TAX LAWS SUBJECT TO STRICT CONSTRUCTION

 

 

            Tax laws are clearly in derogation of personal rights and property interests and are, therefore, subject to strict construction, and any ambiguity must be resolved against imposition of the tax. In Billings v. U.S., 232 U.S. 261, 34 S.Ct. 421 (1914), the Supreme Court clearly acknowledged this basic and long-standing rule of statutory construction:

 

"Tax statutes . . . should be strictly construed, and, if any ambiguity be found to exist, it must be resolved in favor of the citizen. Eidman v. Martinez, 184 U.S. 578, 583; United States v. Wigglesworth, 2 Story, 369, 374; Mutual Benefit Life Ins. Co. v. Herold, 198 F. 199, 201, aff'd 201 F. 918; Parkview Bldg. Assn. v. Herold, 203 F. 876, 880; Mutual Trust Co. v. Miller, 177 N.Y. 51, 57."

(Id at p. 265, emphasis added)

 

Again, in United States v. Merriam, 263 U.S. 179, 44 S.Ct. 69 (1923), the Supreme Court clearly stated at pp. 187-88:

 

"On behalf of the Government it is urged that taxation is a practical matter and concerns itself with the substance of the thing upon which the tax is imposed rather than with legal forms or expressions. But in statutes levying taxes the literal meaning of the words employed is most important, for such statutes are not to be extended by implication beyond the clear import of the language used. If the words are doubtful, the doubt must be resolved against the Government and in favor of the taxpayer. Gould v. Gould, 245 U.S. 151, 153."

                                                                               (emphasis added)

 

And again, in United States v. Goldenberg, 168 U.S. 95, the court also held:

 

 “The primary and general rule of statutory construction is that the intent of the lawmaker is to be found in the language that he has used. He is presumed to know the meaning of the words and the rules of grammar"

 

 

            This rule of strict construction against the taxing authority was reiterated in Tandy Leather Company v. United States, 347 F.2d 693 (5th Cir. 1965), where Judge Hutcheson of our 5th Circuit eloquently and unequivocally proclaimed at p. 694-5:

 

". . . In ruling as he did, that the taxpayer had the obligation to show that sales of the articles in suit were not subject to the excise taxes collected, the district judge was misled by the erroneous contention of the tax collector into misstating the rule of proof in a tax case. This is: that the burden in such a case is always on the collector to show, in justification of his levy and collection of an excise tax, that the statute plainly and clearly lays the tax; that, in short, the fundamental rule is that taxes to be collectible must be clearly laid.

 

"The Government's claim and the judge's ruling come down in effect to the proposition that the state of construction of appellants' kits had reached such an advanced level that the tax levied on the finished products could be collected on their sale, though none had been clearly laid thereon by statute. Shades of Pym and John Hampden, of the Boston tea party, and of Patrick Henry and the Virginians! There is no warrant in law for such a holding. Gould v. Gould, 245 U.S. 151, at p. 153, 38 S.Ct. 53, 62 L.Ed. 211. In 51 American Jurisprudence, "Taxation", Sec. 316, "Strict or Liberal Construction", supported by a great wealth of authority, it is said:

 

'Although it is sometimes broadly stated either that tax laws are to be strictly construed or, on the other hand, that such enactments are to be liberally construed, this apparent conflict of opinion can be reconciled if it is borne in mind that the correct rule appears to be that where the intent of meaning of tax statutes, or statutes levying taxes, is doubtful, they are, unless a contrary legislative intention appears, to be construed most strongly against the government and in favor of the taxpayer or citizen. Any doubts as to their meaning are to be resolved against the taxing authority and in favor of the taxpayer. * * *'

 

"The judgment was wrong. It is, therefore, reversed and the cause is remanded with directions to enter judgment for plaintiffs and for further and not inconsistent proceedings."

                                                                                                (emphasis is the Court's)

 

 

            See also: Gould v. Gould, 245 U.S. 151, 38 S.Ct. 53, 153 (1917); Royal Caribbean Cruises v. United States, 108 F.3d 290 (11th Cir. 1997); B & M Company v. United States, 452 F.2d 986 (5th Cir. 1971); Kocurek v. United States, 456 F. Supp. 740 (1978); Norton Manufacturing Corporation v. United States, 288 F. Supp. 829 (1968); Grays Harbor Chair and Manufacturing Company v. United States, 265 F. Supp. 254 (1967); Russell v. United States, 260 F. Supp. 493 (1966).

