Court Opinion

ID: 4483416
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:16:05.388067+00
Date Added: 2024-06-11T14:53:38.287080
License: Public Domain

Fay,J. dissenting: I respectfully disagree with the majority because I believe the path it follows toward its conclusion represents judicial legislation under the guise of statutory interpretation. Petitioner retired from the United States Air Force at the age of 49 due to a physical disability. He retired with a 10-percent disability rating and was awarded a disability pension of $9,130. Because of his 10-percent disability rating, petitioner was entitled under section 104(a)(4) to exclude 10 percent of this amount from his income.1 In addition, a portion of the disability pension received by petitioner which exceeded his section 104(a)(4) exclusion qualified for the section 105(d) “sick pay” exclusion until he reached his normal retirement age. Sec. 1.105-4(a)(3)(i)(A), Income Tax Regs. In accordance with section 105(d) and the regulations thereunder, petitioner claimed the maximum exclusion allowable of $5,200 in 1972. The remaining portion of the $9,130 disability payment received by petitioner was fully taxable. This amount was used by petitioner in computing his retirement income credit under section 37. The fundamental issue in this case is whether the amounts received by petitioner in excess of his sections 104(a)(4) and 105(d) exclusions qualify as “retirement income” as that term is used in section 37. For individuals under the age of 65, section 37(c)(2) defines “retirement income” to include “income from pensions and annuities under a public retirement system.”2 Unfortunately, the precise meaning of the words “pensions and annuities” is not defined by the statute or respondent’s regulations. The majority limits its meaning to include only those pensions and annuities “whose taxability is determined under section 72.” Because the payments received by petitioner are governed by sections 104 and 105 (and not by section 72), they are, according to the majority, outside the purview of the term “pensions and annuities” in section 37.1 disagree.3  First of all, the most troublesome aspect of this decision, and that which becomes readily apparent upon a reading of the opinion, is that the majority cites no support for its position in the pertinent Code sections, regulations, or legislative history. I believe the result herein is simply a product of the majority’s concern that to hold for the taxpayer in this case would permit him to enjoy multiple tax benefits. Specifically, it states: “In our judgment we doubt whether Congress ever intended to permit a double tax benefit by allowing a taxpayer who receives wage continuation benefits to receive the added benefit of the credit for receiving retired pay.” In reaching the result it desires, the majority finds it necessary to narrowly interpret the plain words of the statute, viz., it restricts “pensions and annuities” to include only those “pensions and annuities whose taxability is governed by section 72.” I believe this is nothing more than a blatant and unwarranted example of judicial legislation. While the taxpayer in the instant case would enjoy multiple benefits under the applicable Code sections, this fact does not suddenly confer upon this Court the power to rewrite the statute. As noted by the Supreme Court in Hanover Bank v. Commissioner, 369 U.S. 672, 687-688 (1962): we are not at liberty, notwithstanding the apparent tax-saving windfall bestowed upon taxpayers, to add to or alter the words employed to effect a purpose which does not appear on the face of the statute. * * * the Government * * * urges this Court to do what the legislative branch of the Government failed to do or elected not to do. This, of course, is not within our province. [Fn. ref. omitted.] In International Trading Co. v. Commissioner, 484 F.2d 707, 711 (7th Cir. 1973), revg. 57 T.C. 455 (1971), the court stated: we find no basis therein for our undertaking to put words into the statute that, whatever the reasons may have been, Congress did not put there. Our task is to construe and apply, not to write, legislation. We would do well to heed these words. The Code sections in this case are complicated enough without our convoluted interpretation of them overlaying the existing confusion. Furthermore, not only is its interpretation of the statute unduly restrictive, but also I believe the myopic approach taken by the majority overlooks the effect of several statutory changes made by Congress in the Tax Reform Act of 1976. As previously noted, the majority appears troubled at the prospect of allowing petitioner multiple tax benefits under various Code sections with respect to the same disability pension. Presumably, by denying petitioner the right to claim a retirement income credit, the majority believes it has reached an equitable result. Unfortunately, by failing to give full consideration to the 1976 amendments affecting sections 104(a)(4) and 105(d), the majority has created a situation where the result in similar future cases will invariably be unjust. Specifically, both sections 104 and 105 were amended so that if the same facts occurred today a similarly situated taxpayer would receive no disability exclusion under section 104(a)(4)4 and would not be allowed a section 105(d) exclusion because he is not “totally and permanently” disabled. See H. Rept. 94-658, 1976-3 C.B. (Vol. 2) 695, 844. These changes would make the full $9,130 taxable, and under the majority’s opinion, petitioner, until he reaches normal retirement age, would not be eligible to claim the credit under section 37. In other words, the means employed by the majority to deal with what it perceives to be an inequitable situation with respect to the petitioner in the instant case, will operate to penalize future taxpayers who themselves will have never received any multiple benefits under the statute. Certainly I would not deny that the concepts of equity and fairness oftentimes serve as the sole basis for a decision; however, I believe any justification for the use of these concepts to reach the result herein has certainly been swept away by changes Congress has made in the statute.5  Tannenwald, J., agrees with this dissenting opinion. Hall, J., dissenting: I respectfully dissent. Section 37(c)(2) provides that “retirement income” (with respect to which the retirement income credit is available) includes, “in the case of an individual who has not attained the age of 65 before the close of the taxable year, income from pensions and annuities under a public retirement system (as defined in subsection (f)).” During the year in issue, 1972, petitioner was under 65 and received disability annuity payments of $9,130 from the retirement system established by Congress for members of the Armed Forces, pursuant to the provision^ of 10 U.S.C. 1201. The only question is whether, within the meaning of section 37(c)(2), these payments constituted “pensions or annuities.” In holding