Court Opinion

ID: 4486624
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:34:34.571958+00
Date Added: 2024-06-11T15:03:49.435133
License: Public Domain

HALPERN, J., concurring. I write separately to emphasize the distinction between the reenactment doctrine and the reasoning of the majority. As stated by the Court of Appeals for the Sixth Circuit in People's Federal Savings & Loan Association of Sidney v. Commissioner, 948 F.2d 289 (6th Cir. 1991), revg. T.C. Memo. 1990-129, a recent expression of the reenactment doctrine is found in NLRB v. Bell Aerospace Co., 416 U.S. 267 (1974). In that case, where the National Labor Relations Board had consistently interpreted the Taft-Hartley Act of 1947 as excluding “managerial employees”, the Supreme Court concluded that Congress' failure, when it amended the Act in 1959, “to revise or repeal the agency's interpretation is persuasive evidence that the interpretation is the one intended by Congress”. Id. at 275. Thus, the reenactment doctrine would appear to rest upon two assumptions: (1) That whenever Congress reenacts a statute, it is aware of the body of interpretation regarding that statute, and (2) that, in such circumstances, Congress' failure to countermand some aspect of that body of interpretation constitutes an affirmative sanction thereof. Together, those assumptions are capable of producing an inference that Congress has sanctioned a given regulation respecting an issue to which Congress has given little or no thought. Apparently, it is that potential overbreadth that concerned the Sixth Circuit in Peoples Federal Saving & Loan Association of Sidney v. Commissioner. The re-enactment doctrine is merely an interpretive tool fashioned by the courts for their own use in construing ambiguous legislation. It is most useful in situations where there is some indication that Congress noted or considered the regulations in effect at the time of its action. Otherwise the doctrine may be as doubtful as the silence of the statutes and legislative history to which it is applied. [Id. at 302-303. Fn. ref. omitted]. Unfortunately, the Sixth Circuit failed to understand that implicit in the compromise achieved by Congress in 1969 is some understanding regarding taxable income. As we noted in Pacific First Federal Savings v. Commissioner, supra at 111: The House Report also contains a number of statistics, including the following: Tax as a percent of economic income 1966 A. Commercial banks 23.2 B. Mutual savings banks 6.1 C. Savings and loan associations 16.9 In response to the foregoing statistics, the House Report comments: Since your committee's bill increases appreciably the 23.2 percent effective rate of tax for commercial banks, it is your committee's intention not only to bring the level of taxation of mutual savings banks (presently 6.1 percent) up to the level of savings and loan associations (16.9 percent), but also to provide an increase in the 16.9 percent rate somewhat comparable to the increase in the 23.2 percent rate for commercial banks. * * * [H. Rept. 91-413, 1969-3 C.B. at 278.] Undoubtedly, Congress was aware of the definition of “taxable income” used in computing the percentage-of-taxable-income bad debt deduction when it considered the existing and expected percentage of economic income to be paid as taxes by mutual savings banks. Moreover, there are two readily apparent ways Congress could have chosen to modify that deduction to increase the tax paid by mutual savings banks. The 1969 Congress could have elected (1) to reduce the base against which the percentage was applied to something less than what it was understood to be at that time or (2) to reduce the percentage of taxable income allowed to be deducted. With respect to the goal of achieving the proper aggregate tax to be achieved from mutual savings banks overall, it would have made little difference whether Congress chose the former, the latter, or some combination of the two. Whether the percentage bad debt deduction was to be computed by taking, for example, two-thirds of 5Ox or one-third of lOOx would have been, quite logically, immaterial with respect to the total tax sought to be collected. However, given the relationship between the definition of taxable income and the percentage thereof deductible, Congress' decision to adjust the latter is only meaningful if it presupposes a particular definition of the former. Given that there was no discussion of altering the then established rule of determining taxable income without respect to NOL's, Congress must have assumed that such rule would continue to apply. Amazingly, however, the Court of Appeals for the Sixth Circuit has concluded that Congress simply did not care whether NOL's are to be deducted in arriving at the figure for taxable income. People’s Federal Savings & Loan Association of Sidney v. Commissioner, supra at 301 (“there is no evidence in the legislative history of the statutes in question that Congress ever had a specific or particular intent with respect to the ordering rule to be applied in this case”). Pursuing that logic, Congress' struggle to determine the most appropriate extent of the bad debt deduction must seem quite comical. As the Sixth Circuit sees the matter, Congress was indifferent to the total percentage of economic income collected, overall, from the banking institutions in question: all Congress cared about was that the bad debt deduction be limited to a particular percentage of an indeterminate income base. The facts belie the Sixth Circuit's apparent conclusion that Congress has acted in that irrational a manner. In 1969, it was settled that taxable income was determined without taking NOL's into account. Congress' computations, discussions, and the eventual compromise must necessarily have been based upon that understanding of what taxable income meant.1 Accordingly, the Commissioner's use of a different definition of taxable income is, in this context, inconsistent with the Tax Reform Act of 1969. I respectfully concur with the majority. CHABOT, HAMBLEN, and Beghe, JJ., agree with this concurring opinion.   Unfortunately, Congress does not appear to have said so explicitly. No Code provision or quotation from the written legislative history can be produced to directly support the point. That does not mean, however, that Congress was indifferent with respect to the ordering rule at question in this case. Where logical reasoning, applied to the sum of the facts and circumstances, can disclose a clear congressional intent, we are obliged to utilize that tool.