t c no united_states tax_court swallows holding ltd petitioner v commissioner of internal revenue respondent docket no filed date p is a foreign_corporation whose only substantial asset is unimproved land in the united_states on its and federal_income_tax returns p recognized rent and option income and claimed deductions for taxes and licenses the result of which was a reported loss for each year p filed each return after its due_date but before any contact from r r determined that sec_882 i r c precluded p from deducting its expenses because it filed its returns untimely in 38_bta_711 a setting similar to that here the board held that sec of the revenue act of ch 45_stat_849 and the revenue act of ch 47_stat_230 an almost verbatim predecessor to sec_882 i r c did not include a timely filing requirement and rejected r’s contrary interpretation subsequently the court_of_appeals for the fourth circuit construed like predecessor text similarly also in rejection of r’s contrary interpretation see 125_f2d_906 4th cir affg 42_bta_1248 120_f2d_424 4th cir modifying and remanding on other grounds 41_bta_910 r continues to adhere to his rejected interpretation and now attempts to support that interpretation by citing treasury regulations issued in those regulations interpret sec_882 i r c to provide that a foreign_corporation generally is entitled to deduct its expenses only if it files a timely return held a timely filing requirement is not found in a plain reading of sec_882 i r c held further the timely filing requirement in the regulations is invalid in that it is unreasonable under a plain reading of sec_882 i r c and an application of the considerations set forth in natl muffler dealers association v united_states 440_us_472 phillip l jelsma for petitioner thomas a dombrowski and nina e chowdhry for respondent laro judge petitioner petitioned the court to redetermine respondent’s determination of deficiencies in its federal income taxes for its taxable years ended date and and taxable years respectively collectively subject years and additions thereto under sec_6651 the deficiencies and additions to tax are as follows unless otherwise noted section references are to the applicable versions of the internal_revenue_code_of_1986 rule references are to the tax_court rules_of_practice and procedure addition_to_tax taxable_year deficiency sec_6651 dollar_figure dollar_figure big_number dollar_figure big_number dollar_figure we decide whether petitioner may deduct the ordinary and necessary expenses it incurred during the subject years the expenses relate to income treated as effectively connected to the conduct_of_a_trade_or_business in the united_states effectively_connected_income and petitioner claimed the expenses on its federal_income_tax returns which it filed before any contact from respondent respondent determined in the notice_of_deficiency that sec_882 precludes petitioner from deducting its expenses because it did not file its returns timely respondent concedes that the expenses are deductible if sec_882 does not include a timely filing requirement in 38_bta_711 the board_of_tax_appeals board held that section of the the revenue act of ch 45_stat_849 and the revenue act of ch 47_stat_230 an almost verbatim predecessor to sec_882 did not include a timely filing requirement in so holding the board construed as will be discussed the relevant text of sec_882 in the manner prescribed in subtitle f is substantially the same as the related text of the predecessors to sec_882 we refer interchangeably to the relevant text of sec_882 and the related text of its predecessors as the relevant text the earlier section's requirement that a foreign_corporation file a true and accurate return in the manner prescribed in this title and rejected respondent’s argument that the word manner as it appeared in the quoted text meant that the foreign_corporation could deduct its expenses only if it filed its returns timely ie before the time set forth in a predecessor to sec_6072 subsequently the court_of_appeals for the fourth circuit in 120_f2d_424 4th cir modifying and remanding on other grounds 41_bta_910 quoted and applied the anglo-am direct tea trading co holding favorably and without reservation the court_of_appeals for the fourth circuit in 125_f2d_906 4th cir affg 42_bta_1248 also acknowledged the anglo-am direct tea trading co holding construed the relevant text not to contain any reference to time and stated that congress had enacted the relevant text in intending to allow a foreign_corporation to deduct its expenses upon its filing of a tax_return in the secretary issued sec_1_882-4 and i income_tax regs disputed regulations the disputed regulations interpret sec_882 to provide that a foreign_corporation generally is entitled to deduct its expenses only if sec_6072 entitled time for filing income_tax returns provides dates by which an income_tax return must be filed in order to be timely it files a timely return under the relevant part of the disputed regulations a return is timely if it is filed before an arbitrary 18-month deadline 18-month deadline devised by the secretary the secretary issued the disputed regulations stating that sec_882 contains a clear requirement that a foreign_corporation file its return timely in order to deduct its expenses the secretary made no mention of the consistent interpretation of the relevant text by the court of the regulations explain the 18-month deadline as follows for taxable years of a foreign_corporation ending after date whether a return for the current taxable_year has been filed on a timely basis is dependent upon whether the foreign_corporation filed a return for the taxable_year immediately preceding the current taxable_year if a return was filed for that immediately preceding_taxable_year or if the current taxable_year is the first taxable_year of the foreign_corporation for which a return is required to be filed the required return for the current taxable_year must be filed within months of the due_date as set forth in sec_6072 and the regulations under that section for filing the return for the current taxable_year if no return for the taxable_year immediately preceding the current taxable_year has been filed the required return for the current taxable_year other than the first taxable_year of the foreign_corporation for which a return is required to be filed must have been filed no later than the earlier of the date which is months after the due_date as set forth in sec_6072 for filing the return for the current taxable_year or the date the internal_revenue_service mails a notice to the foreign_corporation advising the corporation that the current_year tax_return has not been filed and that no deductions other than that allowed under sec_170 or credits other than those allowed under sec_33 sec_34 and sec_852 may be claimed by the taxpayer sec_1_882-4 income_tax regs appeals for the fourth circuit and the board not to include any timely filing requirement petitioner argues that sec_882 does not contain a timely filing requirement and that the disputed regulations are invalid as inconsistent with that section respondent argues that sec_882 provides clearly that a foreign_corporation must file its return timely in order to deduct its expenses and that the disputed regulations are a proper interpretation of that provision respondent asks the court now to accept his interpretation which he acknowledges is the same as that rejected in anglo-am direct tea trading co v commissioner supra and its progeny and to disavow all contrary interpretations expressed by the court_of_appeals for the fourth circuit and the board we agree with petitioner that sec_882 does not contain a timely filing requirement and that the disputed regulations are invalid to the extent discussed herein we hold that petitioner may deduct its expenses on the basis of our holding and a concession by respondent that sec_6651 is inapplicable if petitioner is entitled to deduct its expenses we also hold without further discussion that petitioner is not petitioner also makes numerous other arguments which are pertinent only if the disputed regulations are valid given our holding herein that the disputed regulations are invalid we need not and do not decide any of petitioner’s other arguments liable for any addition_to_tax determined by respondent under sec_6651 findings_of_fact many facts were stipulated and are found accordingly we incorporate herein by this reference the stipulated facts and the exhibits submitted therewith i background petitioner is a barbados corporation whose mailing address was in bridgetown barbados when its petition was filed with the court it is an accrual_method taxpayer that for federal_income_tax purposes files a form 1120-f u s income_tax return of a foreign_corporation form 1120-f on the basis of a fiscal_year ending on may its sole activity during the subject years was owning acres of unimproved_real_estate u s real_estate in san diego county california and receiving option and rental income from the u s real_estate petitioner has never engaged in a trade_or_business in the united_states and it does not have a separate business activity in barbados ii petitioner’s formation and issuance of additional shares raimundo arnaiz-rosas rosas is a citizen and resident of mexico he acquired the u s real_estate on date in date he formed petitioner as his wholly owned corporation he transferred the u s real_estate to petitioner on date aurora elsa arnaiz arnaiz is the sister of rosas she is a citizen and resident of mexico on date petitioner issued additional shares of its stock to arnaiz afterwards arnaiz owned percent of petitioner’s stock and rosas owned the remaining percent iii petitioner’s initial tax_return on date petitioner filed a form 1120-f with respondent’s service_center in philadelphia pennsylvania philadelphia service_center for its short taxable_year from date through date taxable_year the return petitioner’s initial return was petitioner’s first federal_income_tax return that return was prepared by francisco a f cervantes cervantes petitioner’s tax adviser and certified_public_accountant in california as to petitioner’s taxable_year petitioner’s initial return reported that petitioner had no income or expense that it had not engaged in a trade_or_business in the united_states and that it had no effectively_connected_income petitioner’s initial return also reported that petitioner’s business activity was real_estate and that its product or service was investment petitioner’s initial return also reported that petitioner was incorporated in barbados and that petitioner was subject_to income_tax under the laws of barbados iv u s real_estate the u s real_estate has been vacant land throughout the subject years during the subject years an apparently unrelated entity leased from petitioner approximately acres of the u s real_estate for use as a skydiving landing zone pursuant to the lease agreements the lessee was responsible for maintenance_costs utilities license fees personal_property_taxes and other costs associated with its use of the leased property between date and date another apparently unrelated entity held an option to purchase a portion of the u s real_estate during the respective subject years petitioner realized rental income of dollar_figure dollar_figure and dollar_figure as to the lease and dollar_figure dollar_figure and zero dollars as to the option during the same respective years petitioner incurred expenses totaling dollar_figure dollar_figure and dollar_figure for real_property_taxes payable to the county of san diego franchise_taxes payable to the state of california and other fees v petitioner’s tax returns other than the initial return on date petitioner filed with the philadelphia service_center a form 1120-f for its taxable_year ended date taxable_year also on that date petitioner voluntarily before any contact from respondent filed with the philadelphia service_center a form 1120-f for each of the subject years collectively subject returns cervantes first advised petitioner in that it had to file the four returns and cervantes prepared those returns shortly after giving this advice petitioner had no communications with cervantes as of the time of this advice going back to the earlier time at which petitioner’s initial return was filed when the four returns were filed respondent had no knowledge that the returns were overdue the four returns filed in each listed petitioner’s u s employer_identification_number and reported that petitioner was incorporated in barbados that petitioner was subject_to income_tax under the laws of barbados and that petitioner was not liable for a united_states branch_profits_tax each return also reported that petitioner’s business activity was real_estate and that its product or service was investment each return also reported that petitioner had not engaged in a trade_or_business in the united_states but that petitioner had realized a taxable loss effectively connected with the conduct_of_a_trade_or_business in the united_states none of the returns included a statement under sec_1_871-10 income_tax regs reporting that petitioner was making an election under sec_882 because respondent with petitioner’s acquiescence has cervantes also prepared petitioner’s federal_income_tax returns for several years following the subject years treated the subject returns as such an election petitioner’s income from the u s real_estate for the subject years is treated as effectively_connected_income on its form 1120-f for its taxable_year petitioner recognized option income of dollar_figure and deducted an expense for taxes of dollar_figure resulting in a reported taxable loss of dollar_figure on the respective subject returns petitioner recognized rental income of dollar_figure dollar_figure and dollar_figure and option income of dollar_figure dollar_figure and zero dollars petitioner also on the respective subject returns deducted expenses for taxes and licenses in the total_amounts of dollar_figure dollar_figure and dollar_figure resulting in reported losses without consideration of any net_operating_loss nol carryforward of dollar_figure dollar_figure and dollar_figure petitioner reported on its form 1120-f for its taxable_year that it had available as an nol_carryover its prior year’s loss of dollar_figure petitioner reported on its form 1120-f for its taxable_year that it had available as an nol_carryover its prior years’ losses totaling dollar_figure dollar_figure dollar_figure petitioner reported on its form 1120-f for its taxable_year that it had available as an nol_carryover its prior years’ losses totaling dollar_figure dollar_figure dollar_figure dollar_figure vi respondent’s determination on date respondent issued the notice_of_deficiency to petitioner for the subject years respondent determined the deficiencies shown therein by disallowing all of the deductions claimed on the subject returns and applying the corporate_income_tax rates of sec_11 to petitioner’s gross_income as reported respondent disallowed the deductions because none of the returns was filed timely i burden_of_proof opinion the commissioner’s determinations in a notice_of_deficiency are generally presumed correct and taxpayers generally bear the burden of proving those determinations wrong see rule a 290_us_111 in certain cases sec_7491 places the burden_of_proof upon the commissioner given the manner in which we decide this case we need not and do not decide which party bears the burden_of_proof in this case ii parties’ arguments the parties disagree on the sec_882 requirements which serve as a prerequisite to a foreign corporation’s deducting its expenses petitioner argues that it meets those neither party has explained why the notice_of_deficiency does not address petitioner’s taxable_year requirements in that it filed true and accurate federal_income_tax returns according to petitioner sec_882 does not require that the subject returns be filed timely and the disputed regulations are invalid to the extent they impose such a requirement respondent argues that sec_882 includes a clear timely filing requirement and that the disputed regulations are a valid construction of that requirement according to respondent petitioner may not deduct its expenses because it did not file the subject returns timely we agree with petitioner to best understand our decision we first discuss the relevant provisions and developments in the law which preceded the issuance of the disputed regulations we then address our interpretation of the relevant text and the standard by which we judge the disputed regulations to be invalid iii relevant filing_requirements every corporation subject_to federal_income_tax must file a federal_income_tax return with respect to that tax see sec_6012 the regulations interpret sec_6012 to require that such a corporation file a federal_income_tax return even if it does not have any gross or taxable_income for the year see sec_1_6012-2 income_tax regs the regulations interpret sec_6012 to apply to foreign_corporations to the extent set forth in sec_1_6012-2 income_tax regs see id sec_1_6012-2 income_tax regs generally requires that a foreign_corporation file a federal_income_tax return on form 1120-f if it is engaged in trade_or_business in the united_states at any time during the taxable_year or has income which is subject_to taxation under subtitle a of the code relating to income taxes sec_6072 sets the time for the filing of federal_income_tax returns required by sec_6012 a corporation generally must file its return by the 15th day of the third month following the close of its taxable_year see sec_6072 see also sec_1_6072-2 income_tax regs an exception to this rule is found in the case of a foreign_corporation without an office or place of business in the united_states in such a case the foreign_corporation may file its tax_return up until the 15th day of the sixth month following the close of its taxable_year see sec_6072 see also sec_1_6072-2 income_tax regs petitioner did not conduct a trade_or_business in the united_states at any time from its inception through the close of the last subject year thus but for an election under sec_882 petitioner was required by sec_6012 as interpreted by sec_1_6012-2 and g income_tax regs to file a federal_income_tax return for a taxable_year included within that period only if it had income subject_to federal_income_tax petitioner had no such income for its first taxable_year but did have such income for each of its taxable years thereafter through the close of the last subject year for each of the subject years therefore petitioner was required to file a form 1120-f with the commissioner because petitioner was within the rule_of sec_6072 for each of those years the due dates of the subject returns were date and respectively iv place for filing returns sec_6091 sets forth the rules concerning the place where a corporation must file its federal_income_tax returns that section was enacted as part of the internal_revenue_code of code ch 68a stat to replace sec_53 of the internal_revenue_code_of_1939 code ch 53_stat_28 former sec_53 which also appeared in the revenue act of 45_stat_808 and the revenue act of 47_stat_189 provided corporations --returns of corporations shall be made to the collector of the district in which is located the principal_place_of_business or principal office or agency of the corporation or if it has no principal_place_of_business or principal office or agency in the united_states then to the collector at baltimore maryland petitioner would have been required by sec_6012 as interpreted by sec_1_6012-2 and g income_tax regs to file a return for any taxable_year in which it had a sec_882 election in effect such an election was in effect as to petitioner only during the subject years thus before the enactment of the code a foreign_corporation such as petitioner was required to file its federal_income_tax returns at baltimore maryland since the enactment of the code a corporation generally must file its federal_income_tax returns with the district_director for the internal_revenue_district in which is located the corporation’s principal_place_of_business principal office or agency see sec_6091 see also sec_1_6091-2 income_tax regs the rule is different where a foreign_corporation has no principal_place_of_business principal office or agency in any internal_revenue_district see sec_6091 iii in that case sec_6091 and iii allows the secretary to designate by regulation the place where the foreign corporation’s return will be filed as relevant here sec_1_6091-3 income_tax regs before amendment on date by t d 2004_2_cb_669 generally required that a foreign_corporation file its federal_income_tax returns with the director of international operations internal_revenue_service washington d c or the district_director or the director of the service_center depending on the appropriate officer designated on the return form or in the instructions issued with respect to such form that section was issued by the secretary in see t d 1959_1_cb_546 in the instructions for form 1120-f the commissioner directed that all foreign_corporations whether or not engaged in a trade_or_business within the u s must file their return with the internal_revenue_service center in philadelphia pennsylvania previously the instructions for form 1120-f had stated that all foreign_corporations whether or not engaged_in_a_trade_or_business_within_the_united_states must file their return with the director of international operations internal_revenue_service center washington d c see eg the instructions for form 1120-f the instructions for the subject returns state that taxpayers must file their forms 1120-f with the internal_revenue_service center philadelphia pa in accordance with these instructions petitioner filed the subject returns with the philadelphia service_center sec_7482 provides rules as to venue for appeal by a corporation without a principal_place_of_business principal office or agency in a judicial circuit in such a case venue is the united_states court_of_appeals for the circuit in which is located the office to which was made the return of the tax in respect of which the liability arises id because petitioner filed the subject returns in philadelphia pa an appeal of this case would appear to be to the court_of_appeals for the third circuit as noted supra pp a foreign_corporation such as petitioner was required before the enactment of the code to file its federal_income_tax returns at baltimore md venue for appeal in that case was the court_of_appeals for the fourth circuit v sec_882 a overview a foreign_corporation engaged_in_a_trade_or_business_within_the_united_states is taxable under sec_11 sec_55 sec_59a or sec_1201 on its taxable_income that is effectively_connected_income see sec_882 such taxation is consistent with that of a domestic_corporation a foreign_corporation not engaged_in_a_trade_or_business_within_the_united_states is taxable at a flat rate of percent of the amount received from interest other than original_issue_discount as defined in sec_1273 dividends rents salaries wages premiums annuities compensations remunerations emoluments and other fixed_or_determinable_annual_or_periodical_gains_profits_and_income but only to the extent that the income is received from sources within the united_states u s source income sec_881 a foreign_corporation is not taxable in the united_states on its income that is neither effectively_connected_income nor u s source income see id a foreign_corporation that realizes u s source income that is not effectively_connected_income may elect to treat the u s source income as effectively_connected_income if the u s source income is derived from real_property located in the united_states see sec_882 the commissioner has ruled that a foreign_corporation may not make such an election for a taxable_year in which it does not derive income from real_property in the united_states see revrul_91_7 1991_1_cb_110 see also sec_1_871-10 income_tax regs for purposes of sec_882 a foreign_corporation generally determines its taxable_income