Document: 532 U.S. 822121 S.Ct. 1934150 L.Ed.2d 45 NOTICE: This opinion is subject to formal revision before publication in the preliminary print of United States Reports. Readers are requested notify Reporter Decisions, Supreme Court States, Washington, D. C. 20543, any typographical or other errors, order that corrections may be made goes press.UNITED DOMINION INDUSTRIES, INC., PETITIONERv.UNITED STATES No. 00-157. SUPREME COURT OF THE UNITED Argued March 26, 2001Decided June 4, 2001 Syllabus Under Internal Revenue Code 1954, a "net operating loss" (NOL) results from deductions excess gross income for given year. 26 172(c). A taxpayer carry its NOL either backward forward tax years set off lean against lush years. 172(b)(1)(A). The carryback period "product liability loss[es]" 10 172(b)(1)(I). Because product loss (PLL) total taxpayer's expenses (PLEs) up amount NOL, 172(j)(1), with positive annual income, and thus no have PLEs but can PLL. An affiliated group corporations file single consolidated return. 1501. Treasury Regulations provide such group's "consolidated taxable income" (CTI), or, alternatively, net (CNOL), determined by taking into account several items, first which "separate (STI) each member. In calculating STI, member must disregard items as capital gains losses, considered, factored CTI CNOL, on basis. Petitioner's predecessor interest, AMCA International Corporation, was parent an filing returns 1983 through 1986. year, reported CNOL exceeding aggregate individual members' PLEs. Five members STIs. Nonetheless, included those determining PLL 10-year under "single-entity" approach it compared determine contrast, Government's "separate-member" compares affiliate's STI whether affiliate suffers PLL, only then combines PLLs affiliates this approach, incurred cannot contribute 1986 1987, petitioned Service refunds based calculations. IRS ruled AMCA's favor, reversed joint congressional committee controls certain threshold. filed refund action. District applied single-entity concluding so long return reflects PLEs, carried back. reversing, Fourth Circuit separate-member approach. Held: figured consolidated, basis, not aggregating separately company company. Pp. 5-15. (a) straightforward. step applying 172(j)'s definition requires calculate NOL. regulations governing groups one NOL: "consolidated" absence separate context underscored fact measure different context, year corporation files exclusive at level important. Neither nor indicate essential relationship between differs their conventional corporate taxpayer. Comparable treatment achieved if after has been determined, group. comparable also (relatively) easy understand apply. 5-7. (b) case easily made. there below level, nothing comparison produce stage calculation. Thus, proponent identify some figure scheme plausible analogy level. member's analogous, excludes would normally count computing loss, tally loss," Treas. Reg. 1.1502-79(a)(3), used fares better. Although accounts losses does not, 1.1502-79(a)(3)'s purpose allocate seeking back part Such issue here. 8-11. (c) Several objections approach-that allows double deduction, omission series 1.1502-12 tallied consolidation indicates were meant permit significant avoidance abuses-are rejected. 11-15. 208 F.3d 452, remanded. ON WRIT CERTIORARI TO APPEALS FOR FOURTH CIRCUIT Souter, J., delivered Court, Rehnquist, O'Connor, Scalia, Kennedy, Thomas, Ginsburg, Breyer, JJ., joined. Opinion Justice Souter Court. 1 172(b)(1)(I) offset prior years' income. here method electing federal We hold basis instance, 2 * U.S.C. 172(c).1 172(b)(1)(A), past future "set years, strike something like average computed over longer than year," Libson Shops, Inc. v. Koehler, 353 382, 386 (1957). 3 normal time three 1978, Congress authorized special loss[es]," 172(b)(1)(I), since, understood, sort tend particularly "large sporadic." Joint Committee Taxation, 95th Cong., General Explanation Act 232 (Comm. Print 1979). defines lesser (1) year" (2) allowable attributable "expenses." 172(j)(1). words, (PLEs), limited (NOL). By definition, then, PLL.2 4 Instead requiring "[a]n corporations" return, permits 1501 leaves Secretary work out details promulgating returns, 1502. Regs. 1.1502-11(a) 1.1502-21(f),3 "taking account" items. (whether negative) though (i.e., netting expenses), important "modifications." 1.1502-12. These modifications require disregard, among charitable-contribution deductions, dividends-received deductions. Ibid. excluded accounted is, they combined where otherwise (say, charitable contribution) received another (from gain, example). 1.1502-11(a)(3)-(8); 1.1502-21(f)(2) (6). therefore, sum plus minus handful considered II 5 Petitioner Dominion's properly elected these (the lowest being $85 million highest, $140 million) exceeded ($3.5 $6.5 million). focuses five companies, which, together, generated roughly $205,000 1983, $1.6 1984, $1.3 1985, $250,000 No disputes amounts characterization See 453 (CA4 2000) ("The parties agree" respect "the relevant years"). Rather, sole question include carryback. arises because further undisputed companies (with minor exceptions here), STI. 6 answered following what commentators called approach4 For calculated pursuant 1.1502-11(a), aggregated Because, noted above, greater treated full eligible view, throwing large also, when separately, significance. 