Court Opinion

ID: 9493280
Source: CourtListenerOpinion
Date Created: 2023-08-05 15:03:35.057126+00
Date Added: 2024-06-11T17:55:45.416459
License: Public Domain

STRAUB, Circuit Judge,
dissenting:
I respectfully dissent.
The majority is skeptical of the government’s enforcement of I.R.C. § 6715 against ConEd under the circumstances of this case.1 See, e.g., ante at 368 (stating that IRS compliance officer “sprang into action” upon learning “that an innocent mistake, committed without tax avoidance or evasion, without concealment, and without harm, was about to be corrected voluntarily, immediately and without consequence”). However, Congress sought to attack a serious problem when it enacted the stringent penalty provisions found in § 6715. Throughout the 1980s and early 1990s, theft and evasion of gasoline and diesel fuel taxes resulted in spectacular revenue losses to federal and state governments. Organized crime played a large role in fuel tax hijacking. By one account, organized crime had a hand in stealing as much as $8 million a month in fuel taxes for many years in the New York area. See generally Ron Hagquist & Dawn Doyle, Fuel Tax Hijacking: How State Governments are Responding, 15 Gov’t Fin. Rev. 45 (1999); see also 139 Cong. Rec. E1486 (daily ed. June 14, 1993) (statement of Rep. Istook) (discussing the scale of the diesel excise tax evasion problem); 138 Cong. Rec. H7188-89 (daily ed. Aug. 3, 1992) (statement of Rep. Matsui). At the time of enactment of § 6715 in 1993, the level of evasion and theft of federal diesel fuel taxes was estimated by the U.S. Department of Transportation to represent between 15 and 25 percent of the total amount of diesel fuel consumed, amounting to hundreds of millions of dollars in revenue losses each year. See H. Rpt. 103-111, at 748 (1993); Fuel Tax Evasion and Highway Trust Shortfall: Hearing Before the Subcomm. on Investigations and Oversight of the House Comm, on Public Works and Transportation, 103rd Cong., 1994 WL 417181 (Aug. 10, 1994) (statement of Jane F. Garvey, Deputy Administrator, Federal Highway Admin., U.S. Dep’t of Transportation).
Against this backdrop of massive revenue losses, Congress enacted enforcement measures that, as the majority correctly observes, include rather stringent penalty provisions. As the majority notes, the statute is “not as complex as ConEd contends.” Ante at 369. To the contrary, its *373strict provisions are quite straightforward. Section 6715 exacts a penalty whenever “dyed fuel is held for use or used ... for a use other than a non-taxable use” by one who has “reason to know[ ] that such fuel was so dyed.” I.R.C. § 6715(a)(2), 26 U.S.C. § 6715(a)(2). There is nothing ambiguous about this statutory language. If taxpayers have “reason to know” that the fuel being held for use is red-dyed, then they are imputed with constructive knowledge that they are holding red-dyed fuel— regardless of their understanding of the tax consequences of holding that red-dyed fuel or even their actual knowledge of whether the fuel is, in fact, red-dyed.
Here, ConEd concedes that the dyed fuel was both “held” and “used” within the meaning of the statute. As the majority recognizes, the only relevant question therefore concerns whether ConEd had reason to know that the fuel was red-dyed. “All that matters ... is ConEd’s awareness that the fuel was dyed” — its understanding of the tax consequences of that coloration and its “purity of heart” are simply irrelevant. Ante at 370. The delivery ticket presented in this case (which is appended to this opinion) revealed to ConEd in bright red, 18-point letters stamped across the center of the ticket that the delivered fuel was “RED DYED.” The ticket also contained two additional disclosures, one on the front and one on the back, stating clearly that possession of red-dyed fuel under certain circumstances is illegal. While the majority holds that the delivery ticket conveyed “mixed signals” since it “obviously indicate[d]” that tax was to be paid on the delivered fuel, ante at 371-72, the mere presence of this notation on the delivery ticket is insufficient to create a genuine issue of material fact as to ConEd’s “reason to know” that the fuel was red-dyed. In order to avoid summary judgment in favor of the government, ConEd “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); see also Gallo v. Prudential Residential Services, L.P., 22 F.3d 1219, 1223 (2d Cir.1994) (“When no rational jury could find in favor of the nonmov-ing party because the evidence to support its case is so slight, there is no genuine issue of material fact and a grant of summary judgment is proper.”). Rather, ConEd must provide sufficient affirmative indication “that [its] version of relevant events is not fanciful.” Podell v. Citicorp Diners Club, Inc., 112 F.3d 98, 101 (2d Cir.1997) (internal quotation marks and citations omitted).
ConEd has failed to meet this burden. Given the bold red stamp across the face of the delivery ticket plainly indicating that the fuel was “RED DYED,” no reasonable fact-finder could conclude that a reasonably prudent taxpayer in ConEd’s position lacked “reason to know” that the fuel was red-dyed. Rather, the evidence remains “so one-sided that” the government “must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). ConEd is a sophisticated operator of several fueling stations, and it does, in fact, use red-dyed fuel at other facilities. The undisputed facts of this case leave no question — not even an inference — but that ConEd had “reason to know” that the fuel was red-dyed.
Accordingly, I would affirm the District Court’s judgment.
*374Appendix to Dissenting Opinion of Judge Straub
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*375[[Image here]]

. Unless otherwise noted, I adopt the various abbreviations and acronyms utilized by the majority.