by including in its gross_income only its effectively_connected_income see sec_882 whether the foreign_corporation may claim deductions against its gross_income to arrive at taxable_income depends on sec_882 under that section a foreign_corporation shall receive the benefit of the deductions and credits allowed to it in this subtitle only by filing or causing to be filed with the secretary a true and accurate return in the manner prescribed in subtitle f including therein all the information which the secretary may deem necessary for the calculation of such deductions and credits b history of relevant provision sec_1 predecessors to sec_882 we trace sec_882 to its origin in section of the revenue act of there congress provided sec allowance of deductions and credits a foreign_corporation shall receive the benefit of the deductions and credits allowed to it in this title only by filing or causing to be filed with the collector a true and accurate return of its total income received from all sources in the united_states in the manner prescribed in this title including therein all the information which the commissioner may deem necessary for the calculation of such deductions and credits congress enacted section of the revenue act of in the same form as the related bill had been introduced in the house of representatives see h_r sec 70th cong 1st sess the committee reports underlying this enactment do not explain the section’s intent or breadth section of the revenue act of was reenacted verbatim in the revenue act of 47_stat_230 the revenue act of ch 48_stat_737 the revenue act of ch 49_stat_1717 and the revenue act of ch 52_stat_531 the same provision also was codified verbatim in the code 53_stat_79 except that congress placed the word chapter in the two places where the word title had appeared in the previous statutedollar_figure compare section of the code with section of the revenue act of in the code congress recodified section of the code in former sec_882 sec_68a stat with slight modifications sec_882 of the code provided the code was approved and published on date see stat iii the code is an enactment without change_of the edition of the codification of internal revenue laws prepared by the staff of the joint_committee_on_internal_revenue_taxation with the assistance of the department of the treasury and the department of justice stat iii the underlying bill was introduced in the house_committee_on_ways_and_means on date see stat iii c allowance of deductions and credits -- deductions allowed only if return filed --a foreign_corporation shall receive the benefit of the deductions allowed to it in this subtitle only by filing or causing to be filed with the secretary or_his_delegate a true and accurate return of its total income received from all sources in the united_states in the manner prescribed in subtitle f including therein all the information which the secretary or_his_delegate may deem necessary for the calculation of such deductions the house committee report underlying the code stated as to this action subsection c relating to necessity for filing of returns by foreign_corporations in order to secure allowance of deductions and credits is in substance identical with sections and code h rept 83d cong 2d sess a246 see also s rept 83d cong 2d sess same statement except omits the words and credits sec_882 of the code was next amended in the foreign investors tax act of publaw_89_809 80_stat_1555 a stated purpose of that act was to provide equitable tax treatment for foreign investment in the united_states foreign investors tax act of 80_stat_1539 to that end congress renumbered sec_882 of the code with slight modification as sec_882 and added a new sec_882 foreign investors tax act of sec_104 80_stat_1556 as to the first action the house committee report stated deductions and credits allowed only if return filed paragraph of sec_882 continues the substance of the rule contained in sec_882 of existing law that a foreign_corporation is to receive the benefit of the allowable deductions only by filing a true and accurate return of its total income including income subject_to tax under sec_881 a technical amendment has been provided however to make clear that the return must also include the income derived from sources without the united_states which is effectively connected with the conduct_of_a_trade_or_business within the united_states this rule has also been extended to apply to credits against tax such as the foreign_tax_credit other than the credit provided by sec_32 for tax withheld at the source or the credit provided by sec_39 for certain users of gasoline and lubricating oil as so amended sec_882 is consistent with sec_874 of the code as amended by sec_3 of the bill h rept 89th cong 2d sess as to the addition of sec_882 the senate committee report stated as a general_rule the bill provides that income of a nonresident_alien or foreign_corporation will be subject_to the flat 30-percent or lower treaty rate if it is not effectively connected with the conduct_of_a_trade_or_business within the united_states the regular individual or corporate rates apply to income which is effectively connected to the conduct of a u s trade_or_business however the foreigner may elect to treat real_property income as if it were income effectively connected with a u s business this is to permit the deductions attributable to this real_property income to be deducted from it s rept 89th cong 2d sess 1966_2_cb_1059 cf id pincite c b pincite7 where the senate committee noted as to nonresident_aliens owning property in the united_states that taxing income on real_property at a flat 30-percent rate without the allowance of allocable deductions--which in the case of this type of income may be relatively large--may result in quite heavy tax burdens on this type of income your committee agrees with the house that the law in this area should be clarified and doubts whether the disallowance of deductions in such cases is appropriate moreover the disallowance of deductions in such cases would tend to discourage foreign investment in u s realty sec_217 of the revenue act of a overview ten years before the revenue act of 45_stat_791 congress enacted in sec_217 of the revenue act of ch 40_stat_1069 a provision applicable to nonresident_aliens this provision was substantially_similar to section of the revenue act of except that sec_217 used the words nonresident_alien_individual rather than the words foreign_corporation sec_217 of the revenue act of provided nonresident aliens--allowance of deductions and credits sec_217 that a nonresident_alien_individual shall receive the benefit of the deductions and credits allowed in this title only by filing or causing to be filed with the collector a true and accurate return of his total income received from all sources corporate or otherwise in the united_states in the manner prescribed by this title including therein all the information which the commissioner may deem necessary for the calculation of such deductions and credits sec_217 of the revenue act of was reenacted in subsequent revenue acts see eg revenue act of ch sec_217 43_stat_275 revenue act of ch sec_217 44_stat_32 revenue act of ch sec_215 45_stat_848 revenue act of ch sec_215 47_stat_229 and was codified in the code as sec_215 ch 53_stat_77 it was recodified in the code as sec_874 sec_68a stat sec_874 of the code was identical in substance with sec_215 and sec_216 of the code h rept 83d cong 2d sess supra at a245 and is virtually identical to sec_882 except that the latter section uses the words foreign_corporation instead of the words nonresident_alien_individual from the outset the secretary interpreted sec_217 of the revenue act of as providing that a nonresident_alien was allowed deductions upon the alien’s filing of a true and accurate federal_income_tax return and that the alien’s tax_liability would be assessed without the benefit of deductions if the commissioner had to prepare a substitute return for the alien that interpretation was set forth in article of regulation sec_45 as follows art allowance of deductions and credits to nonresident_alien_individual --unless a nonresident_alien_individual shall render a return of income as required in article ie a full and accurate return on form_1040 revised or form_1040 a revised of his income received from sources within the united_states regardless of amount the tax shall be collected on the basis of his gross_income not his net_income from sources within the united_states where a nonresident_alien has various sources of income within the united_states so that from any one source or from all sources combined the amount of income shall call for the assessment of a surtax and a return of income shall not be filed by him or on his behalf the commissioner will cause a return of income to be made and include therein the income of such nonresident_alien from all sources concerning which he has information and he will assess the tax and collect it from one or more of the sources of income within the united_states of such nonresident_alien without allowance for deductions or credits b relationship to former section the court_of_appeals for the fourth circuit has observed that article of regulation sec_45 contains the secretary’s longstanding construction of sec_217 of the revenue act of see blenheim co v commissioner f 2d pincite that court has stated that congress is presumed to have included that construction in section as enacted as part of the revenue act of and as later reenacted see id citing 280_us_327 309_us_78 section of the revenue act of section of the revenue act of 45_stat_849 was a predecessor to sec_6072 and provided the due_date for filing the federal_income_tax returns of a foreign_corporation without an office or place of business in the united_states section of the revenue act of provided sec returns in the case of a foreign_corporation not having any office or place of business in the united_states the return in lieu of the time prescribed in sec_53 shall be made on or before the fifteenth day of the sixth month following the close of the fiscal_year or if the return is made on the basis of the calendar_year then on or before the fifteenth day of june if any foreign_corporation has no office or place of business in the united_states but has an agent in the united_states the return shall be made by the agent section of the revenue act of was reenacted verbatim in the revenue act of 47_stat_230 compare section of the revenue act of with section of the revenue act of vi relevant caselaw a overview this court has observed that sec_874 and sec_882 because similar in text and legislative intent are to be interpreted in_pari_materia see 107_tc_146 the court has also observed that few opinions discuss the text of these sections in the context of federal_income_tax returns submitted to the commissioner untimelydollar_figure id pincite all of the cases discussing the the paucity of cases is not surprising before the enactment of the code all cases interpreting the predecessors of sec_882 were appealable to the court_of_appeals for the fourth circuit see supra note as will be discussed the view of that court was set forth by the end of in three opinions in addition as also will be discussed continued relevant text are in the setting of former section only one case discusses the text of sec_874 and no case discusses the predecessors of that section b anglo-am direct tea trading co in the seminal case of 38_bta_711 the taxpayer was a foreign_corporation with no offices or agents in the united_states and it did not transact any business in the united_states during its taxable years ended date and the taxpayer received gross_income in the form of dividends from a wholly owned domestic_corporation in date the commissioner learned of the dividends determined that the taxpayer had not filed federal_income_tax returns for its taxable years of receipt and discussed this matter with one of the taxpayer’s officers on or about date without informing the taxpayer that he was doing so the commissioner’s revenue_agent prepared substitute federal_income_tax returns for those taxable years of receipt before the substitute returns were accepted by the commissioner the taxpayer on date filed delinquent federal_income_tax returns that included the dividends in its gross_income and claimed corresponding deductions for continued the secretary’s regulations construing the relevant text did not state until that a timely filed return was required as a condition to a foreign corporation’s deducting its expenses dividends received the commissioner denied the deductions reported on those returns sec_23 of the revenue act of 45_stat_799 and the revenue act of 47_stat_179 allowed the taxpayer to deduct from its gross_income any dividend received from a domestic_corporation the commissioner argued that notwithstanding this law the phrase in section of the and revenue acts that conditioned the allowance of deductions on the filing of returns in the manner prescribed in this title meant that deductions were allowable to a foreign_corporation only if it filed its return before the time specified in section of the and revenue acts under section of the and revenue acts the taxpayer’s returns had to be filed by date and respectively in order to be timely the commissioner argued more specifically that congress intended that the word manner be construed broadly as including a timeliness requirement or in other words a reference to the timely filing_requirements found elsewhere in the applicable revenue acts the board in a reviewed opinion with no recorded dissent disagreed with the coommissioner’s interpretation of the relevant text and held that the taxpayer was entitled to its deductions even though its returns had been filed untimely see anglo-am direct tea trading co v commissioner supra pincite the board reached this holding by carefully examining congress’s use in the revenue acts of the words manner and time and by literally applying the word manner in accordance with the word’s usual and ordinary meaning of ‘mode method mien style or way’ id pincite the board concluded that the word manner was not intended by congress to and thus did not include any element of time let alone impose a requirement that a foreign_corporation file its return by a certain date in order to deduct its expenses id pincite the board stated a careful reading of sections and discloses no indication of a legislative intent to extend the meaning of ‘manner’ so as to include ‘time’ neither section provides that the deductions may not be allowed unless the return is filed within the time prescribed id pincite the board added that if congress had intended to deprive a foreign_corporation of its right to a deduction when it did not file a timely federal_income_tax return it would have said so id the board also supported its conclusion by analyzing the structure of the revenue acts the board concluded from that analysis they seem to have a more or less common pattern thus sec_52 governs the manner of filing corporation returns sec_215 deals with the manner of filing returns by or for nonresident_aliens section f the manner of filing returns by citizens of the united_states who are in receipt of income from sources within possessions of the united_states and section the manner of filing returns for a foreign_corporation sec_53 sec_217 and deal with the time and place of filing returns while sec_56 sec_218 and deal with payment inasmuch as separate sections deal with manner and time we think it highly improbable that congress ever intended to include the element of time in the section dealing primarily with the manner of filing id pincite c mills spence co in mills spence co v commissioner a memorandum opinion of the board_of_tax_appeals dated date the board followed its decision in anglo-am direct tea trading co v commissioner supra in mills spence co the taxpayer was a foreign_corporation that had no offices in the united_states but derived income_from_sources_within_the_united_states thus requiring it to file federal_income_tax returns on date the commissioner informed the taxpayer that it had to file tax returns for through because it had received during those years gross_income subject_to federal_income_tax the taxpayer filed those returns on date reporting net losses for each year subsequently the commissioner issued a notice_of_deficiency to the taxpayer that disallowed all of the deductions claimed on the returns the commissioner argued before the board that the taxpayer’s failure_to_file its tax returns timely meant that it was precluded by section of the and revenue acts from deducting its expenses the board disagreed stating that the petitioner received the gross incomes incurred the expenses and sustained the net losses as set out in the tabulation is not in dispute the contention of respondent is that such expenses are not deductible for the sole reason that the petitioner being a foreign_corporation is prohibited from receiving the benefit of such deductions by the provisions of section of the revenue acts of and because none of its returns for the periods involved was timely filed the gist of his contention is that the words in those sections in the manner prescribed in this title embrace timely filing of returns within their meaning and that consequently deductions are allowable to a foreign_corporation only when its returns are filed within the time specified in section of the revenue acts of and supra under this section petitioner should have filed its returns for the periods involved on or before june of each of the years and but did not file any returns until date when it filed returns for all the periods the respondent argues that as a consequence of such untimely filing of the returns the petitioner is not entitled to the deductions of the expenses involved and that the tax should be computed upon its gross_income we do not agree with respondent’s contention it is unnecessary to assign any reason for such conclusion other than to say that our decision on this point is clearly controlled by the holding of the board in anglo-american direct tea trading co ltd promulgated date b t a no accordingly we hold that petitioner is entitled to the deduction of the expenses as set out in the above tabulation and that respondent erred in computing petitioner’s taxes on the basis of its gross_income mills spence co v commissioner supra fn ref omitted d am inv and gen trust co in am inv and gen trust co v commissioner a memorandum opinion of the board_of_tax_appeals dated date the board again applied its holding in 38_bta_711 the board found that the taxpayer a foreign_corporation had not filed its and federal_income_tax returns timely the commissioner again argued that this finding meant that the taxpayer was not entitled to its deductions the board disagreed stating this is not a no return case it is obvious however that the petitioner was delinquent in filing its returns the returns were due not later than date and date whereas they were not filed until after date the commissioner argues that this foreign_corporation can not receive the benefit of the deductions and credits allowed under title i of the revenue act of because the filing of the delinquent returns was not the filing of returns in the manner prescribed in title i this same argument has been considered and rejected by the board in the case of 38_bta_711 it is rejected here on authority of that case am inv and gen trust co ltd v commissioner supra e taylor sec inc next the board decided 40_bta_696 there the commissioner issued a notice_of_deficiency to the foreign_corporation taxpayer on date that notice reflected substitute returns that the commissioner had prepared for the taxpayer’s through taxable years using only the taxpayer’s income on date the taxpayer petitioned the board as to the notice_of_deficiency and the commissioner answered the petition shortly thereafter on date the taxpayer was notified by the board that a hearing was set for a stated session of the board beginning date subsequently after the board continued the date of that hearing until date the taxpayer filed its through tax returns on date the board held that the taxpayer was not entitled to its claimed deductions because it had not filed a return as required by the statute in rejecting any argument that the taxpayer’s returns were returns for this purpose the board distinguished anglo-am direct tea trading co v commissioner supra on the grounds that there the taxpayer had filed its returns before the notice_of_deficiency was issued those returns had been audited not the returns prepared by the revenue_agent and the returns prepared by the revenue_agent had never been accepted by the commissioner see taylor sec inc v commissioner supra pincite the board stated here the question is whether the petitioner by filing returns after the respondent made his determination of deficiencies under the circumstances presented relieved itself of the adverse condition in which it was situated by reason of section and is entitled to the benefits to which it would otherwise have been entitled by the timely filing of returns in our opinion it may not we are unable to conclude that in enacting section supra it was the intention of congress that delinquent returns filed by a foreign_corporation after the respondent’s determination should constitute the returns required as a prerequisite to the allowance of the credits and deductions ordinarily allowable to the corporations by section the allowance to foreign_corporations of the credits and deductions ordinarily allowable is specifically predicated upon such corporations filing returns in view of such a specific prerequisite it is inconceivable that congress contemplated by that section that taxpayers could wait indefinitely to file returns and eventually when the respondent determined deficiencies against them they could then by filing returns obtain all the benefits to which they would have been entitled if their returns had been timely filed such a construction would put a premium on evasion since a taxpayer would have nothing to lose by not filing a return as required by statute id pincite f ardbern blenheim one year later the board decided 41_bta_910 and 42_bta_1248 in ardbern the taxpayer was a foreign_corporation that attempted to file federal_income_tax returns for through in date the taxpayer tendered those returns to the commissioner’s revenue_agent but the agent refused to accept them believing that the returns had to be filed with the collector of internal revenue at baltimore maryland the agent did not inform the taxpayer how to file those returns properly on date the commissioner issued a notice_of_deficiency to the taxpayer for the years in question and days later prepared substitute returns for the taxpayer on date the taxpayer petitioned the board with respect to the matter and the commissioner answered that petition on date on date the taxpayer filed its through federal_income_tax returns with the collector of internal revenue at baltimore maryland claiming deductions and reporting no tax due the board applied taylor sec inc v commissioner supra and sustained the commissioner’s disallowance of deductions the board stated petitioner did not by the lodgment of returns with the revenue_agent discharge the duty which the statute laid upon it also the action of petitioner in filing returns with the collector at baltimore on date was ineffective to bring it within the limitations of the statute so as to entitle it to the benefit of deductions these returns were filed a after respondent had determined the deficiencies and prepared returns for petitioner under section of the revised statutes as amended and b after the petition and answer had been filed and the case was at issue before the board and only approximately two and one-half months prior to the hearing returns filed under such circumstances do not meet the requirements of section 40_bta_696 on the point under discussion the facts of the instant proceeding are not distinguishable in any material respect from those of the