Court Opinion

ID: 4486629
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:34:34.676187+00
Date Added: 2024-06-11T15:03:50.206865
License: Public Domain

HalpERN, J., dissenting. Respectfully, I must dissent. By focusing on whether Congress drew a seemingly arbitrary distinction between animal waste and other solid waste, and virtually ignoring the question of what constitutes recycling, the majority, in my opinion, has missed the boat. Section 48(1)(6) implicitly distinguishes two types of recycling: (1) Recycling that serves to recover usable raw materials, sec. 48(1)(6)(A), and (2) recycling that converts waste into fuel or other useful forms of energy, sec. 48(1)(6)(D). That distinction, which is explicitly drawn by section 1.48-9(g), Income Tax Regs., is neither challenged by petitioner nor questioned by the majority opinion. Section 1.48-9(g), Income Tax Regs., provides in pertinent part: (g) Recycling equipment — (1) In general. Recycling equipment is equipment used exclusively to sort and prepare, or recycle, solid waste (other than animal waste) to recover usable raw materials (“recovery equipment”), or to convert solid waste (including animal waste) into fuel or other useful forms of energy (“conversion equipment”). * * * [Emphasis added.] The distinction between “recovery equipment” and “conversion equipment” can also be stated as a distinction between “recovery recycling” and “conversion recycling”. Simply put, those are distinct processes: one yields raw materials; the other produces energy. Accordingly, it should be no surprise if certain types of waste are usable for conversion recycling but not for recovery recycling. The starting point must be to define what I have termed recovery recycling. Respondent's arguably narrow definition of recovery recycling limits such process to one in which the raw materials recovered can be reused to produce an end-product that is the same as (or perhaps similar to) the end product that gave rise to the solid waste (the majority describes that limitation as imposing an “end-product requirement”). Under respondent's view, animal waste, inherently incapable of being used to create a new animal, or at least additional hamburger or pork chops, simply is not susceptible to recovery recycling. Nonetheless, animal waste can be used to create fuel or other useful energy and, therefore, is susceptible to conversion recycling. The “disparate treatment” stems from the distinct nature of the two processes, assuming respondent's definition of recovery recycling. The majority, however, argues that solid waste should be treated the same in both contexts: The regulations, however, differentiate between the two references to the term “solid waste”. Section 1.48-9(g)(l), Income Tax Regs., excludes animal waste from the definition of recycling of solid waste for purpose of recycling. By way of a similar parenthetical, the same section of the regulation specifically includes animal waste in the definition of solid waste for purposes of the conversion of solid waste into fuel or other useful forms of energy. No explanation is offered by respondent for this disparate treatment between the Code and regulation nor is any to be found. [Majority op. p. 134.] In my opinion, the majority misunderstands the meaning of section 1.48-9(g), Income Tax Regs. The regulation does not, as the majority suggests, contain contradictory definitions of solid waste, in one instance defining solid waste to include animal waste and in another instance defining solid waste to exclude it. The regulation merely provides that only solid waste other than animal waste is eligible for recovery recycling.1 The parenthetical exclusion of animal waste in section 1.48-9(g), Income Tax Regs., may well be nothing more than the regulation's poor way of expressing, by one example, respondent's narrow definition of recovery recycling. If that is so, then the real issue here is not the definition of solid waste but the definition of recovery recycling. Accordingly, to justify a holding for petitioner, it is insufficient to determine, as the majority does and respondent concedes, that animal waste constitutes solid waste. To hold for petitioner, it is also necessary to consider whether animal waste can be subject to recovery recycling. Thus, we must determine whether respondent's definition of the term “recovery recycling” is reasonable or is plainly inconsistent with the Code. See Bingler v. Johnson, 394 U.S. 741, 750 (1969). Moreover, as the majority states, that determination must be made with an especially high degree of deference, since we deal here with a legislative regulation. Phillips Petroleum Co. v. Commissioner, 97 T.C. 30, 34 (1991). Inexplicably, the majority casts deference aside, conclusorily asserting that “any reasonable reading of the statutory provisions dealing with ‘recycling equipment,’ in light of the natural import of the word ‘recycle’ and the legislative history, supports petitioner's substantive position herein.” Majority op. p. 132. The majority seems content to observe that: “No mention is made in the Code, regulations, or legislative history of a same type or similar end-product requirement.” However, the majority concedes that “the legislative history sets forth end-product examples of metal waste, textile fibers, and paper products.” Majority op. p. 132. Moreover, the majority fails to cite even one example from the legislative history of a non-end-product example. Thus, while the legislative history lacks any explicit statement that there is an end-product requirement, it equally lacks any explicit statement that there is not. Further, the fact that, with respect to recovery recycling, the legislative history lists end-product examples only is clearly sufficient to support a reasonable inference that Congress intended an end-product requirement. While I might not read in such a requirement if called upon to determine the most likely interpretation, our task is far more humble. All we may determine is whether the Commissioner's definition is reasonable or is plainly inconsistent with Congress' intent. See Bingler v. Johnson, supra. I believe that petitioner has failed to sustain the heavy burden of demonstrating the latter. Parker, J., agrees with this dissent.   Just as the phrase “colors other than blue” does not suggest that blue is not a color, the phrase “solid waste other than animal waste” does not suggest that animal waste is not solid waste. To reduce respondent's argument to the defense of an inconsistent definition of the term “solid waste” is to construct a straw dummy and ignore the real issue in this case.