Opinion ID: 782365
Heading Depth: 2
Heading Rank: 2

Heading: Deference Due Revenue Rulings

Text: 12 The IRS contends that the district court's holding that molten tin may be depreciated directly contradicts revenue ruling 75-491, upon which the IRS's arguments in opposition to the depreciation deduction primarily are based. Revenue ruling 75-491 advised that the initial installation of tin used in the float process manufacture of flat glass is not depreciable property qualifying as `section 38 property' for investment credit purposes. Rev. Rul. 75-491, 1975-2 C.B. 19. The IRS asserts that because the ruling reasonably interprets 26 U.S.C. §§ 162 and 167 and the regulations promulgated to implement those sections with respect to the issue of molten tin, the ruling should be accorded deference under United States v. Mead Corp., 533 U.S. 218, 222, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001). 13 The Supreme Court held in Mead that although a tariff classification ruling by the United States Customs Service ... has no claim to judicial deference under Chevron [U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)], there being no indication that Congress intended such a ruling to carry the force of law[,].... under Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944), the ruling is eligible to claim respect according to its persuasiveness. Mead, 533 U.S. at 221, 121 S.Ct. 2164. The IRS reads Mead as instructing that revenue rulings are due deference commensurate with the degree of the agency's care, its consistency, formality, and relative expertness.... Mead, 533 U.S. at 228, 121 S.Ct. 2164. 14 The Supreme Court has refrained from deciding whether revenue rulings are entitled to deference. In United States v. Cleveland Indians Baseball Co., 532 U.S. 200, 220, 121 S.Ct. 1433, 149 L.Ed.2d 401 (2001), the Court stated, We need not decide whether the Revenue Rulings themselves are entitled to deference. In this case, [which addresses the year to which back-pay awards should be attributed for tax purposes,] the Rulings simply reflect the agency's longstanding interpretation of its own regulations. Because that interpretation is reasonable, it attracts substantial judicial deference. 532 U.S. at 220, 121 S.Ct. 1433 (citing Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994)). 15 The Court accorded deference to the IRS's revenue rulings in Cleveland Indians largely because the rulings reflected the agency's steady interpretation of its own 61-year-old regulation implementing a 62-year-old statute. `Treasury regulations and interpretations long continued without substantial change, applying to unamended or substantially reenacted statutes, are deemed to have received congressional approval and have the effect of law.' Id. (quoting Cottage Sav. Ass'n. v. Comm'r, 499 U.S. 554, 561, 111 S.Ct. 1503, 113 L.Ed.2d 589 (1991) (citation omitted)). Revenue ruling 75-491, at issue here, does not reflect a similarly longstanding or consistent interpretation of an unamended or substantially reenacted statute. As the district court explained, the revenue ruling, which analyzed whether molten tin qualified as depreciable property, predates the `substantial restructuring' of the depreciation rules effected by the adoption of the Accelerated Cost Recovery System (ACRS) (1981) and the Modified Accelerated Cost Recovery System (MACRS) (1986). See Liddle, 65 F.3d at 332-33, n. 3 ([Under ACRS,] the entire cost or other basis of eligible property is recovered[,] eliminating the salvage value limitation of prior depreciation law.) (quoting General Explanation of the Economic Recovery Tax Act of 1981 at 1450); see also Kurzet, 222 F.3d at 842-43. 16 The statutory framework on which the agency's analysis in revenue ruling 75-491 was based has changed significantly. Additionally, revenue ruling 75-491, unlike that at issue in Cleveland Indians, until now has not been tested in the courts or otherwise reconsidered by the IRS. See Cleveland Indians, 532 U.S. at 220, 121 S.Ct. 1433; see also Davis v. United States, 495 U.S. 472, 482-84, 110 S.Ct. 2014, 109 L.Ed.2d 457 (1990) (giving weight to the IRS's interpretation of for the use of where it had been in long use as was confirmed by several revenue rulings and judicial decisions). Accordingly, we conclude that the district court did not err in declining to treat revenue ruling 75-491 as controlling or persuasive authority. See Keller v. Comm'r, 725 F.2d 1173, 1182 (8th Cir.1984) ([W]hile they are entitled to some evidentiary weight, the Commissioner's private letter rulings and Revenue Rulings are not controlling authority and do not persuade this court in the present case.) (citation omitted); Oetting v. United States, 712 F.2d 358, 362 (8th Cir.1983); see also True Oil Co. v. Comm'r, 170 F.3d 1294, 1304 (10th Cir.1999). 17