that they do not, the majority relies on the fact that Congress has chosen to provide an exclusion under section 105 for the first $5,200 of such payments, and concludes that payments subject to the benefits of such an exclusion must not be the kind of “pensions and annuities” Congress had in mind. Absent section 105, the majority would apparently have no difficulty in finding that petitioner’s pension was a pension. The trouble with the majority’s opinion is the entire absence of statutory support for it. Clearly enough, that which petitioner received was a pension from a public retirement system as defined in the statute. The majority divines a congressional intent to the contrary, but the divination’s major premise is rooted not in the statute or even a regulation, but rather in an unsupported revenue ruling, Rev. Rui. 69-12, 1969-1 C.B. 23. This ruling deals with civilian employees and reads into section 37(c)(2), as previously in effect, a requirement which is simply not in the statute. The ruling says, in effect, that for civilian employees a pension is not a pension if it is treated for purposes of section 105(d) as “wages or payments in lieu of wages.” The difficulty with the ruling is that section 37(c)(2) contains no exception for such amounts. The majority then finds a minor premise in legislative history which says that Congress intended a parity of civilian and military treatment, and concludes that only pensions taxed under section 72 are really “pensions.” The error in the majority’s logic is the faulty major premise. A revenue ruling has no independent force and can be only as persuasive as the reasoning and authorities on which it relies. Stubbs, Overbeck & Associates v. United States, 445 F.2d 1142, 1146-1147 (5th Cir. 1971); Estate of Lang v. Commissioner, 64 T.C. 404, 406-407 (1975), on appeal (9th Cir., Jan. 6, 1976, by respondent, and Jan. 19, 1976, by petitioner). To treat a ruling as more than the position of one of the litigants before us is to permit a man to be judge in his own cause — a principle abhorrent to law since the days of Hammurabi. Rev. Rui. 69-12 is supported neither by reason nor authority. It represents merely respondent’s effort to eliminate what respondent perceives as a statutory double benefit, not by persuading Congress to repeal it, but by the attempted shortcut of administratively decreeing a new requirement not contained in the statute. Nothing in the majority opinion supplies the missing statutory language supporting the result for which respondent contends. It may or may not be that Congress would have preferred to limit the benefits of section 37 to those not also benefiting from section 105(d), had the matter been brought to its attention. We see no a priori reason to presume that it would. However, the desirability of such a limitation is a policy matter concerning which we cannot express a view. We should deal with the statute as we find it. Furthermore, careful reading of the statute discloses not only that Congress failed to exclude pre-65 disability pensions from the statutory category of “pension,” but even that Congress affirmatively intended to include them. Section 37(d)(1) limits retirement income to $1,524 less “any amount received by the individual as a pension or annuity * * * otherwise excluded from gross income.” Section 37(e) provides, however, that subsection (d)(1) does not apply to amounts excluded from gross incom'e under section 105. The implication from the interplay of these sections is that benefits received under section 105 may be viewed, under section 87(d)(1), as a pension or annuity which reduces the amount of retirement income. Benefits received under section 105 may thus fall within the broad rubric of “pensions and annuities,” undercutting the majority’s limited interpretation of that phrase. An additional indication that section 105 benefits are eligible for the credit can be reached through a negative implication. When a person retired on disability pay reaches the age 65, he is deemed no longer to be receiving “sick pay” but rather “retirement pay,” so that the amounts received are not considered to be under section 105 (and are not entitled to an exclusion). Accordingly, an individual could only receive moneys under section 105 which would be excluded from gross income (and therefore create a question whether such a pension or annuity decreases the amount of retirement income) if that individual is under 65. By implication, amounts received by an individual under age 65 are a pension or annuity — otherwise, the reference to section 105 in section 37(e) is superfluous. Additional support for the conclusion that the term “pensions and annuities” is broader than the majority concludes can be found in section 37(c). Section 37(c) defines “retirement income” for which the credit authorized under section 37(a) is allowable. Retirement income is defined separately for persons over 65 and for persons under 65. “Retirement income” after 65 means (1) “pensions and annuities,” (2) interest, (3) rents, (4) dividends, and (5) bonds. Before age 65, retirement income is “pensions and annuities under a public retirement system (as defined in subsection (f)).” For both age groups the same phrase, “pensions and annuities,” is used. For persons over 65 this phrase must encompass all terms of retirement benefits (other than the specified rents, etc.), including disability benefits. The implication to be drawn is that the phrase “pensions and annuities” should be broadly construed. Similarly, “pensions and annuities” should be broadly construed under section 37(c)(2). A pension is a pension. Should Congress desire to narrow that category it need but so provide. It is not for us to do so. Drennen, Fay, Tannenwald, and Wilbur, JJ., agree with this dissenting opinion.  See n. 4 of the majority opinion.   “Public retirement system” includes payments from a fund established by the United States for members of the Armed Forces. See sec. 1.37 — 3(a)(3), Income Tax Regs.   It is unfortunate that the taxpayer herein appeared pro se because the only assistance the majority had in deciding this case was a Government brief which was not particularly illuminating.   Sec. 104(b), added in 1976, makes sec. 104(aX4) inapplicable to an individual enlisting after Sept. 24, 1975, unless his particular disability is combat related.   One significant ramification of our opinion is to elevate to a level of importance the label which is placed on a pension. Por example, suppose an individual, A, who is under the age of 65, retires from the Armed Forces and is awarded a “disability” pension which, because of the new secs. 104(b) and 105(d), is fully taxable. Under our decision A would not be eligible for the sec. 37 credit. However, if A had instead received a fully taxable “regular” pension he would be entitled to a sec. 37 credit by virtue of new sec. 37(e) (old sec. 37(c)). Viewing the realities of the situation, I can see no justification for the difference in treatment.