Opinion ID: 3021849
Heading Depth: 4
Heading Rank: 2

Heading: The Effect of Revenue Ruling 79-404

Text: The Government also contends that Revenue Ruling 79404, in which the IRS determined that a ship-to-shore satellite service for which charges were based on the elapsed time of the transmission alone nevertheless satisfied the definition of “toll telephone service,” is entitled to deference under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 .S. 837 (1984), and United States v. Mead Corp., 533 U.S. 218 (2001). It therefore argues that the agency’s construction should dictate the outcome of this case. Because we conclude that the language of § 4252(b)(1) is plain, however, and that a conjunctive reading of the word “and” effects the unambiguous 14 intent of Congress, we need not defer to the interpretation in Revenue Ruling 79-404 under Chevron, nor consider the appropriate level of deference to be afforded such rulings generally. In Revenue Ruling 79-404, the IRS acknowledged that “literally, the [ship-to-shore] service provided in this case does not come within the definition of . . . ‘toll telephone service’ . . . because the charge for the service does not vary with distance and therefore does not meet the requirement of section 4252(b)(1).” Rev. Rul. 79-404, 1979 C.B. 382. Nevertheless, it concluded: The service in this case is essentially “toll telephone service” as described in section 4252(b)(1) of the Code, even though the charge for calls between remote maritime stations and stations in the United States vary with elapsed transmission time only. The toll charges described in section 4252(b)(1), that vary in amount with both distance and elapsed transmission time of the individual communication, reflect Congress’ understanding of how the charges for long distance calls were computed at the time the section was enacted. The intent of the statute would be frustrated if a new type of service otherwise within such intent were held to be nontaxable merely because charges for it are determined in a manner which is not within the literal language of the statute. Id. at 383. The Government relies on Mead, arguing that although revenue rulings are not subject to notice and comment, they nevertheless should be entitled to Chevron deference because Congress intended to grant the IRS the power to make rules with the “force of law” and Revenue Ruling 79-404 “was 15 promulgated in the exercise of that authority.” Appellant’s Br. at 46 (citing United States v. Mead Corp., 533 U.S. 218, 226-27 (2001)). In Geisinger Health Plan v. Commissioner, 985 F.2d 1210, 1216 (3d Cir. 1993), this Court explained that although “revenue rulings are entitled to great deference, . . . courts may disregard them if they conflict with the statute they purport to interpret or its legislative history, or if they are otherwise unreasonable.” See also In re Kaplan, 104 F.3d 589, 599 (3d Cir. 1997) (citations omitted). Acknowledging Geisinger and Kaplan, the Government nevertheless suggests that we should revisit the issue of the proper level of deference to be afforded revenue rulings because Mead was decided after those cases. Even assuming that Chevron applied to revenue rulings, however, the Government’s argument would fail, and therefore, we need not reconsider our decisions regarding the deference owed such rulings. As the Eleventh Circuit explained: Under Chevron, the court must first determine whether the congressional intent is clear. If the intent is clear, the inquiry ends; the court and agency “must give effect to the unambiguously expressed intent of Congress.” Chevron U.S.A., Inc., 467 U.S. at 843-44. Accordingly, because we hold that § 4252(b)(1) is clear and directly answers the question here, the inquiry ends; we need not give deference to Revenue Ruling 79-404. Moreover, we need not determine the proper level of deference to be given Revenue Ruling 79-404. Am. Bankers, 408 F.3d at 1335 (citations omitted); see also Amtrak, 431 F.3d at 379 (“Even if we were to afford Chevron deference to the ruling, we could not let stand an agency 16 decision that deviates from the statute’s unambiguous meaning.”); OfficeMax, 428 F.3d at 595 (“Even if this circuit gave Chevron deference to revenue rulings, which it does not, this revenue ruling would not clear step one of the Chevron test”) (citations omitted). As discussed above, we conclude that the meaning of the phrase “varies in amount with distance and elapsed transmission time” is clear from the context of § 4252(b)(1) and, therefore, deference need not be afforded to Revenue Ruling 79-404.