taylor case on authority of that decision and for the reasons therein stated which need not be repeated here respondent’s action in computing the present deficiencies without the allowance of deductions is approved ardbern co v commissioner b t a pincite upon appeal the court_of_appeals for the fourth circuit modified and remanded the board’s decision on the authority of 38_bta_711 the court stated fair dealing between the government and a taxpayer would require the agent to whom the returns were improperly tendered for filing to advise the taxpayer as to the official and place where the returns should be filed here the agent muller rejected the returns on the sole ground that they were improperly executed and did not notify the taxpayer that the returns could in no event be filed with him soon after the refusal to accept the returns the deficiency was determined against the taxpayer it is conceded that if the return which taxpayer attempted to file before muller in date had been properly filed before the collector at baltimore taxpayer would have been entitled to the deductions claimed which represented expense incurred in connection with the earning of the income taxed the deductions are denied merely because they were not claimed in a return properly filed until after the deficiency assessment had been made against taxpayer upon a return filed for him by the commissioner in which no deductions were allowed we think however that when return was filed by the commissioner for the taxpayer he should have given him the benefit of proper deductions for expense of doing business of which he had been notified by the return which taxpayer had attempted to file with his agent or at least that taxpayer should be allowed such deductions when upon the assessment of a deficiency against him he shows that prior to its assessment he attempted in good_faith to file a return in which such deductions were claimed this is nothing but elementary justice and we find nothing in the statute which forbids it the return made by the commissioner was clearly not based upon the best available information while there is a specific penalty of per centum fixed for failure_to_file tax returns sec_291 revenue act of there is no provision that there shall be an added penalty in the form of not allowing the delinquent taxpayer deductions to which it otherwise would be entitled the board held in anglo-american direct tea trading co v commissioner b t a inasmuch as separate sections deal with manner and time we think it highly improbable that congress ever intended to include the element of time in the section dealing primarily with the manner of filing we hold therefore that the mere fact the return was not filed within the time prescribed by section does not under the circumstances here presented preclude the allowance of deductions claimed ardbern co v commissioner f 2d pincite the board also followed 40_bta_696 in 42_bta_1248 there the taxpayer was a foreign_corporation that on date filed a personal_holding_company return form 1120h reporting income consisting only of dividends received from domestic corporations the commissioner learned that the taxpayer had not filed a corporate_income_tax return form_1120 for that year and asked the taxpayer to do so the taxpayer declined on date the commissioner prepared a substitute return for the taxpayer and on date issued to it a notice_of_deficiency on date the taxpayer filed a form_1120 for the board held that the filing of form 1120h did not satisfy the requirements of section of the and revenue acts because the personal_holding_company surtax was separate and distinct from the corporate_income_tax id pincite2 as to the form_1120 filed by the taxpayer for the board stated undoubtedly a taxpayer may litigate a determination of respondent on the basis of a return made by the commissioner but a return filed by a taxpayer after such a return has been prepared and filed for him by respondent under the circumstances existing here is a nullity and does not comply with section supra the taxpayer can not thus take advantage from an alleged return submitted by the taxpayer not only after respondent’s filing of its return but also after the issuance of a notice_of_deficiency 40_bta_696 id pincite on appeal the court_of_appeals for the fourth circuit affirmed the court first quoted section of the and revenue acts and then stated with respect thereto it is true that this section contains no reference to a time element blenheim co v commissioner f 2d pincite the court then noted that section of the and revenue acts applied only to foreign_corporations and explained that congress intended to impose special conditions on foreign_corporations vis-a-vis domestic corporations the court stated the difficulty here encountered by the commissioner in attempting to ascertain the petitioner’s correct income_tax is a striking example of the many administrative problems inherent in the application of the federal_income_tax to foreign_corporations this has prompted congress to impose special conditions on such corporations indeed unless a foreign_corporation is induced voluntarily to advise the commissioner of all of its income attributable to sources within the united_states and of the exact nature of all deductions from such income the commissioner may never learn even of the corporation’s existence and in any event he will probably be unable to determine the correct amount of its taxable_income the situation is pregnant with possibilities of tax_evasion in express recognition of this fertile danger to the orderly administration of the income_tax as applied to foreign_corporations congress conditioned its grant of deductions upon the timely filing of true proper and complete returns this is in addition of course to the penalty provided by sec_291 of the act for both foreign and domestic corporations which either file no return or a late return unless reasonable_cause for the failure_to_file a timely return is shown id pincite as to the terminal date that the board had adopted in taylor sec inc v commissioner supra the court_of_appeals for the fourth circuit explained that this date was justified notwithstanding the absence in the statute of a time element the court stated the conclusion that the preparation of a return by the commissioner a reasonable_time after the date it was due terminates the period in which the taxpayer may enjoy the privilege of receiving deductions by filing its own return is consistent not only with the intention of congress but also with considerations of sound administrative procedure and the generally accepted rule concerning the number of returns which may be filed this terminal date which the board_of_tax_appeals first adopted in 40_bta_696 is directed against those foreign_corporations which instead of being induced voluntarily to advise the commissioner of their domestic operations might find their interests best served by filing no return whatever and then waiting until such time if any as the commissioner discovers their existence and acquires sufficient information about their income on which to base a return unless they are precluded from then obtaining the deductions and credits under such circumstances such foreign_corporation can if detected come in for the first time after the commissioner has made a return and suffer no economic loss other than the general late filing penalty which applies to domestic as well as foreign_corporations without prescribing an absolute and rigid rule that whenever the commissioner files a return for a foreign_corporation the taxpayer is completely and automatically denied the benefit of deductions or credits we yet hold that the facts of the instant case justify a disallowance of deductions which petitioner might otherwise have been entitled to claim had it filed a timely return in compliance with the statutory requirement blenheim co v commissioner f 2d pincite the court_of_appeals for the fourth circuit also found in the legislative_history of sec_217 of the revenue act of further support for that conclusion and its reading of the statute to the effect that a foreign_corporation was entitled to deduct its expenses upon the filing of an accurate and complete return it will thus be noted that section relating to foreign_corporations which made its first appearance in the revenue act of u s c a int rev acts page is almost verbally identical with this section governing nonresident_aliens which has been a part of the revenue laws since the application of sec_217 of the act is clear from the outset the treasury regulations have expressly provided that no deductions were allowable to nonresident_aliens unless an accurate and complete return was filed and the filing of the return by the commissioner fixed the tax_liability the foregoing regulation article of sec_45 states specifically that deductions are allowable to a nonresident_alien only if a return is filed and if no return has been filed at the time the commissioner prepares a return for the taxpayer the tax shall be assessed with no allowance for deductions congress may be presumed to have adopted this longstanding administrative construction when it enacted and reenacted section 280_us_327 50_sct_115 74_led_457 309_us_78 60_sct_424 84_led_585 id pincite the court_of_appeals for the fourth circuit distinguished its holding in 120_f2d_424 4th cir stating a substantially different factual situation is presented in the case before us here the commissioner prepared a return only after he had unsuccessfully made repeated requests to the taxpayer to do so and only after the taxpayer had flouted all of these requests then after the commissioner had assessed a deficiency on the basis of his return but only then the petitioner filed its petition for review by the board and also a return unless the deductions are here denied section will become a meaningless provision for if after the commissioner has earnestly attempted to obtain a return by the taxpayer and has waited a reasonable_time before filing his own return the taxpayer may still enjoy the privilege of all deductions and credits there is then no inducement to foreign_corporations voluntarily to file timely returns in the absence of demonstrable fraud they will by self-serving uncooperative conduct suffer no loss other than the general late filing penalty which is applicable to domestic as well as foreign_corporations such a construction of the statute would put a premium on tax_evasion and would reduce the administration of the tax laws to mere idle activity id pincite g georday enters in 126_f2d_384 4th cir affg a memorandum opinion of the board_of_tax_appeals a companion case to 125_f2d_906 4th cir the court_of_appeals for the fourth circuit affirmed the board’s denial of deductions under section of the and revenue acts the court noted that the case for the disallowance was even stronger than in blenheim because the taxpayer did not attempt to file a return voluntarily until after a petition had been filed with the board the court stated on the issues of the timeliness of georday’s federal_income_tax return and the imposition of a penalty our decision in the blenheim case is determinative the case for disallowance of georday’s deductions is even stronger here because georday failed to file a return voluntarily not only after a return had been filed for it by the commissioner and after a deficiency letter had been sent to it but even after a petition to the board had been filed in point of time georday filed its return more than five years after the date on which it was due georday therefore clearly failed to file its return within the reasonable terminal period prescribed in the blenheim case and is now precluded from obtaining the benefits of any deductions it might have otherwise been entitled to claim had it filed a timely return georday enters v commissioner supra pincite h espinosa while each of the previously discussed cases dealt with the applicability of former section to a foreign_corporation 107_tc_146 involved the applicability of sec_874 to a nonresident_alien taxpayer in espinosa the commissioner had mailed a letter to the taxpayer on date asking him if he had filed returns and if he had not instructing him to file returns or otherwise respond the letter stated that the commissioner would file substitute returns for the taxpayer if the taxpayer did not respond by date on date the taxpayer had not yet responded and the commissioner wrote the taxpayer a second request adding that your tax_liability will be determined based on the information we have if the taxpayer did not respond within days on date after the taxpayer had again failed to respond the commissioner notified the taxpayer that the commissioner had filed substitute returns for the taxpayer for through on date the commissioner notified the taxpayer that the substitute returns had been computed the terminal period prescribed in the blenheim case emphasis added is the point where the commissioner prepared a substitute return for the taxpayer without the benefit of any deductions on date the taxpayer submitted federal_income_tax returns for through apparently these returns were never filed by the commissioner the returns reported net losses from rental properties located in the united_states on date the commissioner issued a notice_of_deficiency to the taxpayer for through the commissioner determined in the notice_of_deficiency that the taxpayer was liable for deficiencies and additions to tax as ascertained from the substitute returns pursuant to sec_874 the commissioner did not allow the taxpayer to deduct any of his related expensesdollar_figure this court upheld the commissioner’s determination deciding that a nonresident_alien may not avoid the sanctions of sec_874 by filing returns after the commissioner has prepared returns for the taxpayer but before the commissioner has issued a notice_of_deficiency see espinosa v commissioner supra pincite the court noted that the commissioner before preparing the substitute returns had informed the taxpayer that he had not filed a federal_income_tax return and had given him a reasonable_time to do so id pincite although the commissioner in the notice_of_deficiency had characterized the taxpayer’s rental income as effectively_connected_income the court was careful to note that neither party in that case had questioned whether the taxpayer had made a valid election to support that characterization see 107_tc_146 respondent argues in this case that the court in espinosa v commissioner supra pincite interpreted 38_bta_711 to hold solely that a foreign corporation’s or nonresident alien’s filing of a federal_income_tax return after the due_date set forth in sec_6072 and its predecessors is not the only factor to consider in determining whether the corporation or alien is entitled to deduct its expenses we disagree the court in espinosa on the referenced page made the following observation as to anglo-am direct tea trading co while a terminal date does exist after which a foreign_corporation or nonresident_alien can no longer claim the benefit of deductions by filing a federal_income_tax return the timely filing_requirements of sec_6072 are not determinative as to whether a taxpayer the corporation or alien is entitled to the benefit of deductions the court in espinosa did not limit anglo-am direct tea trading co to that observation or to any other point in fact as the board explained its holding in anglo-am direct tea trading co shortly after rendering it in the anglo-american co case it was held that the phrase in section of the revenue acts of and in the manner prescribed in this title did not mean within the time prescribed in the titles of the respective acts and the allowance of the credits and deductions otherwise allowable by such acts was not dependent under section on the filing of returns within the time prescribed by said acts taylor sec inc v commissioner b t a pincite accord am inv and gen trust co v commissioner a memorandum opinion of the board_of_tax_appeals dated date mills spence co v commissioner a memorandum opinion of the board_of_tax_appeals dated date in addition the court_of_appeals for the fourth circuit in ardbern co v commissioner f 2d pincite quoted and applied favorably the following holding from anglo-am direct tea trading co in deciding for the taxpayer inasmuch as separate sections deal with manner and time we think it highly improbable that congress ever intended to include the element of time in the section dealing primarily with the manner of filing we hold therefore that the mere fact the return was not filed within the time prescribed by section does not under the circumstances here presented preclude the allowance of deductions claimed i inverworld inc in inverworld inc v commissioner tcmemo_1996_301 the taxpayer was a foreign_corporation that had not as of the time of trial filed a federal_income_tax return for any of the relevant years all of those years predated the effective date of the disputed regulations see discussion infra p the taxpayer noted that the applicable regulations had been issued in and that those regulations did not contain a timely filing requirement the taxpayer argued that such a requirement was therefore not applicable to the relevant years the court did not decide that argument instead the court applied the opinions of the court_of_appeals for the fourth circuit in 125_f2d_906 4th cir and ardbern co v commissioner supra and held that sec_882 applied to deny the taxpayer the benefit of any deductions for those years because the taxpayer had never filed a return vii regulations interpreting sec_882 and its predecessors a background the secretary never issued regulations interpreting former section since the enactment of sec_882 of the code the secretary has issued four sets of regulations interpreting the relevant text of that section the first set of regulations was issued in regulations and was amended in through the second set of regulations regulations which contain the disputed regulations the third set of regulations was issued in temporary regulations as temporary regulations amending a portion of the regulations the fourth set of regulations was issued in regulations and finalized the temporary regulationsdollar_figure in addition to the three sets of regulations that were issued after the regulations the secretary in issued one other set of regulations regulations that pertained to the regulations see t d 1981_1_cb_390 the regulations amended the regulations by adding a new paragraph c the substance of which is now reflected in sec_1_882-4 income_tax regs because the regulations relate to a subject that is not relevant to our analysis we make no further reference to them b regulations on date the secretary filed in the federal_register the regulations interpreting sec_882 of the code see sec_1_882-4 income_tax regs fed reg date according to those regulations sec_882 of the code pertained to resident corporations ie corporations with a trade_or_business in the united_states and such a corporation could deduct its expenses only if it filed a true and accurate federal_income_tax return in accordance with sec_6012 and the regulations thereunder the regulations stated that a foreign_corporation would be taxed on its gross_income without the benefit of any deductions if it did not so file such a return the regulations did not require that the required return be filed by a set time nor did the regulations state that the relevant text included a timely filing requirement the regulations stated in relevant part sec_1_882-4 allowance of deductions to foreign_corporations -- b resident foreign_corporations -- return necessary a resident foreign_corporation shall receive the benefit of the deductions allowed to it with respect to the income_tax only if it files or causes to be filed with the district_director in accordance with sec_6012 and the regulations thereunder a true and accurate return of its total income received from all sources within the united_states tax on gross_income if a return is not so filed the tax shall be collected on the basis of gross_income determined in accordance with sec_1_882-1 but without regard to any deductions otherwise allowable c regulations on date the secretary issued the regulations to amend sec_1_882-4 income_tax regs as adopted in see sec_1_882-4 income_tax regs fed reg date t d 1990_2_cb_172 the amendments were first published as proposed_regulations see sec_1_882-4 proposed income_tax regs fed reg date in the preamble to the proposed_regulations the secretary explained since the filing of a timely return is one of the requirements set forth in subtitle f these regulations provide that otherwise allowable deductions and credits will be allowed only if a return is filed by the time limits as set forth in these regulations id as finalized the regulations became effective date for taxable years ended after that date see sec_1_882-4 income_tax regs supra t d c b pincite the regulations added to the regulations a general requirement that a foreign_corporation file its federal_income_tax return timely ie generally before the 18-month deadline in order to deduct its expenses for the year covered by the return as respondent asserts in brief a timely filing requirement was added because when anglo-american and its progeny were decided the scale and nature of international business activity was markedly different from today’s modern business environment at that time international travel was a time-consuming and cumbersome endeavor transatlantic air travel was in its infancy zeppelins and cruise ships were the predominant means of travel books_and_records were in paper not electronic form data and information was transmitted via mail in the years since anglo-american there have been dramatic changes and increases in the nature and level of international business activity international air travel is commonplace taking hours instead of days books_and_records are now maintained in electronic form on computers data information and money are transmitted around the world in electronic form businesses have instantaneous access to information via the internet documents are delivered via overnight delivery or by facsimile sec_1_882-4 income_tax regs as amended in states return necessary a foreign_corporation shall receive the benefit of the deductions and credits otherwise allowed to it with respect to the income_tax only if it timely files or causes to be filed with the philadelphia service_center in the manner prescribed in subtitle f a true and accurate return of its taxable_income which is effectively connected or treated as effectively connected for the taxable_year with the conduct_of_a_trade_or_business in the united_states by that corporation sec_1_882-4 income_tax regs as amended in goes on to set forth filing deadlines by which to measure whether the timely filing requirement has been met see supra note sec_1_882-4 income_tax regs as amended in also states without further explanation that the filing deadlines set forth in paragraph a i of this section may be waived by the district_director or assistant_commissioner international in rare and unusual circumstances if good cause for such waiver based on the facts and circumstances is established by the foreign_corporation as to the inclusion of the timely filing requirement the preamble to the regulations states in relevant part commentators questioned the validity of the filing deadlines as set forth in the proposed_regulations the filing deadlines were not eliminated in the final regulations however since the statute clearly provides for the denial of deductions and credits if returns are not filed in a timely manner this requirement is justified because of different administrative and compliance concerns with regard to nonresident_alien individuals and foreign_corporations t d supra c b pincite fed reg date among the referenced commentators was the american bar association section of taxation abast see letter from holden chair section of taxation american bar association section of taxation date reprinted in tnt date the abast commented that