent necessary to serve as a reasonable basis\nfor, evaluating the effectiveness, efficiency and economy o f IR S operations\nand activities. \xe2\x80\x9d General Explanation of the Tax Reform A ct of 1976,\nJoint Committee on Taxation, H.R. Rep. No. 10612, 94th Cong., 2d\nSess. 337 (1976) (emphasis added). See also S. Rep. No. 42, 95th Cong.,\n1st Sess. 1 (1977). Congress\xe2\x80\x99 authorization o f disclosure of returns and\nreturn information to the GAO must be read in light o f this overriding\npurpose.\nThe Tax Division files contain two principal items: (1) tax returns\nand (2) files of the Division that contain returns and return information.\nThe first question is w hether disclosure of that material is justified as\n\xe2\x80\x9cfor the purpose of, and to the extent necessary in,\xe2\x80\x9d auditing the IRS.\nWe believe it is so justified. We note, first, that both the IRS and\nGAO 2 are agreed that disclosure of the documents at issue is properly\nregarded as \xe2\x80\x9cnecessary in\xe2\x80\x9d making an audit o f the IRS. This construc\xc2\xad\ntion of the statute, agreed upon by the two agencies responsible for\nadministering the statute\xe2\x80\x99s relevant provision, \xe2\x80\x9cis entitled to deference\nunless it can be said not to be a reasoned and supportable interpretation\nof the A ct.\xe2\x80\x9d Whirlpool Corp. v. Marshall, 445 U.S. 1, 11 (1980). The\nIRS and G A O state that review of the Department\xe2\x80\x99s files may well aid\nGAO in assessing the effectiveness of the IRS\xe2\x80\x99 operations. The files\nmay themselves evaluate IRS actions and will in all likelihood indicate\nwhether the IRS has been referring cases to the Department of Justice\nin appropriate circumstances. G A O \xe2\x80\x99s task would be facilitated if, for\nexample, the Department has concluded that the IRS has compiled\ninsufficient evidence in cases in which it has recommended prosecution.\nG A O would also be aided if the files showed that IRS recommenda\xc2\xad\ntions were being followed in most cases or that the reasons why\nprosecution was declined had nothing to do with the IR S\xe2\x80\x99 performance.\nThe files may well show whether the IRS has properly selected, inves\xc2\xad\ntigated, developed, and referred criminal cases. For these reasons, we\nbelieve that the interpretation offered by GA O and IRS is a \xe2\x80\x9c reasoned\nand supportable\xe2\x80\x9d one.\n2 The IRS and GA O were requested to provide memoranda expressing their views on the questions\npresented, and they reached identical conclusions.\n\n43\n\n\x0cT he second question is w hether \xc2\xa7 6103(i)(6) contemplates disclosure\nby any agency having lawful possession of returns and return informa\xc2\xad\ntion, or w hether the disclosure must be made solely by IRS personnel.\nIn this context as well, the IRS and GA O are agreed that the statute\npermits disclosure by the Tax Division. We believe that the language,\nhistory, and structure of the statute are compatible with this view.\nFirst, \xc2\xa7 6103(i)(6) states in broad terms that returns and return informa\xc2\xad\ntion \xe2\x80\x9cshall be open to inspection by, or disclosure to\xe2\x80\x9d GAO. The\nstatute does not state that the materials should be disclosed only by the\nSecretary of the Treasury. This is a significant factor, for a number of\nthe tax disclosure provisions state in plain terms that it is \xe2\x80\x9cthe Secre\xc2\xad\ntary\xe2\x80\x9d w ho \xe2\x80\x9cm ay\xe2\x80\x9d or \xe2\x80\x9cshall\xe2\x80\x9d disclose returns or return information. See\n26 U.S.C. \xc2\xa7 6103(c), (0, (g)- Similarly, the legislative history contains\nno indication that disclosure under \xc2\xa7 6103(i)(6) was to be made solely\nby the IRS. See S. Rep. No. 938, 94th Cong., 2d Sess. 341 (1976).\nFinally, the structure of the statute supports the interpretation offered\nby the G A O and IRS, for, as noted, Congress made explicit who the\nreleasing party must be w hen it intended that disclosure be made only\nby that party.3\nW e conclude by observing that anomalous results would be produced\nif the interpretation proposed by G A O and the IRS were rejected.\nThere is no dispute that the relevant returns and return information\nmay be obtained from the IRS, which has copies of the tax returns in\nquestion. T he intention underlying the tax disclosure provisions of the\nA ct\xe2\x80\x94to limit undue circulation of returns and return information\xe2\x80\x94\nwould plainly not be furthered if \xc2\xa7 6301 (i)(6) were interpreted to pre\xc2\xad\nclude disclosure o f the T ax Division\xe2\x80\x99s files, for the same information\nprotected by the tax disclosure provisions is available to GA O in any\nevent. T he statutory purpose of preventing disclosure of returns and\nreturn information would not, therefore, be served if G A O \xe2\x80\x99s request\nw ere denied. As a result, we see no sufficient basis for rejecting the\ninterpretation offered by G A O and IRS. W e conclude that you are\nperm itted to disclose the files in question.\nL eo n U lm a n\n\nDeputy Assistant Attorney General\nOffice o f Legal Counsel\n\n3 W e also note that the Secretary o f the Treasury has promulgated regulations permitting disclosure\nby other federal agencies in lawful possession of returns and return information even when the statute\non its face requires disclosure by the Secretary See Treas. Reg. \xc2\xa7 301.6103(p)(2)(B)-l(a).\n\n44\n\n\x0c'