 

            Thus, as we enter into the labyrinth of the Internal Revenue Code and its related regulations, we must do so mindful that the courts have repeatedly recognized as indisputable certain “canonized” standards of legal construction, as in  Commonwealth Natural Resources, Inc. v. Commonwealth, 219 Va. 529, 536, 248 S.E. 2d 791 (1978), at pg. 795:

 

"A cardinal rule of statutory construction is that a statute be construed from its four corners and not by singling out a particular word or phrase.”  

 

            The hornbook rule reminds us that tax laws are strictly construed, and that when the letter of the law is subject to more than one interpretation, it must be construed against the imposition of the tax, the rule of interpretation of taxes being:

 

"that the burden in such a case is always on the collector to show, in justification of his levy and collection of an excise tax, that the statute plainly and clearly lays the tax; that, in short, the fundamental rule is that taxes to be collectible must be clearly laid." Tandy Leather Company, supra, at 694.

                                                                                                (emphasis added)

 

 

Federal courts limited to the statutory construction used

 

 

            The courts of the United States do not possess any legislative powers.  Under the Constitution of the United States of America, it states at Article I, § 1, cl. 1:

 

All legislative powers herein granted shall be vested in a Congress of the United States, …”. 

 

            This means that while the courts possess the power to reject a provision, or a statute in its entirety, for want of constitutionality, it does not possess the power to amend, edit, alter or change the law from the actual language used and written by Congress, who possesses “All legislative powers”.   The courts have a  plain and simple judicial duty to apply the statutes as written to the circumstances, facts and evidence of the case as presented and argued in the instant matter before them.

 

 The statutes are almost always simple and clear, without ambiguity or conflict.   The laws simply mean what the words used in them say, and nothing more can be read into the law or assumed about it into existence.   The following U.S. Supreme Court cases below clearly reveal these irrefutable facts

 

            In Demarest v. Manspeaker, 498 US 184, 112 L Ed 2d 608, 111 S Ct. 599, (1991), the court held:

 

"In deciding a question of statutory construction, we begin of course with the language of the statute." 

 

            In Connecticut National Bank v. Germain, 503 US ____, p.  ____, 117 L.Ed 2nd 91(1992), the court identifies that:

 

"When the words of a statute are unambiguous, the first canon of statutory construction -- that courts must presume that a legislature says in a statute what it means and means in a statute what it says, there is also the last, and judicial inquiry is complete."

 

            In McNary v Haitian Refugee Center, 498 US 479, 112 L Ed 2d 1005, 111 S Ct. 888, (1991), the court invokes these basic standards of statutory construction again:

 

"In construing a federal statute, it is presumable that Congress legislates with knowledge of the United States Supreme Court's basic rules of statutory construction."

 

 

            In Reiter v Sonotone Corp., 442 US 330, 337, 60 L Ed 2d 931, 99 S Ct. 2326 (1979), the court again recognizes its duty to begin with the specific words of the statute:

 

"As in all cases involving statutory construction, "our starting point must be the language employed by  Congress,", 

 

 

            And again, in Richards v United States, 369 US 1, 9, 7 L Ed 2d 492, 82 S Ct. 585 (1962), the court indicates that:

 

we assume that the legislative purpose is expressed by the ordinary meaning of the words used."

 

 

In Consumer Product Safety Comm'n v GTE Sylvania, Inc., 447 US 102, 108, 64 L Ed 2d 766, 100 S Ct. 2051 (1980), the court again recognizes:

 

"…absent a clearly expressed legislative intention to the contrary, that language  must ordinarily be regarded as conclusive." 

 

 

            And in Freytag v. Commissioner, 501 US 115 L Ed 2d 764, pp. 767 – 973, the court simply states:

 

"When the terms of a statute are unambiguous, judicial inquiry is complete except in rare and exceptional circumstances." 

 

 

            In Fuller v. United States 615 F. Supp. 1054 (D.C. Cal 1985) , West’s Key 188 quoting Richards v. United States 369 US 1, 9, 82 S. Ct. 585, 590, 7 L.Ed. 2d 492 (1962), the court expands on this point:

 

            "The starting point in any endeavor to construe a Statute is always the words of the Statute itself; unless Congress has clearly indicated that its intentions are contrary to the words it employed in the Statute, this is the ending point of interpretation."