7 From perspective, however, critical According methodology, we will call approach,5 Whereas (or loss) effort Government amount. 8 taxes favor Taxation Congress, threshold, 6405(a). action Western North Carolina. agreed held that, (including income) "may ten years." 3:95-CV-341-MU (June 19, 1998), App. Pet. Cert. 39a. Appeals reversed, "determining 'product loss' correct consistent [Treasury] regulations." F.3d, 458. 9 Circuit's conflicted Sixth adoption Intermet Corp. Commissioner, 209 901 (CA6 2000), granted certiorari, 531 U. S 1009 (2000).6 now reverse. III Section 172(j)(1) apply determines making calculation subtracts If result makes simple PLE becomes extent exceed That until 11 methodology As Dominion correctly points out, see 1.1502-21(f). There Indeed, do infra, ___, underscores Given apparently instance entities (and reasons developed below, ___) think fair say, says, concept "simply exist." Brief 15.7 exclusiveness reasons. Code's authorization contains indication differ Nor Regulation purport change context. If, remain essentially same, key understanding lies regulations' exclusively Working should are: affects same necessarily exactly way, dollar dollar. And because, except calculated. Then, filer, loss. sum, instances usual limiting occurs determined. resting virtue entitled weight doubt: 12 advanced (in variant) adopted (on rationale) Appeals, analysis just course, hence At least, could corporations. A. Dubroff, J. Blanchard, Broadbent, & K. Duvall, Federal Income Corporations Filing Consolidated Returns 41.04[06], p. 41-75 (2d ed. (hereinafter Dubroff) ("Even entity appropriate, unclear how [PLEs] compute NOL"). suggested substitute measures. works. 13 argued 1.1502-12, analogous "separate" negative STI; having 14 claims STI-based places closest position occupied had But simply so. seen already 1.1502-12(j) (n). Owing exclusions, inflated eliminating taken deflated item gain. 15 When pushed, concedes "not equivalent [NOL] return." 21, n. 14. But, claims, "[t]here never who [STI] [NOL]." Tr. Oral Arg. 27. says once difference and, fact, decent enough proxy past, make here, certainly potential importance involved (a contribution, example), hard Government. 16 therefore right reject reliance functional surrogate 459-460. place court relied 1.1502-79, believed "analogous individual's 'net 460. 1.1502-79(a)(3) provides "[f]or purposes subparagraph," shall ... , adjusted computation of" CNOL. said, directive (unlike STI) "takes account, example, [a] contributions" 460-461. 17 sounds too good. It true insofar gets closer commonsense notion does. improves undoing defining suspicious, turns suspicion justified. unbakes cake reason, reason application applies, terms, "for clear way seeks 1.1502-79 (titled "Separate years"); 1.1502-79(a) "Carryover [CNOL] 1.1502-79(a)(1) ("[i]f ..."). us; all carrybacks concepts addressing determination without statutory regulatory doing Cf. 49 Fed. 30530 (1984) ("[A]lthough apportioned backs [under 1.1502-79(a)], NOLs member"). Hence, while might distort does, facial inapplicability regulation concern 18 neither squares comparability regulations. On contrary, expressly support IV 19 raised yet. First, insists rule "double deduction." argues specific (charitable-contribution etc.) required "consumed" "used up" STIs, 1.1502-21(f), Government, use reduce tantamount deduction. 20 double-deduction argument superficial appeal, appeal rests fundamental misconception function liability. Calculation itself event, saving calculated; equal (if CNOL) merely accounting construct devised interim CNOL; "has purpose." Intermet, 906 ("A along CNOL"). turn reduces contributes "dollar dollar," ibid., moment.8 anything wrong proposes do, relation Yet, claimed portion, any, such, 10-year, opposed 3-year treatment. more deduction 21 second objection rejected attached dispositive significance discussed, specifically (capital similarly basis: "The blending [NOLs], explicitly define accompanying reference [PLEs]. permitted ." 22 lesson, however. logic invests familiar: mention implies exclusion others mentioned. Leatherman Tarrant County Narcotics Intelligence Coordination Unit, 507 163, 167 (1993) ("Expressio unius est exclusio alterius"). always, soundness premise timing: good consider drawn, omitting list well something. mean all. reason. promulgated 1966, provision pegged PLLs; notions did become devised. 371, 92 Stat. 2859; Leatherman, Current Developments 393, 5. Omission 1966 absolutely 1966. issue, significance, omission, failure later: earlier changed solely amended it, even carryback? unlikely. Treasury's relaxed amending track changes documented. e.g., Dubroff 41-72, 193; Axelrod Blank 1391; Separate Liability Losses 708-709. amendment added mandatory single-member likely reflection inattention affirmative intention say 23 Last, warns "[t]he petitioner advocates abuses." 