Opinion ID: 3163900
Heading Depth: 2
Heading Rank: 2

Heading: Definitional Provision

Text: Next, we turn to § 7701(a) of the Internal Revenue Code, which provides definitions for certain words that apply throughout the Code, “where not otherwise distinctly expressed or manifestly incompatible with the intent thereof.” The provision relating to the word “corporation” has not changed since 1918. It reads: “The term ‘corporation’ includes associations, joint‐stock companies, and insurance companies.” I.R.C. § 7701(a)(3). As we have recognized, that language is not technically a definition: it does not “specif[y] the characteristics of the entity that it ‘defines.’” McNamee v. Dep’t of Treasury, 488 F.3d 100, 106 (2d Cir. 2007) (alteration omitted). It does, however, serve to expand the federal tax law meaning of “corporation” beyond entities that would ordinarily fall under that term; it offers no hint that Congress intended to contract the ordinary meaning of the term in any way. The statutory definition thus strongly suggests that, at a minimum, all entities covered by the 8 core definition of “corporation” are also included. Section 7701(a)(3) does not provide that core definition itself, but because the ordinary meaning of “corporation” includes nonprofit entities that take the corporate form, the same should be true of the core term as used in § 7701(a)(3). That core definition most plausibly encompasses any entity upon which state law has conferred the rights and duties characteristic of a “corporation” as defined in the sources quoted above. Judicial opinions have generally adopted that reading of § 7701(a)(3). See O’Neill v. United States, 410 F.2d 888, 899 (6th Cir. 1969) (holding “that a corporation created under state law is a corporation within the meaning of . . . § 7701(a)(3)”); United States v. Empey, 406 F.2d 157, 169 (10th Cir. 1969) (noting “the long followed administrative practice of treating a corporation organized and chartered under state law as a corporation for federal income tax purposes,” which Congress “tacitly approved” by repeatedly reenacting § 7701(a)’s definition of “corporation”).2 2 Because of the open‐ended nature of § 7701(a)(3)’s definition of “corporation,” the IRS has promulgated regulations, known as “check‐the‐box regulations,” “to provide straightforward guidance as to how various types of entities, including single‐owner businesses, are to be classified for tax purposes.” McNamee, 488 F.3d at 107. Much of the district court’s opinion is devoted to showing that MMC is a “corporation” under those regulations, and much of MMC’s briefing on appeal is devoted to arguing that the regulations are invalid. Because MMC is unambiguously a “corporation” under the statutory definition, however, we need not address those arguments. 9 Several other Code provisions use the word “corporation” in a manner that plainly includes incorporated nonprofit organizations, bolstering our conclusion that the Code’s generally applicable definition of “corporation” under § 7701(a)(3) is not limited to for‐profit entities. For example, under § 501(a) & (c)(3), “[c]orporations . . . organized and operated exclusively for . . . charitable . . . purposes” are exempt from federal income tax. If the word “corporation” referred only to for‐profit entities, that provision would be self‐contradictory. Similarly, § 1381(a)(2)(A) specifies that the rules governing the tax treatment of “cooperatives” apply to, inter alia, “any corporation operating on a cooperative basis other than an organization . . . which is exempt from tax under this chapter.” The carve‐out for tax‐exempt organizations would not have been necessary if they were already excluded from the definition of “corporation.” The same is true of the carve‐out in § 1504(b)(1), which deals with affiliated groups of corporations, and defines “includible corporation” to include “any corporation except,” inter alia, “[c]orporations exempt from taxation under section 501.” Because “we must give effect to every word of a statute wherever possible,” Leocal v. Ashcroft, 543 U.S. 1, 12 (2004), we cannot easily write off these last two provisions as instances of overcautious drafting, as MMC urges. 10