the timely filing requirement was inconsistent with sec_882 and supported that comment by citing 38_bta_711 125_f2d_906 4th cir 120_f2d_424 4th cir and 126_f2d_384 4th cir all of which the abast stated rejected such a requirement see letter from holden supra the abast also observed that there had been almost countless tax bills over the past years including recodifications in and and concluded that congress must have acquiesced in the interpretation set forth in those cases id d temporary regulations on date the secretary filed with the federal_register the temporary regulations consisting of sec_1_882-4t a ii iii and iv temporary income_tax regs fed reg date these temporary regulations amended the waiver standard prescribed in sec_1_882-4 income_tax regs as amended in and listed examples of the amended standard the temporary regulations were effective for open years for which a request for a waiver was filed on or after date e regulations on date the secretary replaced the temporary regulations with the regulations see fed reg date the regulations allow the commissioner to waive the 18-month deadline prescribed in the regulations if the foreign_corporation establishes to the satisfaction of the commissioner or his or her delegate that the corporation based on the facts and circumstances acted reasonably and in good_faith in failing to file a u s income_tax return sec_1_882-4 income_tax regs sec_1_882-4 and iii income_tax regs as finalized in the regulations is effective for open years for which a request for a waiver is filed on or after date see sec_1_882-4 income_tax regs in the case of the subject returns the 18-month deadlines are date and respectively ie months after the 15th day of the sixth month after the close of the taxable_year viii secretary’s authority to issue regulations the secretary may issue two types of regulations see 115_tc_1 84_tc_789 see also e i dupont de nemours co v commission41_f3d_130 3d cir affg 102_tc_1 the first type legislative regulations are issued pursuant to a specific delegation from congress to the secretary the second type interpretative regulations are issued under the general authority vested in the secretary under sec_7805 respondent acknowledges that the disputed regulations are interpretative regulations sec_7805 reflects a broad delegation of general authority from congress to the secretary to prescribe all needful rules and regulations for the enforcement of the internal_revenue_code see 389_us_299 the authority delegated to the secretary however is not limitless and if exercised improperly may usurp the role of congress as the legislator in our system of government the secretary’s authority to issue regulations is not the power to make law it is the power to carry into effect the will of congress as expressed in the statute under which the regulations are prescribed see 297_us_129 when a statute’s provisions are unambiguous and its directive is specific the secretary has no power to amend that statute by regulation see 298_us_441 ix this court’s review of an interpretative_regulation this court is empowered to invalidate a regulation that exceeds the authority of the secretary to issue it see eg 89_tc_165 estate of pullin v commissioner supra stephenson trust v commissioner 81_tc_283 78_tc_523 washington v commissioner 77_tc_656 affd 692_f2d_128 d c cir when this court reviews an interpretative federal tax regulation we generally apply the analysis set forth by the supreme court in natl muffler dealers association v united_states 440_us_472 dollar_figure see eg 119_tc_44 115_tc_589 113_tc_309 under natl muffler which like the present case involved an interpretative_regulation issued under sec_7805 an interpretative_regulation is valid if it implements a congressional mandate in a reasonable mannerdollar_figure see natl muffler dealers association v united_states supra pincite- citing 411_us_546 united_states v correll supra pincite see also 532_us_200 507_us_546 452_us_247 we must defer to a federal tax regulation that is reasonable under this standard cf 533_us_218 517_us_735 a task force of the american bar association has recently concluded likewise that the supreme court primarily reviews interpretative federal tax regulations under the analysis set forth in natl muffler dealers association v united_states 440_us_472 see salem et al aba section of taxn report of the task force on judicial deference tax note sec_1231 legislative regulations by contrast are upheld unless arbitrary capricious or manifestly contrary to the statute 467_us_837 an interpretative federal tax regulation is reasonable under natl muffler dealers association v united_states supra only if it harmonizes with the plain language of the statute its origin and its purpose id pincite see also 455_us_16 for this purpose a regulation may have particular force if it is a substantially contemporaneous construction of the statute by those presumed to have been aware of congressional intent if the regulation dates from a later period the manner in which it evolved merits inquiry other relevant considerations are the length of time the regulation has been in effect the reliance placed on it the consistency of the commissioner’s interpretation and the degree of scrutiny congress has devoted to the regulation during subsequent re-enactments of the statute natl muffler dealers association v united_states supra pincite following its decision in natl muffler dealers association v united_states supra the supreme court decided 467_us_837 there the supreme court stated when a court reviews an agency’s construction of the statute which it administers it is confronted with two questions first always is the question whether congress has directly spoken to the precise question at issue if the intent of congress is clear that is the end of the matter for the court as well as the agency must give effect to the unambiguously expressed intent of congress if however the court determines congress has not directly addressed the precise question at issue the court does not simply impose its own construction on the statute as would be necessary in the absence of an administrative interpretation rather if the statute is silent or ambiguous with respect to the specific issue the question for the court is whether the agency’s answer is based on a permissible construction of the statute the judiciary is the final authority on issues of statutory construction and must reject administrative constructions which are contrary to clear congressional intent if a court employing traditional tools of statutory construction ascertains that congress had an intention on the precise question at issue that intention is the law and must be given effect id pincite some fn refs omitted citations omitted the question arises from the timing of these two decisions whether the supreme court intended for chevron u s a inc v natural res def council inc supra to replace natl muffler dealers association v united_states supra in the review of a federal tax regulation we have previously stated with respect to that question we are inclined to the view that the impact of the traditional ie national muffler standard has not been changed by chevron but has merely been restated in a practical two-part test with possibly subtle distinctions as to the role of legislative_history and the degree of deference to be accorded to a regulation 104_tc_384 see also id pincite discussing the review of federal tax regulations under natl muffler in relation to chevron cf e i dupont de nemours co v commission41_f3d_130 3d cir questioning whether chevron applies to interpretative federal tax regulations here we conclude likewise that we need not parse the semantics of the two tests to discern any substantive difference between them while we apply a natl muffler analysis our result under a chevron analysis would be the same x review of the disputed regulations a overview we conclude that the timely filing requirement in the disputed regulations does not harmonize with the plain language origin or purpose of the relevant text of sec_882 a plain reading of the relevant text in the context of the internal_revenue_code shows that the text includes no timely filing requirement where as here the secretary has prescribed a regulation that is inconsistent with the plain meaning of a statute the regulation is invalid and any deference to the secretary’s interpretation of that statute under natl muffler dealers association v united_states 440_us_472 is unwarranted such is especially so where as here the disputed regulations also are unreasonable under an analysis of natl muffler dealers association v united_states supra pincite b plain meaning of the relevant text we begin our analysis of the relevant text with the words used therein we apply the plain meaning of the words used in a statute unless we find that a word’s plain meaning is ambiguous see 469_us_70 n see also 337_us_55 when interpreting a statute t he judiciary is the final authority on issues of statutory construction chevron u s a inc v natural res def council inc supra pincite n see also 390_us_261 ftc v colgate-palmolive co 380_us_374 we agree with the holdings in 38_bta_711 and its progeny that the plain meaning of the word manner as used in the relevant text does not include an element of time for purposes of our federal tax system congress has consistently used the word time together with the word manner when it intended to include the meanings of both words in a single taxing section in the revenue act of for example from which section emanated congress used both words in sec_115 and sec_291 the former section addressed the situation where a corporation cancels or redeems its stock at such time and in such manner as to make the distribution and cancellation or redemption in whole or in part essentially equivalent to the distribution of a taxable dividend revenue act of ch sec_115 45_stat_822 the latter section provided that additions to tax for failure_to_file a tax_return shall be collected at the same time and in the same manner and as part of the tax revenue act of ch sec_291 45_stat_857 in the code when the relevant text was first codified congress again used the words time and manner together when it intended to include the meanings of both words in a single statutory provision see eg code sec_55 and d b g b b c b b d d c b c a b e b a many of those instances applied specifically to the time and manner of the filing of a return see eg code secs b and b the return required of the executor under subsection a shall be filed at such times and in such manner as may be required by regulations made pursuant to law such returns shall contain such information and be made at such times and in such manner as the commissioner with the approval of the secretary may by regulations prescribe same language a same language same language b same language see also code secs stating the specific time by which a return must be filed and that the return shall contain such information and be made in such manner as the commissioner with the approval of the secretary may by regulations prescribe similar language similar language in the code when congress recodified the relevant text with a reference to subtitle f congress continued to use the words time and manner together to express its intent to include both meanings in a single provision see eg code sec_6033 sec_6036 sec_6081 sec_6103 and d b a a and b c b b b for instances where congress upon enactment of the code used both words in a single provision in subtitle f then sec_6001 through congress did likewise in the foreign investors tax act of when it legislated as to sec_882 and in the 1986_code when it recodified the relevant text a second time as to the former legislation see eg secs as amended by the foreign investors tax act of d d as to the latter legislation see eg 1986_code sec_6033 sec_6036 sec_6038 sec_6038a sec_6038b sec_6039c sec_6039d and c 6039f a d b 6050a a 6050k a c c b c f a and b and p a a a b b a a a and b i c 6324a a for instances where congress upon enactment of the 1986_code used both words in a single provision in subtitle f then sec_6001 through see also 1986_code sec_6039 stating the specific time by which a written_statement must be furnished in such manner and setting forth such information as the secretary may by regulations prescribe we believe that congress acted intentionally and purposely when it included both time and manner in single sections of the referenced statutes but omitted the word time in favor of only the word manner in other single sections of those statutes eg as in sec_882 and its predecessors see 511_us_531 chicago v envtl def fund 511_us_328 508_us_200 464_us_16 in construing a statute we must give a definite meaning to every word and expression found therein 64_us_66 57_us_610 and we must shy away from interpreting a statute in a way that would render any part of it redundant or surplusage see 99_us_48 see 529_us_848 348_us_528 see also 349_us_232 in applying the traditional rules of statutory construction a court should assume that congress uses language in a consistent manner unless otherwise indicated such is especially so where as here we understand congress’s use of the word manner in the referenced code sections as giving context to that word we understand that use to refer to items of information and not to refer to the time for the filing of a return or the furnishing of any other document we conclude that congress by using only the word manner in sec_882 did not intend to include in that provision any element of timedollar_figure nor do we believe that congress intended for the word manner in that situation to have a flexible definition to be prescribed by the secretary in order to carry out the text’s general purpose as was the case in chevron u s a inc v natural res def council inc u s pincite instead we believe that the word manner when used in the relevant text was intended by congress to have only the single definition that we decide herein respondent requests that we defer to the secretary’s interpretation of the word manner to include a timely filing requirement we decline to do so because we find the meaning of the word manner as used in sec_882 to be plain and unambiguous any deference that we would otherwise accord to the secretary’s interpretation of the word manner is unwarranteddollar_figure in fact as to the 18-month period set forth in the regulations it is not only arbitrary but without any statutory basis at all as we understand the secretary’s formation of that period it corresponds to year after the 6-month extended due_date of the return see t d 1990_2_cb_172 fed reg date see also sec_6081 generally allowing the secretary to grant extensions of up to months where that 1-year rule came from we do not know a term is ambiguous if it is ‘capable of being understood in two or more possible senses or ways’ 534_us_84 quoting webster’s ninth new collegiate dictionary although the disputed regulations are contrary to our construction of the text as is the construction of the relevant text by respondent we do not believe that these contrary interpretations mean that continued see 278_us_269 147_us_661 105_us_691 see also 523_us_382 deference is especially unwarranted where as here the secretary’s construction of the relevant text does not fill in a gap left open by the statute as to a timeliness requirement but simply adopts respondent’s unsuccessful litigating position with total disregard to firmly established judicial precedent and adds an continued the relevant text as of the issuance of the disputed regulations was reasonably capable of being understood in two or more senses or ways the treasury_department was not the first authoritative body to have interpreted the relevant text that text had previously been construed on a number of occasions by both the court_of_appeals for the fourth circuit and the board in addition contemporaneous to the seminal interpretation of the relevant text in 38_bta_711 congress codified the text in the code without any significant change from the text construed by the board in anglo-am direct tea trading co then after both the court_of_appeals for the fourth circuit and the board had repeatedly and consistently construed the relevant text as not including a timely filing requirement congress recodified the relevant text in the and codes again without any significant change given the multiple legislative reenactments of the relevant text and the consistent and unanimous prior interpretations of that text by the court_of_appeals for the fourth circuit and the board we do not believe that the relevant text as of the time of the disputed regulations was reasonably capable of being understood in the sense advocated by respondent and adopted by the secretary in the form of the disputed regulations we include the board in our references to the judiciary although the board was established as an independent agency in the executive branch of the government revenue act of ch continued impermissible restriction to the statutedollar_figure the functional reasons for deference to agencies ie the agencies’ expertise and experience do not carry the same force when interpreting the word manner for purposes of the relevant text the judiciary has enough expertise and experience to ascertain congressional intent with respect to that word and any deference that is owed to the secretary does not mean that the judiciary as a matter of course should simply ratify an unauthorized assumption by the secretary of major policy decisions properly made by congress eg here a foreign corporation’s forfeiture of deductions absent its filing of a timely tax returndollar_figure cf estate of continued sec a k 43_stat_336 the court_of_appeals for the third circuit has noted that the board for all practical purposes was a judicial tribunal operating in the federal judicial system 215_f2d_701 3d cir revg on other grounds 21_tc_155 the improper addition to the statute is easily seen by comparing sec_882 with sec_1_882-4 income_tax regs as amended in the two sections are essentially the same except that the regulation includes the word timely respondent has not explained why sec_1_882-4 income_tax regs as amended in stated that a return must be filed both timely and in the manner prescribed in section f if as he argues the concept of time is subsumed within the statutory phrase in the manner prescribed in subtitle f absent a clear expression of legislative intent we believe it unreasonable to conclude as did the secretary in the disputed regulations that congress intended for a foreign_corporation to forfeit any deduction of its otherwise deductible ordinary and necessary business_expenses simply because it filed its tax_return untimely cf s rept 89th cong 2d sess 1966_2_cb_1059 noting as to continued applebaum v commissioner 724_f2d_375 3d cir adams j concurring affg tcmemo_1982_278 courts are not obliged to stand aside and rubber-stamp their affirmance of administrative decisions that they deem inconsistent with a statutory mandate or that frustrate the congressional policy underlying a statute nlrb v brown 380_us_278 accord fec v democratic senatorial campaign comm 454_us_27 c application of natl muffler we also conclude that the secretary’s interpretation of a timely filing requirement is unreasonable under an analysis of the considerations discussed in natl muffler dealers association v united_states u s pincite that case requires that we take into account the following considerations whether the regulation is a substantially contemporaneous construction of the statute by those presumed to have been aware of congressional intent the manner in which a regulation dating from a later period evolved the length of time that the regulation has been in effect the reliance placed upon the regulation the consistency of the secretary’s interpretation and continued nonresident_aliens owning property in the united_states that their allocable deductions may be relatively large and that not allowing such deductions may result in quite heavy tax burdens the degree of scrutiny congress has devoted to the regulation during subsequent reenactments of the statute id our analysis of these considerations reinforces our conclusion that the disputed regulations are invalid the regulations were issued in years after the relevant text was enacted and years after the enactment of the parallel provision of sec_217 of the revenue act of thus the disputed regulations are not a substantially contemporaneous construction of the statute by those presumed to have been aware of congressional intent id pincite we therefore inquire into the manner in which the disputed regulations evolved see id the disputed regulations were issued after both the court_of_appeals for the fourth circuit and the board had repeatedly and consistently held that the relevant text did not include a timely filing requirementdollar_figure the regulations also were issued after multiple reenactments of the relevant text none of which altered the judiciary’s construction of the text and merely adopted respondent’s unsuccessful litigating position the secretary’s statement accompanying the issuance of the disputed regulations the relevant meaning that we distill from the referenced cases of the court_of_appeals for the fourth circuit and the board is twofold first a foreign_corporation must file a tax_return in order to deduct its expenses second the commissioner’s preparation of a substitute return for the corporation is generally considered to be the corporation’s return for federal_income_tax purposes and divests the taxpayer of its entitlement to file a return for itself the statute clearly provides for the denial of deductions and credits if returns are not filed in a timely manner see preamble of t d c b pincite flies in the face of the judiciary’s prior holdings that the relevant text does not include a timely filing requirement and the like interpretation by the abast and the other commentators referenced in the preamble to the regulationsdollar_figure the secretary’s statement is even a departure from his previous interpretation set forth in the regulationsdollar_figure the regulations make no mention of a timely filing requirement but allow a resident foreign_corporation to deduct its expenses if it files a true and accurate federal_income_tax return in accordance with sec_6012 and the regulations thereunder we also note as to our analysis under natl muffler dealers association v united_states supra that the disputed regulations had only been in effect for approximately years as of the first year in issue in fact if anything is clear it is that the statute does not contain any time requirement and that the secretary’s inclusion of one in the disputed regulations is ultra vires of course the mere fact that the secretary has changed his interpretation of a statutory term does not necessarily mean that the latter interpretation is invalid see chevron u s a inc v natural res def council inc u s pincite 465_us_330 courts should accord considerably less deference however to an agency’s statutory interpretation that conflicts with the agency’s previous interpretation of the same statute see 501_us_680 ins v cardoza-fonseca 480_us_421 ndollar_figure as to the remaining two considerations ie the degree of scrutiny that congress has devoted to the regulation in question during subsequent reenactments of the statute and the reliance placed on that regulation these considerations also do not support the secretary’s issuance of the disputed regulations as to the former sec_882 has not been amended since the issuance of the disputed regulations as to the latter petitioner obviously did not rely upon the disputed regulations when it filed the subject returns untimely in fact the record before us persuades us that petitioner filed those returns relying on the belief that it would be taxed on the same taxable base as that of a domestic_corporation ie gross_income less deductions given the relevant text its legislative_history the regulations and the longstanding judicial precedents we have no doubt that taxpayers and