40. Specifically: 24 "Under petitioner's currently unprofitable substantial (i) acquire profitable expense acquisition, (ii) (iii) thereby create nonexistent new allow acquiring claim paid 25 suggests, "a manufacturing profits current losses) exposure purchase tobacco both profits) expenses" assert ten-year losses' always profit 'loss' type." Id., 40-41, answers. score avoidance, better perhaps worse) treatment; entail risk tax-motivated behavior. 681 (Under "[d]espite sound non-tax business reasons, disinclined form transfer assets members, worry lose benefit carryback," encouraged increase [PLL], transfers ill-advised"). Second, may, address behavior 269, gives ample authority "disallow [any] credit, allowance" transaction principal [of] evasion tax." 269(a). finally, conclude 269 provided little protection live exercise Code, 1502 amend 27 28 true, argued, vests adopt effect binding resolution presented case." 19-20. To exercised authority, actions point answer. disagrees, one. 29 judgment remanded proceedings opinion. 30 ordered. 31 concurring 32 Stevens, dissenting NOTES: Unless noted, references et seq. (1982 Supp. V), 1986, question. $100 $50 deductible $75 additional $25 $100-$50-$75= -$25); $125 $75, entire And, $40 thus, CFR 1.1502-11 (1982-1986). Blank, Returns, 10-Year Carrybacks, 90 Tax Notes, 10, 1383 (Mar. 5, 2001) Blank). "specified losses" (SLLs), PLLs. difference, matter. SLL, folded SLL 11811(b)(1) Omnibus Budget Reconciliation 1990, 104 1388-532. "[i]n respects, provisions [PLLs] SLLs same." Groups, 486 PLI/Tax 389, (2000) Developments). addition discussed two provisions, 1503(f)(2) version (though applicable 1986) 1502-21(b) (2000), refer NOLs. emphasized Not inapplicable us (either substantively, temporally, both), but, commentator observed, "stem[] careless drafting meaningful design." Are Groups?, 52 Tax. Law. 663, 705 (1999) Losses). whatsoever netted income: method, same. 1394 (noting conclusion follows associative principle arithmetic (which holds groupings subtraction result)"). 33 concurring. 34 I agree corresponding control filings best interpreted write respectfully disagree dissent's suggestion ambiguous, defer interpretation. post, 1-2. bare minimum, cases one, complex lends number interpretations, inclined rely traditional canon construes revenue-raising laws drafter. Leavell Blades, 237 Mo. 695, 700-701, 141 S. W. 893, 894 (1911) ("When gatherer puts his finger citizen, he put law permitting it"); Merriam, 263 179, 188 (1923) ("If words doubtful, doubt resolved taxpayer"); Bowers New York Albany Literage Co., 273 346, 350 (1927) taxing statute; liberally taxpayers"). Accord American Net Twine Co. Worthington, 468, 474 (1891); Benziger 192 38, 55 (1904). 35 dissenting. 36 close difficult case, statute offer definitive answer crucial textual Absent anchor, credit concerns about abuse created reading affirm decision basis.1 37 majority accurately reports, during 1954 allowed "taxpayer" "ha[d] whether, implementing "taxpayer." 38 obvious hand, generally accepted rationale behind run elect entity. See, 17-19 (collecting sources stated). quite remains legal literal sense "taxpayer," status consequences. Woolford Realty Rose, 286 319, 328 (1932) ignored joining none less 7701(a)(14) (defining "any person internal revenue tax," related "person" corporations). "taxpayers" contexts, presents genuine ambiguity. 39 patent ambiguity, courts, share preference resolving ambiguity via executive National Muffler Dealers Assn., 440 472, 477 (1979). issuing issued regulation. regulation, scoured tangentially regulations, looking clues intend. want precise sound. 40 point, majority's analysis. particular tells wants whenever necessary tell Even draw mild presence absence, filed, similar corporation-specific NOL's), power inference counterbalanced listing expenses. 1.1502-12; H. Enterprises Int'l, Commisioner, 105 T. 71, 85 (1995) (construing 1.1502-80(a) "[w]here differently treated, Code"). addition, subsequent promulgation (albeit purpose), loss"), demonstrates inherent problems implicit undertaking 41 short, find text Regulation.2 However, government valid policy militates construction statute: fear abuse. 40-42. Put simply, fears previously receive windfall losses. id., subjective troubling. U.S., 330 (rejecting willing foster opportunity juggling facile obvious"). More importantly, scope Perhaps suggesting alleviated applications anti-abuse ante, 15, am persuaded my own ability judgment. deal "with highly specialized despair judges," Dobson 320 489, 498 (1943), ounce deference appropriate. dissent.3 Thomas tradition construing "revenue-raising laws" (Thomas, concurring). ambiguous imposes rather crafts exception general duty taxpayers, countervailing suggests government's favor. INDOPCO, 503 79, 84 (1992); Interstate Transit Lines 319 590, 593 (1943); Deputy Du Pont, 308 488, 493 (1940); Colonial Ice Helvering, 292 435, (1934); 326 (1932). agreement Court's rejection argument. 11-12. contemplated approximates individually alternative forwarded Appeals' entirety.

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