Opinion ID: 446761
Heading Depth: 3
Heading Rank: 2

Heading: Favorable Tax Treatment

Text: 45 Petitioners note that [f]rom its inception, the commercial aviation industry has received substantial direct and indirect assistance from the federal government, and that [m]ost of the major airlines received direct subsidies in their early years. 102 Currently, they argue, such federal financial assistance takes the form not only of money subsidies under certain sections of the Federal Aviation Act but also of special investment tax credits made available to certain railroads and airlines by the Internal Revenue Code, 26 U.S.C. Sec. 46(a)(8) (1976 & Supp. V 1980). Respondents, by contrast, find it inconceivable, that Congress intended to place nondiscrimination obligations on every commercial enterprise enjoying some form of favorable tax treatment. 103 46 Petitioners find support for their position in McGlotten v. Connally, 338 F.Supp. 448 (D.D.C.1972) (three-judge court), which held that assistance provided through the tax system is within the scope of Title VI of the 1964 Civil Rights Act, since 47 [i]n the absence of strong legislative history to the contrary, the plain purpose of the statute is controlling. Here that purpose is clearly to eliminate discrimination in programs or activities benefitting from federal financial assistance. Distinctions as to the method of distribution of federal funds or their equivalent seem beside the point .... 104 48 The three-judge court in McGlotten ruled that the tax exemption provided fraternal orders by section 501(c)(8) of the Internal Revenue Code, [s]ince it is available only to particular groups ... operates in fact as a subsidy in favor of the particular activities these groups are pursuing. It thus falls within the coverage of the Civil Rights Act. 105 By direct and legitimate analogy, petitioners suggest, the investment tax credit available to railroads and airlines in particular by section 46(a)(8) constitutes sufficient federal financial assistance to airlines so subsidized 106 to trigger coverage by section 504. 49 In its rulemaking proceeding the CAB failed to address the tax subsidy argument. To this court, respondents argue that McGlotten is petitioners' sole authority, that it has had no case law progeny, that its discussion of Title VI and federal financial assistance was merely dictum in a case that was really about the state action doctrine and the equal protection clause, and that in its recent decisions holding that tax exemptions and tax deductibility do indeed constitute a form of subsidy that is adminsitered through the tax system, Regan v. Taxation with Representation of Washington, 461 U.S. 540, 544, 103 S.Ct. 1997, 2000, 76 L.Ed.2d 129 (1983), the Supreme Court conspicuously failed to invoke McGlotten. 107 None of these arguments is convincing. Both in Regan and Bob Jones University v. United States, 461 U.S. 574, 103 S.Ct. 2017, 76 L.Ed.2d 157 (1983), the Supreme Court affirmed McGlotten's fundamental approach. More important, we think, is the possibility that Congress did not intend, by granting a limited tax incentive to a particular industry or group, to thereby encompass every such industry or group, or, for that matter, individual within some ever-widening and potentially almost limitless definition of federal financial assistance. 50 It is true that the industry-specific nature of the accelerated depreciation allowance permitted airline property may obviate that danger in this case. But it is also true that the exemptions and deductions at issue in McGlotten, Bob Jones, and Regan were of a much more fundamental nature than the modest incentive to capital expenditures to which petitioners point here. 108 To find that the government could force an airline to comply with a federal antidiscrimination mandate solely because it takes advantage of section 46(a)(8) tax credits would be to find the government impotent to compel such compliance if any airline should elect to forego such credits. If Congress did intend handicapped citizens to have access to air transportation and to apply the nondiscrimination principles of section 504 to all carriers, we would violate that intent by holding that a carrier could avoid compliance through its accountant, or that Congress would be giving a green light to discrimination if it ever chose to enhance federal revenues in this deficit-plagued era by closing tax loopholes or simplifying the Code.