their advisers would have reasonably concluded immediately before the issuance of the disputed regulations that the relevant text did not include a timely filing requirement and would have reasonably concluded upon the issuance of those regulations that such issuance was an unreasonable attempt by the secretary to circumvent the firmly established legal terraindollar_figure in fact as to petitioner it did almost everything that congress envisioned as to foreign we have found no authority nor has respondent cited any to support respondent’s position that the relevant text contains a timely filing requirement taxpayers and their investment in real_property in the united_states petitioner invested in the u s real_estate and voluntarily filed federal_income_tax returns reporting that income net of the expenses related thereto for sake of completeness we also note the legislative reenactment doctrine under that doctrine congress is presumed to have known of the administrative and judicial interpretations of a statutory term reenacted without significant change and to have ratified and included that interpretation in the reenacted term see newark morning ledger co v united_states u s pincite 487_us_552 456_us_353 434_us_575 see also 238_f3d_603 5th cir 100_tc_124 affd without published opinion 25_f3d_1048 6th cir cf 441_us_677 it is always appropriate to assume that our elected representatives like other citizens know the law see generally 2a sands sutherland on statutory construction dollar_figure 4th ed and cases cited therein the legislative reenactment doctrine applies with vigor where congress reenacts statutory text mainly in its entirety see 5_f3d_649 3d cir or where a prior judicial interpretation of that text has been relied upon and never questioned by the judiciary as of the time of reenactment see cannon v univ of chicago supra pincite prior interpretation of a statute was repeatedly cited with approval and never questioned during the ensuing five years see also merrill lynch pierce fenner smith inc v curran supra pincite in the light of the legislative reenactment doctrine we presume that congress upon reenacting the relevant text without significant change as part of the and codes as well as part of the foreign investors tax act of was mindful of the relevant judicial interpretations and included within the reenacted text the judiciary’s interpretation that the text contains no timely filing requirementdollar_figure see dutton v wolpoff abramson supra pincite cf kovacs v commissioner supra pincite concluding by application of the legislative reenactment doctrine that congress had adopted a prior board decision when it amended sec_104 in and and when it enacted the internal revenue codes of and this presumption is further supported by considering the setting of each of the reenactments of the relevant text in fact respondent concedes that congress knows of 38_bta_711 and that it is significant that congress has never amended the relevant text after that case following its interpretation by the judiciary first when the relevant text was codified in the code that text had recently been construed in 38_bta_711 a unanimous reviewed opinion of the board as including no timely filing requirementdollar_figure second as of each of the times when the text was reenacted in the code the foreign investors tax act of and the 1986_code anglo-am direct tea trading co had been cited repeatedly favorably and without reservation by both the court_of_appeals for the fourth circuit and the board as of each of those times the court_of_appeals for the fourth circuit also had decided 125_f2d_906 4th cir which confirmed the holding of anglo-am direct tea trading co that the relevant text contained no reference to a time element and stated that congress in initially enacting the text as part of the revenue act of had adopted a longstanding administrative construction of a parallel provision to the effect that a foreign_corporation may deduct its expenses if it files a return before respondent prepares a substitute return for it we also note the legislative_history underlying the code to the effect that congress did not then believe that a timely filing requirement was included within sec_882 the code was enacted approximately months after the release of anglo-am direct tea trading co v commissioner supra while no committee report makes any mention of such a requirement the house and senate committee reports both note specifically the necessity for filing of returns by foreign_corporations in order to secure allowance of deductions see s rept 83d cong 2d sess supra pincite h rept 83d cong 2d sess supra at a246 the fact that congress was keenly aware of the foreign tax provisions when it enacted the code also is seen from its inclusion in that act of sec_6091 that section allowed the secretary to move all appeals of the issue at hand from the court_of_appeals for the fourth circuit which had decided the issue unfavorably to respondent to another circuit of his liking third as part of the foreign investors tax act of we note the substantial amendments which congress made to sec_882 in relevant part congress added a new sec_882 that among other things allowed a foreign_corporation to elect to treat real_property income as if it were effectively_connected_income a stated purpose of this legislation was to promote foreign investment in real_property located in the united_states as an inducement to such foreign investment congress intended to allow foreigners to deduct their expenses related to those investments the disputed regulations work against this intent in that the regulations deny a foreign_corporation the taking of its expenses upon the filing of an untimely return with the result that the foreign_corporation is required to pay taxes on its gross rather than net_income we know of no statutory authority under which any type of taxpayer forfeits an entitlement to deduct substantiated ordinary and necessary business_expenses simply because the taxpayer files a tax_return untimely while respondent proffers sec_882 as such authority in the case of a foreign_corporation that section does not explicitly support that proffer we also bear in mind the foreign investors tax act of 1966’s legislative_history which adds to our understanding that congress was then mindful of the interpretations set forth in anglo-am direct tea trading co v commissioner supra and its progeny the house committee report for example refers specifically to existing law states that a foreign_corporation is entitled to benefit from its deductions by filing a true and accurate return of its total income and makes no mention of a timely filing requirement see h rept 89th cong 2d sess supra pincite the senate committee report likewise makes no mention of a timely filing requirement the senate committee report on the other hand does state in a manner consistent with our view that the committee intended for sec_882 to allow a foreign_corporation to treat its real_property income as effectively_connected_income in order to deduct its expenses related to that income see s rept 89th cong 2d sess supra pincite c b pincite the senate report also expresses congress’s reluctance through the foreign investors tax act of to disallow a nonresident alien’s deductions related to his or her investment in u s real_estate because such a disallowance would tend to discourage foreign investment in u s realty s rept 89th cong 2d sess supra pincite c b pincite7 respondent acknowledges that the disputed regulations are invalid if the relevant text is unambiguous in including no timely filing requirement in contrast to the secretary’s statement in the preamble to the regulations respondent argues that the caselaw suggests that the relevant text is ambiguous respondent observes that some of this caselaw states that a foreign_corporation must file a timely return in order to benefit from its deductions respondent notes especially the court’s use of the word timely in blenheim co v commissioner supra pincite we disagree with respondent that the caselaw interprets the relevant text as including the secretary’s timely filing requirement in 125_f2d_906 4th cir the court_of_appeals for the fourth circuit did state that a foreign_corporation must file a timely return in order to deduct its expenses however the court used the word timely to mean that the foreign_corporation had to file its return before respondent prepared a substitute return for it the timely reference in that and in the other cases is to such a terminal date found not in the statute but first adopted in 40_bta_696 and subsequently followed in blenheim co v commissioner supra pincite and georday enters v commissioner f 2d at dollar_figure see also blenheim v commissioner b t a pincite preparation of a substitute return by the commissioner makes any later return prepared by the taxpayer a nullity which in turn means that the taxpayer’s later return is not a return within the meaning of former sec taylor sec inc v commissioner supra pincite board declined to conclude that congress intended that delinquent returns filed by a foreign_corporation after the respondent acknowledges that the terminal date in 40_bta_696 125_f2d_906 4th cir affg 42_bta_1248 and 126_f2d_384 4th cir was the point where the commissioner prepared a substitute return for the taxpayer the court_of_appeals for the fourth circuit stated as to this point that it is consistent with among other things the generally accepted rule concerning the number of returns which may be filed blenheim co v commissioner supra pincite while the court also stated that this point is not an absolute and rigid rule we understand that statement to mean that a foreign_corporation may in certain cases be entitled to benefit from its deductions where the commissioner has prepared a substitute return for the corporation in fact had the court_of_appeals for the fourth circuit adopted such an absolute and rigid rule in blenheim its actions would have been inconsistent with its earlier holding in 120_f2d_424 4th cir modifying and remanding 41_bta_910 that the foreign_corporation was entitled to its deductions even though the commissioner had filed substitute returns for it commissioner’s determination are returns within the meaning of former sec contrary to respondent’s assertion that the court_of_appeals for the fourth circuit and the board construed the statute to impose a timely filing requirement those tribunals in referencing the word timely were adopting a judicial limitation based on the statute’s requirement that a foreign_corporation file a tax_return in order to deduct its expenses and their conclusion that a foreign_corporation could not file such a return if a return had already been prepared for it by the commissioner d natl cable in the recent case of natl cable telecomm association v brand x internet servs u s 125_sct_2688 the supreme court decided the validity of a regulation that construed a statute inconsistently with a prior judicial interpretation the court held that a court’s prior judicial construction of a statute trumps an agency construction otherwise entitled to chevron_deference only if the prior court decision holds that its construction follows from the unambiguous terms of the statute and thus leaves no room for agency discretion id pincite the court stated only a judicial precedent holding that the statute unambiguously forecloses the agency’s interpretation and therefore contains no gap for the agency to fill displaces a conflicting agency construction id pincite the court noted that its decisions in 516_us_284 502_us_527 and 497_us_116 allow a court’s prior interpretation of a statute to override an agency’s interpretation only if the relevant court decision held the statute unambiguous natl cable telecomm association v brand x internet servs supra at s ct pincite given that the supreme court has historically reviewed federal tax regulations primarily under the reasonableness test of natl muffler dealers association v united_states 440_us_472 the question arises whether natl cable telecomm association v brand x internet servs supra which neither cited natl muffler nor involved a federal tax regulation applies to federal tax regulations we do not decide that question because we conclude that natl cable is distinguishable from this case and thus its holding is not controlling here while we take seriously the supreme court’s holding in natl cable we likewise take seriously that court’s discussion of its rationale for and the context of that holding after considering that discussion and the significant contrasts between that case and the case before us we are persuaded for numerous reasons that the holding of natl cable does not govern here first the issue in natl cable telecomm association v brand x internet servs supra was whether broadband was subject_to regulation as a telecommunications service before ruling the federal communications commission fcc had carefully considered technological developments and its own related interpretations the supreme court’s extensive discussion of the fcc’s work on its ruling suggests that it was exactly the kind of agency decision that is most entitled to deference here we find no corresponding record of the secretary’s consideration of whether the relevant text in included a timely filing requirement the secretary’s rationale for adopting the disputed regulations is at best perfunctory second the supreme court in natl cable telecomm association v brand x internet servs supra noted that the fcc had not previously ruled on the question at hand but that its ruling regarding broadband was consistent with prior fcc rulings here the secretary in directly altered regulations adopted in and unchanged since thus unlike natl cable the instant case raises questions as to the reasonableness and how much deference applies when the secretary issues an interpretative_regulation that reverses long-settled law third in natl cable telecomm association v brand x internet servs supra the fcc was not a party to at t corp v portland f 3d 9th cir the prior case that the court_of_appeals for the ninth circuit had treated as controlling here the commissioner was the unsuccessful party in all of the cases holding that timely filing is not required for a foreign_corporation to claim its deductions and credits in addition unlike the fcc the secretary through the disputed regulations is attempting to overturn the outcome of those cases through his general regulatory authority fourth at t corp v portland supra which the supreme court declined to permit to trump the fcc ruling had been decided only approximately years before natl cable telecomm association v brand x internet servs supra here 38_bta_711 and its progeny were decided approximately years before the disputed regulations were issued thus in natl cable the supreme court was not faced with the question of whether a longstanding judicial interpretation is entitled to more deference than a recent judicial interpretation nor was that court faced with the question of the effect of the reenactment of the underlying statute on a prior judicial interpretation the case of natl cable also did not involve an agency that was seeking to reverse course from a preexisting decades old regulatory position that was consistent with judicial precedents of even greater antiquity moreover apart from the previously mentioned differences the court in natl cable telecomm association v brand x internet servs supra stated that regulatory interpretations do not prevail over a contrary previous judicial interpretation when the judicial tribunal referred to the interpreted statute as unambiguous although the judicial tribunals in 120_f2d_424 4th cir 125_f2d_906 4th cir and anglo-am direct tea trading co v commissioner supra did not state explicitly that they were applying the unambiguous meaning of the word manner we believe that they did so given their analysis and the fact that their interpretation of that word was purely one of statutory construction that resulted from the employment of traditional tools of statutory construction it is emphatically the province and duty_of the judicial department to say what the law is marbury v madison 5_us_137 and if a court employing traditional tools of statutory construction ascertains that congress had an intention on the precise question at issue that intention is the law and must be given effect chevron u s a inc v natural res def council inc u s pincite n see also ins v cardoza-fonseca 480_us_421 moreover where the only or principal dispute relates to the meaning of the statutory term the controversy must ultimately be resolved not on the basis of matters within the special competence of the agency but by judicial application of canons of statutory construction 397_us_159 compare chevron u s a inc v natural res def council inc supra pincite supreme court exercised a very limited review of an agency’s regulations after the court concluded that congress had left a gap in the statute for the agency to fill with ins v cardoza-fonseca supra pincite supreme court rejected an agency’s interpretation of a statute after the court concluded that the question before it was a pure question of statutory construction for the courts to decide in anglo-am direct tea trading co v commissioner supra the board was the first judicial body to construe the relevant text it construed the meaning of the word manner plainly using traditional tools of statutory construction the court_of_appeals for the fourth circuit performed a similar textual construction in blenheim co v commissioner supra pincite by simply reading and applying the words of section of the revenue act of dollar_figure the referenced decisions of the court of in ardbern co v commissioner f 2d pincite 4th cir the court_of_appeals for the fourth circuit noted that respondent had conceded that the taxpayer would have been entitled to its claimed deductions if the return which the taxpayer had attempted to file with the revenue_agent had instead been filed with the collector at baltimore the court continued appeals for the fourth circuit and the board turned not on the need to fill in a gap that congress left in the statute but on a matter of pure statutory construction those judicial tribunals gave effect to the relevant text by reading the text literally and without reference to any contrary argument that the text was ambiguous as to the inclusion of a timely filing requirement the judicial tribunals’ reading of the word manner was consistent with that word’s accepted meaning in legislative practice as seen from the board’s discussion in anglo-am direct tea trading co of the structure of the revenue acts respondent with a citation to his nonacquiscence in anglo-am direct tea trading co v commissioner supra see c b pt argues on brief that the holdings in anglo-am direct tea trading co and ardbern co v commissioner supra as to the construction of former section are incorrect and invites the court to disavow those holdings we decline that invitation we also disagree with respondent’s argument that the applicability of the rationale of the court in ardbern is limited to those cases where a continued therefore primarily limited its analysis of whether the statute included a timely filing requirement to the statement of the board quoted supra p the court did point out however that no provision in the revenue act of ch 48_stat_680 precluded a late filing taxpayer who filed a return from receiving the benefit of the deductions to which the taxpayer was otherwise entitled see id pincite compelling equitable consideration is present so as to serve elementary justice the court_of_appeals for the fourth circuit held specifically in ardbern co v commissioner supra pincite that former section does not forbid a taxpayer from deducting expenses when the taxpayer files or attempts in good_faith to file a return claiming those deductions before the commissioner determines a deficiency against the taxpayer or files a substitute return on the taxpayer’s behalf accord blenheim v commissioner supra pincite it is true that this section section of the and revenue acts contains no reference to a time element xi conclusion on the basis of the foregoing we conclude that the disputed regulations are invalid to the extent described herein given the plain meaning of the relevant text and the historical setting laid out in detail in this opinion including caselaw legislation legislative_history and regulations the secretary’s adoption of a timely filing requirement and his attempted sub silentio overruling of contrary judicial and administrative precedents is unreasonable under natl muffler dealers association v united_states 440_us_472 dollar_figure we note that this case is strikingly similar to 38_bta_711 where the taxpayer was allowed to receive the benefit of its deductions upon the untimely filing of returns more than continued congress is the legislator in our system of government and when an interpretation must be made of a tax bill enacted into law both the judicial and executive branches of governments the latter acting through the treasury_department may render that interpretation in their own constitutionally permitted ways as one of those ways however it is not reasonable for the secretary or anyone else for that matter to construe a statute’s unambiguous meaning in a manner contrary to that intended by congress in passing the legislation such is especially so where as here the secretary attempts to circumvent longstanding judicial decisions that have arrived at the plain meaning of a statute enacted decades before after the passage of over a half of a century during which the law on this subject has remained settled and has been relied upon by both taxpayers and the government alike it is simply wrong for the secretary to attempt to resurrect a failed litigating position through the issuance of interpretative regulationsdollar_figure continued months after their due_date indeed the facts in support of an allowance of deductions are even stronger here while the taxpayer in anglo-am direct tea trading co filed its returns only after respondent discovered that the returns were overdue petitioner filed its returns before any contact from respondent congress is the only body that may amend the relevant text respondent makes no assertion that the secretary ever asked congress to amend the text to change the holding of anglo-am direct tea trading co v commissioner supra and its progeny that the text does not include a timely filing continued we hold contrary to respondent’s determination that sec_882 does not preclude petitioner from deducting the expenses claimed on the subject returns we have considered all arguments made by the parties as to the manner in which we resolve this case and have found those arguments not discussed herein to be without merit decision will be entered for petitioner reviewed by the court gerber cohen wells colvin vasquez gale thornton marvel haines goeke wherry and kroupa jj agree with this majority opinion chiechi and foley jj concur in result only continued requirement nor have we found that such was the case instead respondent invites this court to take a fresh look at the relevant text in the light of the disputed regulations to reject the judiciary’s almost 70-year-old interpretation of that text and to incorporate into the text the timely filing concept as embodied in the regulation respondent asserts that not reading a timely filing requirement into the statute is administratively unworkable in that it would permit foreign taxpayers to live off the u s fisc indefinitely file their returns only when hindsight suggests it is in their own best interests to do so and put the service at an extreme disadvantage in performing its statutory duties to say the least such equitable arguments are made more appropriately to congress than to the judiciary swift j dissenting for the reasons explained below i respectfully disagree with the majority opinion the majority opinion fails properly to distinguish the pre-1990 no-regulation environment of the cited court opinions from the