Court Opinion

ID: 6931313
Source: CourtListenerOpinion
Date Created: 2022-07-24 00:03:10.712214+00
Date Added: 2024-06-11T16:07:12.056305
License: Public Domain

SEYMOUR, Circuit Judge,
dissenting.
I respectfully dissent from the majority opinion in this case. I would affirm on the basis of the tax court’s opinion.
As the majority recognizes, when the Treasury is given a specific grant of authority to promulgate regulations, there is a strong presumption in favor of the validity of those regulations. See United States v. Vogel Fertilizer Co., 455 U.S. 16, 24, 102 S.Ct. 821, 827, 70 L.Ed.2d 792 (1982); Commissioner v. Portland Cement Co. of Utah, 450 U.S. 156, 169, 101 S.Ct. 1037, 1045-46, 67 L.Ed.2d 140 (1981). Regulations are invalid, however, if they are unreasonable or plainly inconsistent with the Code itself. See Bingler v. Johnson, 394 U.S. 741, 750, 89 S.Ct. 1439, 1445, 22 L.Ed.2d 695 (1969).
Other circuits have struck down Treasury regulations that made exceptions to classifications contained in the Code without author*1017ity from the Code itself. See, e.g., Iglesias v. United States, 848 F.2d 362, 367 (2d Cir.1988) (Treasury regulation altering scope of statute by excluding prejudgment interest from taxable income a nullity); Goodson-Todman Enterprises, Ltd. v. Commissioner, 784 F.2d 66, 76-77 (2d Cir.1986) (Treasury regulation defining all game show tapes as “topical or transitory” held unreasonable for excluding the tapes as a class from investment tax credits otherwise available under Code); Cosby v. United States, 795 F.2d 999 (Fed.Cir.1986) (holding same regulations invalid).
As the majority recognizes, the reason animal waste is excluded from the definition of recovery recycling in Treasury Regulation 1.48-9(g) is because the Treasury has interpreted the term “recycle” to require the end product recovered to be one that is usable in the same manner as the original material processed. This reasoning is flawed for two reasons. First, had the Commissioner actually used this definition of recycle across the board, more than just animal waste would have to be excluded from the “solid waste” permitted to be recycled. For example, as the tax court noted, “there would be few, if any, agricultural products which could be recycled.... Clearly, animal parts cannot be recovered to produce a cow, nut shells to produce nuts, pea pods to produce peas, or corn husks to produce corn.” Pepcol Manufacturing Co., v. Commissioner, 98 T.C. 127, 135-36, 1992 WL 17457 (1992). It is unreasonable for the Commissioner to exclude only animal waste from the category of solid waste by claiming to be following a definition of recycle which would exclude other types of waste as well.
In addition, the Supreme Court has stated that when Congress does not specifically define a term, revenue laws should be interpreted in accordance with common understanding and experience. Helvering v. Horst, 311 U.S. 112, 118, 61 S.Ct. 144, 147-48, 85 L.Ed. 75 (1940); Addison v. Holly Hill Fruit Products, 322 U.S. 607, 618, 64 S.Ct. 1215, 1221-22, 88 L.Ed. 1488 (1944). We have also held that the failure of Congress to define a term strongly suggests that its traditional and well-established meaning should be used. Estate of Greshem v. Commissioner, 752 F.2d 518, 522 (10th Cir.1985) (where Code did not define the term “fair market value,” Treasury regulation that defined it differently from traditional sense was invalid). The ordinary meaning of the word recycle is much broader than the Commissioner’s narrow definition. One court which reached the same conclusion as the tax court in the instant case stated:
[T]he common usage of the word “recycling” envisions a process whereby items that have no other economic use in their present form are transformed into valuable, usable products. It makes no difference whether paper is recycled to create more paper or whether disposable diapers are recycled to create plastic chairs — both processes constitute “recycling.”
Griffin Industries, Inc. v. United States, 27 Fed.Cl. 183, 190 (1992). Consequently, even if the Commissioner did properly exclude animal waste from the definition of recovery recycling in Treasury Regulation 1.48-9(g) based on an end-use definition of recycling, I am convinced the definition used is contrary to the common use of the term and is thus unreasonable.
Before SEYMOUR, Chief Judge, GOODWIN * and McKAY, Circuit Judges.
AMENDED ORDER
Because amendments to this court’s opinion filed December 29, 1993, 13 F.3d 355, were omitted from the March 31, 1994, unpublished order denying rehearing and rehearing in banc, the court, upon its own motion, recalls the mandate and amends that order to read as follows:
This matter comes on for consideration of appellee’s petition for rehearing and suggestion for rehearing in banc.
Upon consideration whereof, the court’s opinion is amended as follows: [Editor’s *1018Note: Amendments incorporated for purposes of publication].
The opinion having been so amended, the petition is denied by the panel that rendered the decision sought to be reheard. Judge Seymour voted to grant rehearing.
In accordance with Rule 85(b), Federal Rules of Appellate Procedure, the suggestion for rehearing in banc was transmitted to all of the judges of the court who are in regular active service. No member of the panel and no judge in regular active service on the court having requested that the court be polled on rehearing in banc, Rule 35, Federal Rules of Appellate Procedure, the suggestion for rehearing in banc is denied.
Because this order includes, amendments to the court’s opinion filed December 29, 1993, the order is published.