Opinion ID: 1387190
Heading Depth: 4
Heading Rank: 2

Heading: Chevron Step 2-Reasonableness of the Secretary's Action

Text: Our inquiry is not yet at its end, as we will only defer to the Secretary's action if it is a permissible construction of I.R.C. § 882(c)(2). See Woodall, 432 F.3d at 248 (citing Chevron, 467 U.S. at 842-43, 104 S.Ct. 2778). We need not conclude that the agency construction was the only one it permissibly could have adopted to uphold the construction, or even the reading the court would have reached if the question had arisen in a judicial proceeding. Chevron, 467 U.S. at 843 n. 11, 104 S.Ct. 2778. Often, a promulgated rule is the culmination of intense debate between the agency, Congress, other members of the Executive Branch and the public. Rules represent important policy decisions, and should not be disturbed if `this choice represents a reasonable accommodation of conflicting policies that were committed to the agency's care by the statute. . . . Id. at 845, 104 S.Ct. 2778 (quoting United States v. Shimer, 367 U.S. 374, 382-83, 81 S.Ct. 1554, 6 L.Ed.2d 908 (1961)). Further, Chevron deference is even more appropriate in cases that involve a `complex and highly technical regulatory program. . . . Robert Wood, 297 F.3d at 282 (quoting Thomas Jefferson v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994)). The Code is indisputably complex and technical, and we will adjust our inquiry accordingly. In this case, the Secretary has promulgated a rule that creates an eighteen-month window within which foreign companies must file a federal tax return in order to claim rental activity tax deductions. Taxpayer argues that previous cases upholding the disallowance of deductions under I.R.C. § 882(c)(2) involved filing deadlines that permitted at least a two year window within which foreign corporations could have filed timely tax returns. From this, Taxpayer draws the conclusion that it is unreasonable for the Secretary to promulgate a rule with a filing period of less than two years. We find Taxpayer's argument to be unpersuasive. The Secretary will, under the current regulation, allow a foreign company to file eighteen months after the filing was originally due. Moreover, because I.R.C. § 6072(c) already provides for a five and one-half month filing period, foreign companies have, in practice, twenty-three and one-half months to submit a timely return. It is not unreasonable for the Secretary to impose such a deadline. Additionally, we believe that drawing this temporal line is a task properly within the powers and expertise of the IRS. Chevron recognizes the notion that the IRS is in a superior position to make judgments concerning the administration of the ambiguities in its enabling statute. In this case, the IRS found that eighteen months served as a balance between its desire for compliance with the federal tax laws and a foreign corporation's desire to obtain valuable tax deductions. Therefore, we hold that the eighteen-month filing window created by Treas. Reg. 1.882-4(a)(3)(i) is a reasonable exercise of the Secretary's authority.