Opinion ID: 206582
Heading Depth: 1
Heading Rank: 4

Heading: Chevron Step Two: The Treasury Regulations Are a Reasonable Interpretation of the Limitations Period

Text: The second step of the Chevron analysis asks whether the newly issued Treasury regulations constitute a reasonable policy choice for the agency to make. Chevron, 467 U.S. at 845, 104 S.Ct. 2778. Review of the Treasury regulations reveals that they are reasonable, even though they depart from the judicial interpretation of Colony and Salman Ranch. As it did before this court in Salman Ranch, the Treasury Department justified its statutory interpretation with two basic arguments. First, the Department viewed Congress's addition of a special gross receipts definition in the 1954 Internal Revenue Code as a response to disagreement among the courts that existed at the time regarding the proper scope of section 275(c) of the 1939 Internal Revenue Code. Preamble to Temp. Treas. Regs., 74 Fed. Reg. 49,321 (Sept. 28, 2009); see also Preamble to Treas. Regs., 75 Fed.Reg. 78,897 (Dec. 17, 2010) (adopting the reasons set forth in the preamble to the temporary regulations). By emphasizing the effect of the gross receipts definition, the regulations purport to better reflect Congress's intention when compared to Colony. Second, the Department argues that to apply Colony outside the trade or business context risks rendering the gross receipts definition meaningless. It asks, why would Congress enact a new definition for gross receipts in the trade or business context if it had already established (as Colony held) that that same definition would apply in all contexts? Preamble to Temp. Treas. Regs., 74 Fed.Reg. at 49,321-22. Salman Ranch discussed these justifications and found them non-persuasive, 573 F.3d at 1374-76, but we are unable to say that they, or the policy they support, are ipso facto unreasonable. It is beyond question that in 1954 Congress added provisions for computing gross income in the trade and business context without expressly stating whether those provisions would also apply to other contexts. One could, and in this case the Treasury Department did, reasonably argue that this was evidence of an intent to treat nontrade or business income according to a different rule. Grapevine opposes this conclusion, reasoning first that an interpretation that departs from Colony cannot be reasonable. Appellees' Br. 42-43. For the reasons already set forth, we disagree. Colony's holding does not foreclose reasonable disagreement in agency rules under Chevron. Neither that case nor Salman Ranch found Congress's intent was so clear as to support no reasonable interpretation other than the taxpayer's. In its response brief, Grapevine also argues that the temporary Treasury regulations should not receive Chevron deference because of purported procedural shortcomings in their issuance. Now that the regulations have issued in final form, these arguments are moot. There can be little doubt that the final regulations of the Treasury Department are entitled to Chevron review and, where appropriate, deference. Mayo Found., 131 S.Ct. at 714 (We believe Chevron and Mead, rather than National Muffler [ v. United States, 440 U.S. 472, 99 S.Ct. 1304, 59 L.Ed.2d 519 (1979)] and Rowan [ Companies, Inc. v. United States, 452 U.S. 247, 101 S.Ct. 2288, 68 L.Ed.2d 814 (1981)], provide the appropriate framework for evaluating the full-time employee rule [a Treasury regulation promulgated after notice-and-comment procedures].); United States v. Cleveland Indians Baseball Co., 532 U.S. 200, 219, 121 S.Ct. 1433, 149 L.Ed.2d 401 (2001); cf. Fed. Nat'l Mortg. Ass'n v. United States, 379 F.3d 1303, 1307-08 (Fed.Cir. 2004). Because the Treasury regulations are a reasonable interpretation of § 6501(e)(1)(A), they must receive our deference. Colony and Salman Ranch notwithstanding, we will defer to the Treasury Department's interpretation in applying § 6501(e)(1)(A).