environment or authority that came into existence upon promulgation in of sec_1_882-4 and i and ii income_tax regs with regard to such a change in the regulatory environment applicable to a particular federal_law question the supreme court recently stated in natl cable telecomm association v brand x internet serv u s 125_sct_2688 allowing a judicial precedent to foreclose an agency from interpreting an ambiguous statute would allow a court’s interpretation to override an agency’s chevron’s premise is that it is for agencies not courts to fill statutory gaps the better rule is to hold judicial interpretations contained in precedents to the same demanding chevron step one standard that applies if the court is reviewing the agency’s construction on a blank slate only a judicial precedent holding that the statute unambiguously forecloses the agency’s interpretation and therefore contains no gap for the agency to fill displaces a conflicting agency construction citing 467_us_837 ndollar_figure based on this recent supreme court explanation in natl cable telecomm association of chevron_deference to be given federal_agency regulatory authority i do not believe that 1930s and 1940s court opinions construing the predecessor of sec_882 preempted respondent’s regulatory authority to promulgate in a specific administrative rule with regard to sec_882 see 467_us_837 in light of natl cable we should be focusing herein on an analysis of the reasonableness of the filing deadline reflected in sec_1_882-4 and i and ii income_tax regs as promulgated in vis-a-vis the filing deadline reflected in the court opinions that had been extant for approximately years the majority opinion’s analysis see majority op pp however of the reasonableness of the regulation is quite inadequate for the reasons set forth in the discussion below sec_1_882-4 and i and ii income_tax regs constitutes a reasonable administrative rule promulgated by the commissioner and the treasury_department and reasonably fills in a gap in the statutory language of sec_882 the 1930s and 1940s court opinions adopted and applied a tax_return filing deadline to the ability of foreign_corporations to qualify for deductions and credits under the predecessor of sec_882 the court opinions in 40_bta_696 120_f2d_424 4th cir modifying and remanding 41_bta_910 125_f2d_906 4th cir affg 42_bta_1248 126_f2d_384 4th cir affg a memorandum opinion of the board_of_tax_appeals clearly clarified and modified 38_bta_711 and adopted and applied a tax_return filing deadline timely filing_date cutoff or terminal date whatever one chooses to call it to the entitlement of foreign_corporations to deductions and credits under the predecessor of sec_882 as the board_of_tax_appeals explained in taylor sec inc v commissioner supra pincite in view of such a specific prerequisite that foreign corporate taxpayers file tax returns it is inconceivable that congress contemplated by that section that taxpayers could wait indefinitely to file returns and eventually when the respondent determined deficiencies against them they could then by filing returns obtain all the benefits to which they would have been entitled if their returns had been timely filed such a construction would put a premium on evasion since a taxpayer would have nothing to lose by not filing a return as required by statute in light of the above clarification by the board_of_tax_appeals to its earlier opinion arguably to the contrary in anglo-am direct tea trading co supra it is taylor sec inc not anglo-am that is to be regarded as the lead pre- regulation court case see blenheim co v commissioner supra pincite in which the court_of_appeals for the fourth circuit acknowledges that it is taylor sec inc that in spite of the prior anglo-am opinion first adopted a foreign_corporation tax_return terminal date or filing deadline for purposes of allowing deductions and credits to foreign_corporations thus for more than years prior to when the regulation in issue herein was promulgated and since the issuance of the opinion of the board_of_tax_appeals in taylor sec inc sec_882 and its predecessor were interpreted and were held by federal courts to be unclear and incomplete as to the above corporate filing deadline and the courts recognized the need for and applied such a deadline as the court_of_appeals for the fourth circuit stated explicitly in blenheim co v commissioner supra pincite it is true that this section contains no reference to a time element nevertheless we feel that the so-called normal_tax return filed by petitioner on form_1120 was not a sufficient or timely compliance with section the predecessor of sec_882 to entitle the petitioner to the deductions claimed therein the above judicially recognized need for a foreign corporate filing deadline for purposes of allowing deductions and credits under sec_882 and its predecessor provides perhaps the strongest support for the conclusion that the regulation in issue is reasonable ie the regulation simply reflects the attempt by respondent and by the treasury_department to address via a formally promulgated regulation the same need the courts addressed in taylor sec inc v commissioner supra and its progeny the majority opinion’s description of sec_1 a and i income_tax regs as simply a reflection of respondent’s unsuccessful litigating position majority op p is inaccurate which inaccuracy perhaps is explained by the failure of the majority opinion to consider the specifics of the filing deadline set forth in the regulation although it early on see majority op note sets forth the language of sec_1_882-4 income_tax regs the majority opinion provides only two single-sentence general explanations of the filing deadline set forth therein see majority op pp and nowhere does the majority opinion attempt to compare the filing deadline that was adopted and applied by taylor sec inc and its progeny with the specifics of the filing deadline set forth in the regulation in that regard the following explanation of the specifics of the filing deadline set forth in sec_1_882-4 and i income_tax regs may be helpful sec_1_882-4 and the first sentence of i income_tax regs explains that the timely filing deadline set forth therein applies only in determining a foreign corporation’s entitlement to deductions and credits under sec_882 it does not constitute a generic timely filing deadline that applies to foreign_corporations under other provisions of the code for example the timely filing deadline of the above regulation does not apply for purposes of sec_6072 sec_1_882-4 income_tax regs then proceeds for purposes of allowing deductions and credits under sec_882 for a current taxable_year to divide foreign_corporations required to file federal tax returns into two categories first those that for the prior taxable_year filed an income_tax return and those for which the current taxable_year is the taxpayers’ first taxable_year for which a federal tax_return is required category corporation and second those that for the prior taxable_year were required to but did not file a federal tax_return category corporation for purposes of allowing deductions and credits under sec_882 for the current_year sec_1 a i income_tax regs provides that for a category corporation prior year tax_return filed or first year tax_return required the filing deadline for the current taxable_year is a fixed months after the due_date for the current_year tax_return where prior to the filing by a category corporation of its current_year tax_return within this 18-month period respondent notifies the corporation that no tax_return has been filed for the current_year and that no deductions or credits under sec_882 will be allowed the 18-month filing deadline set forth in the regulation represents a lengthening of the return filing deadline that would have applied under 40_bta_696 and its progeny under which respondent’s prior notification would have established the deadline where a category corporation files its tax_return for the current_year after the 18-month period but before respondent notifies the taxpayer the fixed 18-month filing deadline of the regulation would apply and the regulation represents a shortening of the filing deadline that would have applied under taylor sec inc and its progeny for purposes of allowing the deductions and credits under sec_882 for the current_year for a category corporation tax_return for the prior year not filed sec_1_882-4 income_tax regs provides that a foreign_corporation must file its tax_return for the current_year before the earlier of either respondent’s notification to the corporation that no tax_return has been filed for the current_year and that no deductions or credits under sec_882 will be allowed or months after the due_date for the current_year tax_return where respondent so notifies a category corporation within the specified 18-month period this filing deadline constitutes the same filing deadline as would have applied under taylor sec inc and its progeny for a category corporation that files its tax_return after the 18-month period but before respondent notifies the taxpayer the 18-month filing deadline of the regulation would apply and the regulation represents a shortening of the filing deadline that would have applied under taylor sec inc and its progeny in effect the filing deadline set forth in sec_1 a i income_tax regs significantly incorporates and reflects aspects of the filing deadline of taylor sec inc and its progeny but it shortens that deadline to no later than months after the due_date of the current_year tax_return and it lengthens that deadline to months after the tax_return due_date for a foreign_corporation that filed a tax_return for the prior year and that received notification from respondent prior to filing its tax_return as is evident contrary to the majority opinion’s contention that sec_1_882-4 and i income_tax i regard the notification to foreign_corporations described in sec_1_882-4 income_tax regs that no tax_return has been filed for the current_year and that no deductions or credits under sec_882 will be allowed as not materially different from the notification mentioned in 40_bta_696 and its progeny that respondent has prepared a substitute tax_return or issued a notice_of_deficiency in which a corporation’s deductions and credits under sec_882 were not allowed regs simply adopts respondent’s unsuccessful litigating position majority op p or seeks to resurrect respondent’s failed litigating position majority op p the regulation in issue incorporates significant aspects of the judicially crafted filing deadline that was in effect for many years prior to it would seem obvious that the increased number of foreign_corporation federal_income_tax returns filed with respondent in today’s world as distinguished from the 1930s when the cases relied on by the majority opinion were decided and the increasingly complex tax laws and tax_administration applicable thereto would support per se respondent’s effort by properly promulgated regulation to modify and clarify in the above modest manner the return filing deadline that has been applicable to foreign_corporations further it is appropriate to emphasize that the regulation at issue herein provides in subdivision ii of sec_1 a income_tax regs a good cause facts and circumstances exception to the return filing deadline otherwise applicable under sec_1_882-4 income_tax regs this aspect of the regulation is consistent with the facts and circumstances filing deadline that was applied by the court_of_appeals for the fourth circuit in 120_f2d_424 4th cir lastly on this point in respondent’s litigating position in 38_bta_711 was that the return filing deadline for purposes of the predecessor of sec_882 was the same as the statutory due_date for filing foreign_corporation tax returns by if not earlier respondent’s litigating position had changed and respondent was conceding that foreign_corporation tax returns filed late but before respondent’s notification to foreign_corporations would be considered timely under the predecessor of sec_882 see ardbern co v commissioner supra pincite in summary on this point the filing deadline reflected in sec_1_882-4 and ii income_tax regs incorporates significant aspects of the judicially crafted foreign_corporation tax_return filing deadline and is quite different from respondent’s original litigating position in in anglo-am direct tea trading co the majority opinion see majority op p suggests that sec_1_882-4 and i income_tax regs is inconsistent with the treasury regulation promulgated in namely sec_1_882-4 income_tax regs to the contrary the regulation was silent as to any_tax return filing deadline under sec_882 just as sec_882 is silent still today as to any such deadline sec_1_882-4 and i and ii income_tax regs thus fills a gap not only in the language of sec_882 but also in the language of the regulation just as taylor sec inc and its progeny filled a gap in the language of the predecessor of sec_882 in its discussion of the legislative reenactment doctrine see majority op pp the majority opinion ignores a significant limitation on the legislative reenactment doctrine as follows the legislative reenactment doctrine does not apply where nothing indicates that the legislature had its attention directed to the administrative interpretation upon reenactment 2b singer sutherland statutory construction sec_49 6th ed in this case in reenacting sec_882 and its predecessor no evidence indicates that congress had its attention directed to any of the 1930s and 1940s court opinions involving a deadline for foreign_corporations to file their tax returns in order to preserve deductions and credits under the predecessor of sec_882 absent such evidence any application herein of the legislative reenactment doctrine would be inappropriate a vague statement in one of respondent’s briefs that congress was aware of the early board_of_tax_appeals and other court opinions is puzzling and ambiguous as the court_of_appeals for the seventh circuit explained in 40_f3d_224 7th cir revg t c memo however neither the taxpayer nor the tax_court has pointed to any occasion when congress even mentioned the old--or new--regulation this fact is important to the workings of the re-enactment_doctrine for a relevant factor in a court’s review is the degree of scrutiny congress has devoted to the regulation during subsequent re-enactments of the statute citing 440_us_472 the regulations and statutes involved in this area are too complex for us to venture to assume congress’s intent through its silence therefore we choose to not second- guess the treasury on this matter the sixth circuit was correct when it stated the re-enactment_doctrine is merely an interpretive tool fashioned by the courts for their own use in construing ambiguous legislation it is most useful in situations where there is some indication that congress noted or considered the regulations in effect at the time of its action otherwise the doctrine may be as doubtful as the silence of the statutes and legislative_history to which it is applied quoting 948_f2d_289 6th cir revg tcmemo_1990_129 we also have applied this particular limitation to the legislative reenactment doctrine in 95_tc_348 we refused to apply the we also have stated that we do not believe that the legislative reenactment doctrine can be applied to bar reasonable amendments to regulations where the change is made only prospectively from the date of the announcement of the proposed change 79_tc_355 affd sub nom 728_f2d_1249 9th cir continued legislative reenactment doctrine to a revenue_ruling because without affirmative indications of congressional awareness and consideration we decline to cloak this revenue_ruling with the aura of legislative approval finally rather than expressing sympathy for petitioner see majority op pp whose federal_income_tax returns were due on november of each year the fact that petitioner filed each of its and federal corporate_income_tax returns on date some years after the return due dates and years after sec_1 a and i income_tax regs was promulgated is hardly indicative of a foreign_corporation seeking to comply with u s tax laws in conclusion it is not respondent herein who is attempting to resurrect anything see majority op p rather it is the majority opinion that would resurrect 38_bta_711 and that would ignore later board_of_tax_appeals and court_of_appeals opinions and litigation that concluded that the statutory language of the predecessor of sec_882 was incomplete and ambiguous and necessitated the adoption and continued note the prospective only effective date of the regulation at issue herein for taxable years ending after date sec_1_882-4 income_tax regs application by the courts of a foreign_corporation filing deadline for purposes of the predecessor of sec_882 sec_1_882-4 and i and ii income_tax regs reflects the commissioner’s and the secretary’s consistent and similar conclusion the specific foreign_corporation tax_return filing deadline that is reflected in the regulation incorporates aspects of the judicially crafted deadline is flexible to take into account unusual situations but also is modestly tightened up to reflect updated tax_administration concerns relating to foreign corporate tax compliance for the reasons stated i respectfully dissent from this opinion which invalidates sec_1_882-4 and i income_tax regs holmes j agrees with this dissenting opinion halpern j dissenting i introduction this case involves the deference if any that we must show the secretary of the treasury’s secretary’s construction of the internal_revenue_code the majority holds that we need show no deference to the secretary’s construction found in sec_1_882-4 and i income_tax regs imposing a timely filing requirement on foreign_corporations it holds the regulation to be invalid i disagree in 467_us_837 the supreme court set forth a sequential approach for determining whether an agency’s construction of a statute it administers should be given deference first always is the question whether congress has directly spoken to the precise question at issue if the intent of congress is clear that is the end of the matter for the court as well as the agency must give effect to the unambiguously expressed intent of congress i f the statute is silent or ambiguous with respect to the specific issue the question for the court is whether the agency’s answer is based on a permissible construction of the statute id fn ref omitted that approach was reaffirmed by the supreme court in 523_us_382 a case involving the validity of an income_tax regulation in which with respect to the second question the court added the admonition t he task that confronts us is to decide not whether the treasury regulation represents the best interpretation of the statute but whether it represents a reasonable one see 499_us_554 accordingly the questions in the instant case are whether in denying a foreign_corporation an allowance for deductions and credits without distinction deductions unless the foreign_corporation files a true and accurate income_tax return within the time limits set forth in sec_1_882-4 and i income_tax regs the secretary has contradicted the unambiguously expressed intent of congress and if that cannot be said whether the time limits imposed by the secretary constitute a permissible construction of sec_882 before proceeding it may be helpful to establish some terminology regarding the time for filing returns i find the majority’s use of the term timely confusing for example on page of its report the majority uses the term timely to mean both a return filed on or before the due_date established by sec_6072 see note and a return filed after the due_date but before the arbitrary 18-month deadline devised by the secretary i use the term on-time to describe a return filed on or before the date established by the relevant provision of a statute and the term timely to describe a return filed after that date but before some date after which the filing would be considered untimely eg the terminal date described by the court_of_appeals for the fourth circuit in 125_f2d_906 4th cir affg 42_bta_1248 ii first question has congress directly spoken to the precise question at issue if a foreign_corporation files its income_tax return on or before the due_date prescribed in sec_6072 the return is on-time moreover no provision of subtitle f deprives a foreign_corporation of the benefit of deductions claimed on a return simply because the return was not on-time indeed in 38_bta_711 our predecessor the board_of_tax_appeals the board held that section of the revenue act of ch 45_stat_849 a precursor to sec_882 could not be read to make an on-time return a prerequisite to a foreign corporation’s having the benefit of deductions to which it was otherwise entitled i f congress had intended to deprive a foreign_corporation of its right to a deduction if it did not file its return within the time prescribed we think it would have said so id pincite emphasis added thereafter however both the board and the court_of_appeals for the fourth circuit acknowledged that the allowance of deductions to a foreign_corporation was a privilege which should be terminated at some point to assure the proper administration of the income_tax 126_f2d_384 4th cir affg a b t a memorandum opinion blenheim co v commissioner supra pincite 120_f2d_424 4th cir modifying and remanding 41_bta_910 40_bta_696 in blenheim co v commissioner supra pincite the court_of_appeals did state that section of the revenue act of ch 48_stat_737 contains no reference to a time element it found however that the return filed by the taxpayer was n evertheless not a sufficient or timely compliance with section to entitle the petitioner to the deductions claimed therein id emphasis added it held that in subjecting foreign_corporations to section of the act congress conditioned its grant of deductions upon the timely filing of true proper and complete returns id pincite emphasis added in taylor sec inc v commissioner supra the board concluded that once the commissioner determined a deficiency in tax a taxpayer could not avoid the effect of section by thereafter filing a return the board stated w e are unable to conclude that in enacting section it was the intention of congress that delinquent returns filed by a foreign_corporation after the respondent's determination should constitute the returns required as a prerequisite to the allowance of the credits and deductions ordinarily allowable to the corporations in view of such a specific prerequisite it is inconceivable that congress contemplated by that section that taxpayers could wait indefinitely to file returns and eventually when the respondent determined deficiencies against them they could then by filing returns obtain all the benefits to which they would have been entitled if their returns had been timely filed such a construction would put a premium on evasion since a taxpayer would have nothing to lose by not filing a return as required by statute id pincite more recently in 107_tc_146 the issue was whether untimely returns filed by a nonresident_alien_individual were sufficient to avoid the disallowance of deductions under sec_874 which contains language virtually identical to the language in question in sec_882 we upheld the disallowance of deductions under sec_874 concluding w hile sec_874 and sec_882 contain no explicit time limit the policy behind these provisions as applied by the case law dictates that there is a cut-off point or terminal date after which it is too late to submit a tax_return and claim the benefit of deductions if no cut-off point existed taxpayers would have an indefinite time to file a return and these provisions would be rendered meaningless id pincite emphasis added as the above discussion suggests no case has said that section c does not or its precursors did not make timely filing a prerequisite to receiving the benefit of deductions nor does the body of cases discussing section c and its precursors provide guidance of general applicability concerning timeliness it merely resolves issues created by unique fact patterns