Court Opinion

ID: 9493126
Source: CourtListenerOpinion
Date Created: 2023-08-05 14:58:53.848285+00
Date Added: 2024-06-11T17:55:40.019445
License: Public Domain

SCHALL, Circuit Judge,
dissenting.
I respectfully dissent because I am unable to agree that § 1804(e)(4) of the Tax Reform Act of 1986 prohibited the IRS from requiring Doyon to pay the AMT on tax sharing payments that it received in transactions authorized by § 60(b)(5) of DEFRA 1984.
I
The majority holds that § 1804(e)(4) created a tax exemption for Native Corporations by excluding tax sharing payments from book income for purposes of computing the AMT. In reaching this holding, it concludes that the language of § 1804(e)(4) (“[N]o provision of the Internal Revenue Code of 1986 ... or principle of law shall apply to deny the benefit or use of losses incurred or credits earned by [a Native Corporation] to the affiliated group of which the Native Corporation is the common parent.”) meant that the statute applied to any provision of the tax code or principle of law, including the AMT. It also concludes that the word “benefit” in § 1804(e)(4) meant the “subsequent ‘benefit’” of the amount of money received through the sale of NOL’s and ITC’s by Native Corporations. Because paying taxes on tax sharing payments reduced the total amount of money received by Native Corporations from engaging in tax sharing transactions, the majority reasons, Native Corporations were denied the “benefit” of engaging in affiliated transactions. My problem with the majority’s holding is that I believe it runs afoul of the intent of Congress in enacting § 1804(e)(4).
II
“The ultimate objective when interpreting a statute is to give effect to the intent of Congress.” In re Portola Packaging, Inc., 110 F.3d 786, 788 (Fed.Cir.1997). Statutory interpretation begins with the language of the statute. See VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1579 (Fed.Cir.1990). However, “ ‘we look not only to the particular statutory language, but to the design of the statute as a whole and to its object and policy.’” In re Portola Packaging, 110 F.3d at 788 (quoting Crandon v. United States, 494 U.S. 152, 158, 110 S.Ct. 997, 108 L.Ed.2d 132 (1990)).
Congress passed § 60(b)(5) of DEFRA 1984 in order to exempt Native Corporations from the normal affiliation rules, so *1318that they could sell their NOL’s and ITC’s to profitable companies for tax sharing purposes. Then, after the IRS thwarted that goal, Congress enacted § 1804(e)(4). It did so to prohibit what the IRS was doing (blocking Native Corporations from engaging in the desired tax sharing transactions). However, neither the statute nor the legislative history suggests that Congress intended to create a tax exemption for Native Corporations when it enacted § 1804(e)(4). Indeed, the majority very fairly acknowledges that “it appears that the AMT was not part of the impetus for passing § 1804(e)(4).” Moreover, § 56 of the Internal Revenue Code, entitled “Adjustments in computing alternative minimum taxable income,” was enacted at the same time as § 1804(e)(4). See Tax Reform Act of 1986, Pub.L. No. 99-574, 100 Stat. 2085, 2328, 2801. Section 56(f)(2)(G), entitled “Rules for Alaska native corporations,” specifically allows certain adjustments to be made to the “adjusted net book income” of a Native Corporation. 26 U.S.C. § 56(f)(2)(G). However, § 56(f)(2)(G) has never allowed adjustments to be made to book income based upon tax sharing transactions conducted under the authority of § 1804(e)(4). of the Tax Reform Act of 1986 or § 60(b)(5) of DEFRA 1984. Had Congress contemplated the exemption urged by Doyon, it is reasonable to expect that it would have made provision for it in § 56.
The majority states that we must bear in mind that “statutes are to be construed liberally in favor of the Indians, with ambiguous provisions interpreted to their benefit.” Montana v. Blackfeet Tribe of Indians, 471 U.S. 759, 766, 105 S.Ct. 2399, 85 L.Ed.2d 753 (1985). The majority also cites Choate v. Trapp, 224 U.S. 665, 675, 32 S.Ct. 565, 56 L.Ed. 941 (1912) (holding that although tax exemptions generally are to be construed narrowly, in “the Government’s dealings with the Indians the rule is exactly the contrary. The construction, instead of being strict, is liberal.”). According to the majority, it is within this framework that Doyon’s claim for a refund must be viewed. What I will refer to as the “Indian canon of construction” is a well-established doctrine. Indeed, it was recently applied by this court in Little Six, Inc. v. United States, 210 F.3d 1361 (Fed.Cir.2000), where we construed ambiguous language in 25 U.S.C. § 2719(d)(1) in favor of an Indian tribe and its wholly-owned corporation in holding that the tribe and the corporation were exempt from the payment of federal wagering taxes. In my view, however, the Indian canon of construction does not apply in this case.
“Indians ... are subject to the payment of income taxes as are other citizens.... [T]o be valid, exemptions to tax laws should be clearly expressed.” Squire v. Capoeman, 351 U.S. 1, 6, 76 S.Ct. 611, 100 L.Ed. 883 (1956). Moreover, “[t]he canon of construction regarding the resolution of ambiguities in favor of Indians ... does not permit reliance on ambiguities that do not exist; nor does it permit disregard of the clearly expressed intent of Congress.” South Carolina v. Catawba Indian Tribe, Inc., 476 U.S. 498, 506, 106 S.Ct. 2039, 90 L.Ed.2d 490 (1986).
In this case there is simply no indication that, when Congress enacted § 1804(e)(4), it intended to grant Native Corporations an exemption from the AMT. Quite simply, all Congress did was enact legislation for a clearly defined purpose, and that purpose did not include granting a tax exemption. In short, there is no tax exemption provision whose language — assuming it to be ambiguous — is to be construed in favor of Native Corporations. See Cook v. United States, 86 F.3d 1095, 1097 (Fed.Cir.1996) (“Absent a definitely expressed exemption, Indians, like all other United States citizens, are subject to federal taxation.”). Under these circumstances, the predicate for application of the Indian canon of construction is missing. Thus, we are left with the normal rules of statutory construction. In my view, application of those rules compels the conclusion that § 1804(e)(4) does not confer a tax exemption upon Native Corporations. Finally, I believe that the Court of Federal Claims *1319did not err in rejecting Doyon’s other arguments in support of its claim for a refund, see footnote 6 of the majority opinion. I therefore would affirm the court’s decision.