on a case-by-case basis although those cases do not unambiguously establish the limits of timeliness they clearly establish that timely filing is required those cases treat sec_882 as if it were incomplete timeliness is required but timeliness is not defined timeliness is anchored by sec_6072 to the date required for filing the return but neither sec_882 nor any other provision of the code tells us when the line runs out this case does not involve the question of whether a line can be drawn to enforce sec_882 that has already been decided in the affirmative this case involves the question of who gets to draw the line the courts or the secretary the clearly expressed intent of congress to the contrary not being apparent the secretary is not deprived of his authority under sec_7805 to draw that line ie to establish needful rules and regulations for the enforcement of sec_882 iii second question is the secretary’s regulation based on a permissible construction of the statute having reached the second step in our sequential analysis the question that we must answer is whether the timely filing rule found in sec_1_882-4 and i income_tax regs is based on a permissible construction of the statute in chevron u s a inc v natural res def council inc u s pincite the supreme court said if congress has explicitly left a gap for the agency to fill there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation such legislative regulations are given controlling weight unless they are arbitrary capricious or manifestly contrary to the statute sometimes the legislative delegation to an agency on a particular question is implicit rather than explicit in such a case a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency fn refs omitted sec_882 does not specifically make the allowance of deductions to a foreign_corporation contingent on a timely filed return nor does it grant the secretary express authority to prescribe regulations defining timeliness for purposes of sec_882 in promulgating sec_1_882-4 and i income_tax regs the secretary exercised his rulemaking authority under sec_7805 which gives the secretary general authority to prescribe all needful rules and regulations for the enforcement of the internal_revenue_code see t d 1990_2_cb_172 the appropriate standard for in 537_us_437 the supreme court said of another treasury regulation issued under the authority of sec_7805 even if we regard the challenged regulation sec_1_861-8 income_tax regs as interpretive because it was promulgated under sec_7805's general rulemaking grant rather than pursuant to a specific grant of authority we must still treat the regulation with deference see 499_us_554 determining whether sec_1_882-4 and i income_tax regs is based on a permissible construction of sec_882 is whether it represents a reasonable interpretation of that section see atl mut ins co v commissioner u s pincite to be more specific we must determine whether the 18-month limitation found in sec_1_882-4 income_tax regs is reasonable since the otherwise applicable filing limitation found in sec_1_882-4 and i income_tax regs construes the statute in a similar indeed in a more generous manner than the courts have construed it see judge swift’s dissent p i have already quoted our report in espinosa v commissioner supra to the effect that the policy behind sec_882 implies a cutoff point or terminal date after which it is too late to submit a tax_return and claim the benefit of deductions the question is thus one of line drawing and the majority has failed to convince me that the line drawn by the secretary is unreasonable judges holmes and swift have adequately dealt with the majority’s conclusion to the contrary and i have nothing to add i also fully join i am not ready to join judge holmes in concluding that in 533_us_218 the supreme court clarified the law by conflating the standard of ‘reasonableness’ with the standard of ‘arbitrary capricious an abuse_of_discretion or otherwise not in accordance with law ’ judge holmes’s dissent p judge holmes’s criticism of the majority’s distinction of natl cable telecomm association v brand x internet servs u s __ 125_sct_2688 since we are faced here with a question of line drawing the secretary’s reasonably drawn line necessarily supersedes the line drawn by any court see natl cable telecomm association supra pincite iv conclusion for the reasons stated i would uphold sec_1 a and i income_tax regs as a reasonable exercise of the secretary’s authority under sec_7805 to draw lines swift j agrees with this dissenting opinion holmes j dissenting the issue in this case is easy to understand sec_882 denies foreign_corporations that have u s income the benefit of the deductions and tax_credits they would otherwise get if they fail to file returns in the manner prescribed by subtitle f section 6072--which is part of the code’s subtitle f--imposes a time limit for filing foreign corporate returns before courts had construed the phrase in sec_882 -- in the manner prescribed by subtitle f --as meaning neither foreign_corporations must file their returns by the deadline set in sec_6072 nor foreign_corporations have till the end of time to file but rather that foreign_corporations have only until the secretary after a reasonable_time prepares a substitute return the regulation that we invalidate today replaced the old reasonable_time standard with an 18-month grace period1 beyond sec_6072's deadline and replaced the preparation of a substitute return with a written notice the 18-month grace period might be shorter or longer than the old judicially-constructed one it is undeniably more definite as judge swift carefully explains see dissent supra pp the disputed regulation is fairly complex and establishes a number of exceptions to the general 18-month rule for simplicity’s sake i refer to the regulation as creating an month grace period upholding this regulation should be almost trivially easy so long as the commissioner issues regulations that ‘implement the congressional mandate in some reasonable manner ’ we must defer to the commissioner’s interpretation only if the code has a meaning that is clear unambiguous and in conflict with a regulation does a court have the authority to reject the commissioner’s reasoned interpretation and invalidate the regulation 141_f3d_936 9th cir revg 106_tc_31 for the secretary to issue a regulation giving a clear 18-month grace period doesn’t contradict anything in the code at least anything clearly and unambiguously in the code our court has met with limited success in finding regulations unreasonable after the extensive review of the sort we do today see 94_tc_101 invalidating sec_1 b iv income_tax regs after plenary review of statute and legislative_history revd 961_f2d_800 9th cir we cannot usurp the treasury’s authority and invalidate the regulation unless it is an unreasonable construction disagreed with by 948_f2d_289 6th cir a court may not substitute its own construction for the reasonable interpretation of an agency disagreed with again by bell fed sav loan association v commissioner f 3d big_number 7th cir revg tcmemo_1991_368 choice among reasonable interpretations is for the commissioner not the courts and finally abrogated cent pa sav association subs v commissioner 104_tc_384 see also 106_tc_31 invalidating sec_1 9t b i a temporary income_tax regs fed reg date after plenary review of statute and legislative_history revd 141_f3d_936 9th cir using language quoted in text above disagreed with by allen v united_states continued i respectfully dissent because today’s opinion lays down new and misleading trails through three different parts of the jungle of administrative law it misapplies the plain_meaning_rule it greatly extends the doctrine_of legislative reenactment to overturn a regulation and it rejects the recent teaching of the supreme court in brand-x3 on the necessity of deferring to an administrative agency’s decision to issue a regulation overturning caselaw i also write separately to highlight what i think is a serious confusion in the appropriate way we should review regulations that have gone through notice-and-comment rulemaking especially those that change existing law much of the majority’s exhaustive recitation of the history of sec_882 and its regulation arises from the different factors that we continued 173_f3d_533 4th cir regulation need not be best possible means of implementing the statute if it’s reasonable and disagreed again with 190_f3d_791 7th cir revg tcmemo_1998_92 i t is not our role to determine the most appropriate interpretation of the statute but simply to assess whether the regulation reflects a reasonable construction and finally abrogated 119_tc_44 natl cable telecomm assn v brand x internet servs u s ___ 125_sct_2688 use in applying national muffler4 compared to chevron this case may therefore be a good vehicle for appellate guidance on whether national muffler continues to be in good working order after chevron mead and brand x i the majority begins its analysis as i agree we should with the question of whether sec_882's phrase in the manner prescribed by subtitle f has an unambiguous meaning whether national muffler or chevron applies there is no doubt that if congress has spoken on the issue no regulation in conflict can survive if the intent of congress is clear that is the end of the matter for the court as well as the agency must give effect to the unambiguously expressed intent of congress chevron u s pincite see also national muffler u s pincite but what materials should a court look at to decide whether a statutory phrase is unambiguous the answer is in natl r r passenger corp v boston maine corp 503_us_407 citations omitted a court must look to the structure 440_us_472 467_us_837 533_us_218 and language of the statute as a whole if the text is ambiguous and so open to interpretation in some respects a degree of deference is granted to the agency the majority crane their necks away from the actual words of sec_882 and its place in the code to look at whether the regulation adopts respondent’s unsuccessful litigating position with total disregard for judicial precedent majority op p and at the legislative reenactment doctrine majority op p note as i discuss later on these factors are only relevant if at all in reviewing a regulation based on a text that we’ve already found to be ambiguous the majority’s strongest point though is their cataloging of the various times in the code where a phrase like at the time and in the manner prescribed appears the absence of the first part of the phrase they reason means that the second part-- in the manner prescribed has no time element because congress must whether a court should look to the text alone in deciding if a statute is ambiguous as in natl r r passenger or to the text plus legislative_history as chevron implies see chevron u s pincite is a matter of some controversy see 376_f3d_118 n 2d cir collecting cases see also 350_f3d_100 d c cir 348_f3d_136 6th cir affg 107_tc_73 it doesn’t matter in this case because the legislative_history of sec_882 shows no congressional intent one way or the other about when a foreign_corporation must file its return to avoid loss of deductions see infra p have known what it was doing when it included manner and left out time majority op pp they conclude we understand that use ie of the word manner to refer to items of information and not to refer to the time for the filing of a return or the furnishing of any other document we conclude that congress by using only the word manner in sec_882 did not intend to include in that provision any element of time majority op pp this was also more or less the reasoning of our predecessor the board_of_tax_appeals in 38_bta_711 but there are at least two problems with this reasoning the first is that as is usually the case with a statute as old and overgrown as the code there are counterexamples of the use of the word manner consider for example sec_179 this section gives small businesses the option of expensing capital purchases such an election shall be made in such manner as the secretary may by regulations prescribe he prescribed such the code governs the place of filing returns as well as their time and manner part vii of subtitle f has detailed rules which the irs has supplemented with extensive regulations sec_1_6091-1 sec_20_6091-1 sec_25_6091-1 sec_31_6091-1 sec_40 6091-1t given today’s narrow reading of manner prescribed under subtitle f we may someday have to decide whether a return that a foreign_corporation intentionally sends astray could trigger a loss of deductions a regulation sec_1_179-5 income_tax regs and it restricts the time in which a taxpayer can make this election given the practical needs of a tax system based on periodic returns the same is true of elections by a reciprocal insurer under sec_835 which requires a consent in such manner as the secretary shall prescribe the secretary prescribed the manner in a regulation which again requires filing of such consents by a particular time see sec_1 c income_tax regs this is hardly surprising while i agree that we should always construe the words of a statute to have their original public meaning it is also true that we can--indeed we should-- recognize that even tax statutes are written against a background of common_law legal usage and it is generally the case that when a legal instrument omits explicit time limits to do something permitted or required it does not ordinarily mean that there are no time limits at all see restatement contract sec_2d sec_41 corbin corbin on contracts sec dollar_figure pincite i f the offeror has not communicated a specific time limit with sufficient definiteness the power of acceptance by the offeree continues for a reasonable_time w hat is a reasonable_time in any case is a question of fact to be determined by a consideration of all the circumstances existing when the offer is made eg 63_f2d_701 3d cir as offer contained no time limitation for acceptance it was incumbent upon the plaintiff to accept within a reasonable_time 119_us_149 i f the offer does not limit the time for its acceptance it must be accepted within a reasonable_time i’m not saying that we need to canvass contract law to construe the code only suggesting that the observation that congress used the word manner without specifying time is not the end of the argument the context in which the word occurs suggests that imputation of a reasonable_time limit is not a departure from the ordinary legal meaning of the word--any more than imputation of a reasonable delivery time in a contract for delivery of specified goods restatement contract sec_2d sec_33 or imputation of a reasonable_time for closing a conveyance of property restatement property mortgages 3d sec would be and before today i knew of no place in the code where a court has held that manner without time means anytime at all the reason for imputing some time limits on filing returns or making elections is one of practical necessity and this is where the majority’s invocation of anglo-american is so unintentionally radical because the second problem with its discussion of the plain meaning of manner is that it misunderstands the import of the many opinions from the 1930s and 1940s that in effect did set a filing deadline for foreign_corporations if they wanted to qualify for deductions and other credits the bta’s opinion in 40_bta_696 and the opinions of the fourth circuit in 120_f2d_424 4th cir modifying and remanding 41_bta_910 125_f2d_906 4th cir affg 42_bta_1248 and 126_f2d_384 4th cir all disagreed with a reading of anglo-american as disallowing any limits on late filing as the board_of_tax_appeals explained in taylor securities in view of such a specific prerequisite that foreign corporate taxpayers file tax returns it is inconceivable that congress contemplated by that section that taxpayers could wait indefinitely to file returns and eventually when the respondent determined deficiencies against them they could then by filing returns obtain all the benefits to which they would have been entitled if their returns had been timely filed such a construction would put a premium on evasion since a taxpayer would have nothing to lose by not filing a return as required by statute b t a pincite the fourth circuit recognized long ago that taylor securities was an innovation blenheim f 2d pincite it is therefore taylor securities not anglo-american that was--until today at least--the controlling pre-regulation case and taylor securities accommodated the commissioner’s need for some point at which he could assess delinquent taxes owed by a foreign_corporation that had failed to file its own return taylor securities and its progeny were precisely the sort of case-by- case development of reasonableness that one would expect in response to the absence of a specific mention of time in sec_882 where our opinion leaves the commissioner after today’s ruling is very unclear current irs practice even when the commissioner prepares a substitute return under sec_6020 is to encourage nonfilers to prepare and file a return if for no other reason than to stop the addition_to_tax for failure to timely file see sec_6651 a in re 161_br_406 n d ohio noting number of exceptions to recognition of substitute return giving taxpayer continuing incentive to file saltzman irs practice procedure par dollar_figure citing examples in code where taxpayer may file a return after substitute return prepared to challenge commissioner’s the majority seems to soften its analysis by suggesting at a couple points that the commissioner can still enforce sec_882 by again preparing substitute returns see majority op pp note but the opinion also states that this cannot be an absolute and rigid rule majority op p note determinations if the majority’s hesitance to explicitly overrule taylor securities is an endorsement of what was over years ago the generally accepted rule concerning the number of returns which may be filed majority op p note quoting blenheim f 2d pincite it will just cause more confusion given the intervening evolution in the effect of substitute returns ii having concluded that the plain language of sec_882 invalidates the regulation the majority could have stopped instead as an alternative holding it goes on to analyze the reasonableness of the regulation under national muffler--asking whether the regulation harmonizes with the plain language of the statute its origin and its purpose majority op p quoting national muffler u s pincite applying national muffler the majority concludes that the regulation is out of tune with the statute not just because it fails to harmonize with sec_882's plain language but because the regulation is not a ‘substantially contemporaneous construction of the statute ’ merely adopted respondent’s unsuccessful litigating position conflicts with the agency’s previous interpretation of the same statute had been in effect for only a short time before being challenged was not issued after a revision to sec_882 and was not relied on by petitioner to his detriment see majority op pp each of these statements is at least arguably true--though it seems a stretch to say that a bright-line 18-month grace period is so substantially different from the old reasonable- time-before-letting-the-irs-bring-the-curtain-down-by-filing-a- substitute-return test as to be in conflict and each of the factors the majority cites is concededly relevant in a national muffler analysis these counts though don’t add up to a successful indictment of the regulation’s reasonableness for what really seems to trouble the majority is that this regulation was promulgated years after sec_882 or its predecessor was enacted and that it disregarded the caselaw that had built up in the meantime these related issues are the legislative reenactment and brand-x problems a according to the majority the legislative reenactment doctrine means that congress is presumed to have known of the administrative and judicial interpretations of a statutory term reenacted without significant change and to have ratified and included that interpretation in the reenacted term majority op p the majority then marches through the history of the reenactments of section 882--both the great codifications of and and a minor amendment having nothing to do with the filing requirement in 1966--before reaching its conclusion that congress was mindful of the relevant judicial interpretations and included within the reenacted text the judiciary’s interpretation majority op p i don’t agree that this is right formulation of the legislative reenactment doctrine at least when it is used to invalidate rather than uphold a regulation in a lengthy discussion of the doctrine the d c circuit held the district_court mistakenly relied on the familiar notion that congress is presumed to be aware of administrative interpretations of a statute or regulation when it adopts such language in a statute though courts have stated this general proposition usually as a defense to a later attack against the same interpretation no case has rested on this presumption alone as a basis for holding that the statute required that interpretation afl-cio v brock 835_f2d_912 n d c cir even if we wanted to be pioneers i am quite leery of the majority’s formulation elsewhere in brock the d c circuit summarized its understanding of the doctrine to require express congressional approval of an administrative interpretation if it is to be viewed as statutorily mandated id pincite other appellate courts have likewise been careful in limiting the doctrine mere reenactment is insufficient it must also appear that congress expressed approval of the agency interpretation that is to say the doctrine applies when congress indicates not only an awareness of the administrative view but also takes an affirmative step to ratify it 865_f2d_468 2d cir when the congressional discussion preceding reenactment makes no reference to the regulation and there is no other evidence to suggest that congress was even aware of the interpretive position ‘we consider the reenactment to be without significance ’ am bankers ins grp v united_states 408_f3d_1328 11th cir quoting am online v united_states 64_fedclaims_571 see also 948_f2d_289 9th cir doctrine is most useful in situations where there is some indication that congress noted or considered the regulations in effect at the time of its action the majority’s reliance on legislative reenactment should have ended when it could find no affirmative evidence that congress knew of any of the fourth circuit or bta cases that it describes the legislative_history that the majority quotes and summarizes features only vague references to existing law majority op p of course the majority also describes at great length the absence of even a mention of a timely filing requirement in any of the various legislative histories that it pores through they reason that the absence of any disagreement with the existing bta and fourth circuit precedents shows that congress intended to ratify those precedents see majority op pp this is an innovation if taken seriously it would freeze existing judicial constructions and irs regulations in place whenever congress reenacted a portion of the code forcing us to treat them as if they were part of the statutory language and blocking the secretary from changing regulations without persuading congress to change the code this cannot be right b the majority is i think also wrong about the amount of deference the secretary owes to caselaw when he writes a regulation this is the brand-x problem in that case the fcc had issued a declaratory rule interpreting the term telecommunica- tions service under its general authority to enforce the telecommunications act of brand x 125_sct_2688 according to this new regulation broadband cable modems were not a telecommunication service this was a change in the law at least in the ninth circuit because in 216_f3d_871 9th cir that court had specifically ruled that broadband cable modems were a telecommunications service the supreme court began its analysis by citing the fcc’s broad grant of regulation-writing power--very similar to the secretary’s in sec_7805 a --of prescribing such rules and regulations as may be necessary in the public interest brand x s ct pincite the court recognized that the regulation did change existing caselaw but reasoned a court’s prior judicial construction of a statute trumps an agency construction otherwise entitled to chevron_deference only if the prior court decision holds that its construction follows from the unambiguous terms of the statute and thus leaves no room for agency discretion id pincite the majority distinguishes brand x in several ways the fcc gave a more careful consideration of developments in the field than the secretary did here brand x did not involve a change in the agency’s own interpretation the fcc was not a party in the court case whose holding it was reversing and the fcc’s new regulation was promulgated only five years after the contrary caselaw majority op pp these distinctions should not make a difference--the supreme court did not balance carefulness of consideration prior litigation history or the amount of time that had passed between the caselaw and the new regulation it simply looked to see if the agency had been delegated broad regulatory authority and whether its construction of an ambiguous statutory phrase was reasonable brand x s ct pincite2 conflicting precedent would have mattered only if that precedent had held the phrase telecommunications service to have an unambiguous meaning contrary to the regulation id pincite and in this case the majority can point to no precedent that holds the absence of a time restriction in sec_882 unambiguously means that there is no time restriction iii finding the regulation unreasonable under national muffler even if sec_882 is ambiguous raises some very difficult issues at the intersection of administrative and tax law i think the majority has erred both in relying so heavily on the disputed regulation’s change to existing law and in being so skeptical about whether brand x even applies to tax regulations majority op p i also think those errors are examples of how difficult some of these issues have proven to be for trial courts conscientiously trying to follow their reviewing courts’ precedents in the spirit of eberhart v united_states u s ___ 126_sct_403 revg 388_f3d_1043 7th cir i think it important not to hide these troublesome issues and hope that their effects in this case will help those likely to review our decision a the first issue is whether it is still correct to say as we did ten years ago that we are inclined to the view that the impact of the traditional ie national muffler standard has not been changed by chevron but has merely been restated in a practical two-part test 104_tc_384 quoted at majority op p both national muffler and chevron do tell courts to review regulations for their reasonableness but the factors that each test tells us to consider can be quite different national muffler--at least as our court has applied it-- requires a top-to-bottom review of the regulation to see if it is in harmony with the plain language of the statute its origin and its purpose national muffler u s pincite it requires us to consider whether a regulation is a substantially contemporaneous construction of the statute by those presumed to have been aware of congressional intent if the regulation dates from a later period the manner in which it evolved merits inquiry other relevant considerations are the length of time the regulation has been in effect the reliance placed on it the consistency of the commissioner’s interpretation and the degree of scrutiny congress has devoted to the regulation during subsequent re-enactments of the statute id national muffler gives great weight to the consistency of an agency’s position over time consistency with judicial prece- dent and any reliance interest the public might have developed this makes a regulation that changes existing law more likely to be invalidated and this is logical--if a court has to consider factors focusing on the secretary’s justification for changing his position there will be some cases where they will be decisive see eg 94_tc_101 discussed supra note chevron review places substantially less emphasis on justification for regulatory change it expressly recognizes that there can be a range of permissible alternatives and directs a court to decide only if the agency’s regulation is a permissible construction of the statute chevron u s pincite this seems to be a special concern for our court see eg ga fed bank v commissioner 98_tc_105 later vacated and remanded regulations contrary to judicial precedents created a greater inconsistency than they resolved redlark t c pincite the nuts and bolts of this case is that the commissioner continues to disagree with the pre-tra judicial view see also majority op p deference unwarranted where secretary has total disregard to firmly established judicial precedent after chevron there is a range of permissible interpretations and the agency is free to move from one to another so long as the most recent interpretation is reasonable its antiquity should make no difference 535_us_212 scalia j concurring in part and concurring in judgment it’s important to recognize that in most cases applying either national muffler or chevron will end up producing the same result--when a statute is ambiguous agencies do have considerable leeway in devising regulations that clarify the law but the most important class of cases in which results under the two tests diverge is the one into which this case falls--when an agency writes a regulation that changes existing law either in the form of a previous regulation or judicial construction the supreme court has consistently held that chevron allows such reversalsdollar_figure chevron is such an important case because it was so explicit in recognizing that resolution of ambiguities in a see eg brand x u s s ct pincite agency reversal permissible as it is charged with interpreting ambiguous statutes 517_us_735 prior contradictory agency position is not fatal 500_us_173 changing circumstances require that an agency’s position not be carved in stone of course such changes are permissible under national muffler too indeed national muffler involved a regulation that changed existing law u s pincite but they would seem to be less probable because of the national muffler factors that concentrate on consistency in the law over time statute is more a question of policy than of law when congress through express delegation or the introduction of an interpretive gap in the statutory structure has delegated policy-making authority to an administrative agency the extent of judicial review of the agency’s policy determinations is limited 501_us_680 we have in some cases at least viewed the decision to analyze a regulation under national muffler as a mandate to undertake a review of the secretary’s legal analysis construing reasonableness under national muffler almost as meaning the most reasonable construction compare the majority’s analysis in today’s opinion to the minimal deference given regulations under 323_us_134 the weight in a particular case will depend upon the thoroughness evident in its consideration the validity of its reasoning its consistency with earlier and later pronouncements and all those factors which give it the power to persuade if lacking power to control this hard look deference simply doesn’t reflect the contemporary understanding of administrative law that regulations are a way to make policy choices not just a way to interpret ambiguous statutory phrases i agree with the majority that the judicial interpretations of sec_882 in the years before the regulation was issued are more in keeping with the actual words of the code than are the words of the regulation but this is due to the different competencies of judges and regulation writers regulation writers are doing their jobs when they make up safe harbors and lay down deadlines for judges to do so-- instead of setting up fact-bound tests of reasonableness --looks like an exercise of legislative or administrative rather than judicial power my disagreement with the majority is not just a disagreement about how to apply national muffler instead i think the problem lies in a very subtle distinction between national muffler and chevron-- reasonableness using the national muffler factors is taken to mean is the secretary construing the statute reasonably while under chevron it means is the secretary behaving unreasonably by violating the statute in the course of exercising his delegated authority to set policy both cases look to reasonableness but in different ways the majority’s condemnation of the secretary’s 18-month grace period majority the supreme court’s continuing citations to national muffler after chevron all stand for this general proposition see 537_us_437 532_us_200 523_us_382 520_us_93 507_us_546 499_us_554 op p note illustrates this it rhetorically asks where that rule came from we do not know majority op p note the fact is that the secretary routinely makes tax law more certain by using his regulatory authority under sec_7805 to dredge safe harbors and stake well-defined boundaries see eg sec a -2 b income_tax regs there are undoubtedly hundreds more such instances scattered throughout the five thick volumes of title_26 of the code_of_federal_regulations they or at least most of them survive chevron review because they are permissible constructions in the sense that they don’t violate the code not in the sense that they interpret the code in the same way a judge using normal canons of statutory interpretation would if each of these detailed regulations had to survive scrutiny by matching it up against general statutory language and asking where did this come from instead of does the code prohibit it today’s opinion would ignite a thoroughgoing revolution in tax law b this observation brings me to the next two issues today’s decision raises--should regulations issued under sec_7805 receive chevron_deference and what would such deference look like the key text here is the famous passage from chevron where the supreme court said if congress has explicitly left a gap for the agency to fill there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation such legislative regulations are given controlling weight unless they are arbitrary capricious or manifestly contrary to the statute sometimes the legislative delegation to an agency on a particular question is implicit rather than explicit in such a case a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency u s pincite fn refs omitted what is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation and what is the difference between reviewing a regulation to decide whether it is arbitrary capricious or manifestly contrary to the statute in contrast to a reasonable interpretation i’ll discuss each in turn the majority accurately states our court’s general_rule - if the secretary issues a regulation under sec_7805 we call it interpretive and analyze its validity under national muffler but if the secretary issues a regulation under a more specific grant of authority we call it legislative and analyze its validity under chevron 115_tc_589 understanding the problem this causes requires a brief introduction into the ambiguity of the terms interpretive and legislative when used to describe regulations in tax law legislative regulations are those issued by the secretary under a specific grant of authority in a particular code section interpretive regulations on the other hand are all those regulations issued under the secretary’s general authority to prescribe all needful rules and regulations see sec_7805 interpretive regulations issued under sec_7805 are however almost always sent through notice-and-comment rulemakingdollar_figure in administrative law these same terms mean something different under the administrative_procedure_act legislative regulations are those that create new legal duties binding on the parties and the courts merrill watts agency rules with the force of law the original convention harv l rev they must generally be subjected to notice-and- comment rulemaking u s c sec_553 interpretative regulations in contrast only clarify existing saltzman irs practice procedure 2d ed par sec_601_601 statement of procedural rules duties and they do not bind the public and do not go through notice-and-comment rulemakingdollar_figure there can be little doubt that in this classification both general and specific authority tax regulations are intended to bind the public and have the force of law the irs and treasury use the same regulation-writing process for both general and specific authority regulations subjecting both to the same painstaking review under the irs’s regulation drafting handbook i r m both types are issued as treasury decisions and both are signed by an assistant treasury secretary and the irs commissioner and when the code penalizes taxpayers for disregard of rules and regulations sec_6662 it penalizes them for disregard of either type of regulation see sec_1_6662-3 income_tax regs chevron’s distinction between explicit and implicit congressional delegations of authority certainly doesn’t reflect any difference between general and specific authority regulations the court there cited to four cases as examples of the confusing nomenclature prompted one academic to propose calling treasury regulations issued under sec_7805 general authority regulations and treasury regulations issued under other sections specific authority regulations coverdale court review of tax regulations and revenue rulings in the chevron era geo wash l rev i adopt this convention for the remainder of this opinion express delegations chevron u s pincite n but look at the statutes involved u s c a whether a child has been deprived of parental support or care by reason of the unemployment as determined in accordance with standards prescribed by the secretary 432_us_416 u s c sec_1396a a b taking into account only such income and resources as are as determined in accordance with standards prescribed by the secretary available to the applicant 453_us_34 communications act of the commission may in its discretion prescribe the forms of any and all accounts records and memoranda at t v united_states 299_us_232 and u s c the president may prescribe such regulations as he may think fit for carrying into effect the various provisions of any act relating to indian affairs and for the settlement of the accounts of indian affairs 415_us_199 ndollar_figure the first two delegations are the kind that tax lawyers would say lead to legislative regulations--they are delegations of authority to fill in a gap in one particular section of a statute but the second two delegations are entirely as broad as sec_7805’s power to make all needful rules and regulations under this title to make the contrast sharper consider the two cases cited by the court in chevron as examples of a legislative delegation to an agency on a particular question that is implicit rather than explicit ins v jong ha wang 450_us_139 analyzing reviewability of the attorney general’s decision to suspend deportation of an illegal alien under u s c sec_1254 if it would result in extreme hardship and 421_us_60 analyzing reviewability of the epa administrator’s approval of a state’s clean air act plan under u s c 1857c a requiring him to approve a plan if he determines that it was adopted after reasonable notice and hearing neither of these two cases involved direct review of regulations at all but instead were reviews of individual decisions by agencies in the course of which they had to construe disputed statutory terms in short i think that the contrast that chevron made was between review of regulations put through notice-and-comment rulemaking and construction of statutory terms in the course of administrative adjudicationdollar_figure reading chevron this way makes sense when one considers the administrative_procedure_act itself which tells courts to use one standard in reviewing formal regulations--are they arbitrary capricious an abuse_of_discretion or otherwise not in accordance with law u s c sec_706 see motor_vehicle manufacturers association of this is the consensus view in nontax fields see cunningham repetti textualism and tax_shelters va tax rev united_states inc v state farm 463_us_29 and another standard in reviewing administrative adjudications--are they unsupported by substantial evidence u s c sec_706 which has been interpreted as going to the reasonableness of what the agency did 373_us_709 emphasis added mead makes this clearer--it says that the court has recognized a very good indicator of delegation meriting chevron treatment in express congressional authorizations to engage in the process of rulemaking or adjudication that produces regulations u s pincite it then lists among other cases to prove that point 523_us_382 a case in which we were reversed after invalidating a regulation issued under sec_7805dollar_figure mead u s pincite n many perhaps most of the cases cited in that footnote involve general authority regulations e g 529_us_1 issued under u s c sec 1395cc b secretary may act as may be specified in regulations 526_us_380 issued under u s c sec_1502 secretary may establish and promulgate such rules and regulations not inconsistent with the law 525_us_366 issued under u s c sec b commissioner may prescribe such rules and regulations as may be necessary 521_us_642 issued under u s c sec_78j b authorizing rules and regulations as the sec commissioner may prescribe as necessary or appropriate am hospital assn v nlrb 499_us_606 issued under continued after mead i don’t think it possible to draw distinctions between the deference owed tax regulations issued under sec_7805 and those issued under more specific authoritydollar_figure see 537_us_437 dismissing dispute over distinctions between general and specific authority regulations because both must be treated with deference if applying chevron instead of national muffler would lead to a different result this discussion might still not matter-- national muffler and the pre-chevron cases that relied on it 455_us_16 452_us_247 were all tax cases continued u s c sec authority from time to time to make amend and rescind such rules and regulations as may be necessary 494_us_83 issued under u s c a et seq secretary authorized to make rules and regulations and to establish procedures not inconsistent with this subchapter which are necessary 490_us_107 issued under u s c sec the secretary may prescribe such regulations as he finds necessary or appropriate 486_us_281 issued under u s c sec d secretary may prescribe such rules and regulations as may be necessary see also vermuele mead in the trenches geo wash l rev notice-and-comment rulemaking a safe- harbor category but see 376_f3d_118 n 2d cir merrill the mead doctrine rules and standards meta-rules and meta-standards admin l rev notice-and-comment rulemaking begets chevron_deference only if regulation intended to have force of law that distinction wouldn’t matter here because general authority tax regulations are intended to have the force of law and the rule is that we are bound to follow the cases that more directly control until and unless they are expressly overruled 521_us_203 quoted by eberhart f 3d pincite but our court has a special problem in trying to find the precedents it should follow--appeals from our decisions go to twelve different courts of appeal and the question of what review a general authority regulation issued under sec_7805 should get has already led to divergent results some of our reviewing courts have concluded that general authority regulations don’t qualify for chevron_deference and some have concluded that they qualify only as an implicit delegation on a particular question and read chevron as silently incorporating national muffler and its factors as a test of reasonableness and some read chevron as requiring review of general authority regulations under an arbitrary-and-capricious standard the resulting circuit split was noted as long ago as see 142_f3d_973 7th cir and it seems only to have become more pronounced second circuit--gen elec co v commissioner 245_f3d_149 n noting conflict but not taking sides third circuit--e i du pont de nemours co v commission41_f3d_130 and ndollar_figure less deference to general authority regulations but leaving open possibility of considering the question see also the nontax cases 167_f3d_801 chevron_deference applies to notice-and-comment rules 61_f3d_170 interpretive rules get only skidmore deference fourth circuit--123_f3d_190 general authority regulations get national muffler review under chevron fifth circuit--997_f2d_1134 national muffler review rather than chevron sixth circuit--948_f2d_289 chevron review for reasonableness 348_f3d_136 seventh circuit--142_f3d_973 chevron review for reasonableness eighth circuit--217_f3d_960 national muffler review ninth circuit--141_f3d_936 chevron arbitrary-and-capricious review tenth circuit--in re craddock 149_f3d_1249 national muffler review eleventh circuit--992_f2d_1516 chevron arbitrary-and- capricious review d c circuit--350_f3d_100 chevron review and fed circuit--109_f3d_753 national muffler deference how would review of this regulation look under chevron here again i think that mead has clarified the law by conflating the standard of reasonableness with the standard of arbitrary capricious an abuse_of_discretion or otherwise not in accordance with law see mead u s at dollar_figure on what reasonableness means in the post-mead world i generally agree with judges swift and halperndollar_figure the question is one of line-drawing and substituting an 18-month rule for an indeterminate and case-by-case consideration of the facts certainly seems reasonable it does nothing more than substitute more definite deadlines for less definite ones and allows the commissioner to trigger them by sending a notice rather than filing a substitute return see also sunstein law and administration after chevron colum l rev chevron might be taken to suggest that whenever an agency is entrusted with implementing power--whether to be exercised through rulemaking or adjudication--agency interpretations in the course of exercising that power are entitled to respect so long as they are reasonable see also 246_f3d_1218 9th cir summarizing caselaw on chevron step two as requiring reasonableness in substantive interpretation and in the process of making the decision there is an extensive commentary on chevron step-two standards see polsky can treasury overrule the supreme court b u l rev cunningham repetti supra n va tax rev pincite i will only add a cite to 463_us_29 in that case the supreme court wrote that a regulation was arbitrary and capricious if the agency has relied on factors which congress has not intended it to consider entirely failed to consider an important aspect of the problem offered an explanation for its decision that runs counter to the evidence before the agency or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise id pincite see also sunstein colum l rev pincite5 that is of course far from what happened here the secretary faced an ambiguous phrase in a code section unambiguously aimed at giving foreign_corporations a major incentive to file their returns he also learned by experience that some taxpayers would wait to file until a notice_of_deficiency was issued 38_bta_711 or would file only after starting a case in this court 125_f2d_906 or would refuse to file even after a revenue_agent came calling 120_f2d_424 to issue a regulation with a fixed grace period and provision for exceptions reflected experience failed to consider no aspect of the problem and ran counter to no reasonable evidence before him the regulation did change existing law but under chevron and brand-x the secretary should be allowed to change the law --even if the law is our caselaw--by regulation vetted by notice-and-comment and tested against only a very liberal notion of reasonableness i respectfully dissent swift j agrees with this dissenting opinion