 

            And, this is echoed in Estate of Cowart  v. Nicklos Drilling Co., 505 US 120 L Ed 2d 379, 112 S Ct. 2589 (1992), the court wrote:

 

"In a statutory construction case, the beginning point must be the language of the statute, and when a  statute speaks with clarity to an issue, judicial inquiry into the statute's meaning--in all but the most extraordinary circumstance--is finished; courts must give effect to the clear meaning of statutes as  written."

 

 

And again in Washington Market Co. v. Hoffman, 101 U. S. 112, 115, 25 L. Ed. 782, 783:

 

"Words used in the statute are to be given their proper signification and effect."

 

 

And again in Beecham v. United States, 511 US 128 L Ed 2d 383 (1994):

 

"The court's task is to determine whether the language the legislators actually enacted has a plain, unambiguous meaning." 

 

 

            And in recognition of the lack of judicial power to alter written law, in Federal Trade Com. v Simplicity Pattern Co., 360 US 55, p. 55

 

"The United States Supreme Court cannot supply what Congress has studiously omitted in a statute." 

 

 

            And continuing, from Product Safety Comm'n v. GTE Sylvania, 447 US 102, 64 L Ed 2d 766, 100 S Ct. 2051 (1980), the court again, consistently holds:

 

"The starting point for interpreting a statute is the language of the statute itself; absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive."

 

 

            In United States v. Lexington Mill & E. Co., 232 US 399, pp. 409. (1914), the court reiterates:

 

"We are not at liberty to construe any statute so as to deny effect to any part of its language. It is a cardinal rule of statutory construction that significance and effect shall, if possible, be accorded to every word. As early as in Bacon's Abridgment, § 2, it was said that 'a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word, shall be superfluous, void, or insignificant.' This rule has been repeated innumerable times."

 

 

            In Busse v. Commissioner of Internal Revenue, 479 F2d 1143, the court again is consistent in its recognition of both its own duty, and the limits of its own power to create effect with its rulings:

 

"Courts have no power to rewrite legislative enactments to give effect to their   

  ideas of policy and fitness or the desirability of symmetry in statutes."

 

 

            And, in CBS, Inc. v FCC, 453 US 367, p. 367, 69 L Ed 2d 706, p. 709, the court commands:

 

"The construction of a statute by those charged with its execution should be followed unless there are compelling indications that it is wrong, especially when Congress has refused to alter the administrative construction, and such deference is particularly appropriate where an agency's interpretation involves issues of considerable public controversy and Congress has not acted to correct any misperception of its statutory objectives."

 

 

In Russello v United States, 464 US 16, 23, 78 L Ed 2d 17, 104 S Ct. 296 (1983) (citation omitted), and Keene Corp. v United States, 508 US 124 L Ed 2d 118, 113 S Ct. (1993), the court recognizes that:

 

"This fact only underscores our duty to refrain from reading a phrase into the statute when Congress has left it out.  Where Congress includes particular language in one section of a statute but omits it in another ..., it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion."

 

 

And in American Tobacco Co. v Patterson, 456 US 63, 71 L Ed 2d 748, 102 S Ct. 1534, the court again confirms it impropriety of adding to legislation, that which is not there.

 

"It is not a function of the United States Supreme Court to sit as a super-legislature and create statutory distinctions where none were intended."

 

 

  In Ratzlaf v. United States, 510 US ____, p. ____, 126 L Ed 2d 615 (1994), the declares that:

 

     "...courts do not resort to legislative history to cloud a statutory text that is clear"

          

 

In Piper v. Chris-Craft Industries, Inc., 430 US 1, 26, 51 L Ed 2d 124, 97 S Ct. 926 (1977) the court declares:

 

"Going behind the plain language of a statute in search of a possibly contrary congressional intent is "a step to be taken cautiously" even under the best of circumstances."  

 

 

And in United States v. Calamaro, 354 U.S. 351, 1 L. Ed. 2d 1394, 77 S Ct 1138 (1957), the court held in response to the government’s argument that regulations may serve as the sole founding source of authority for it’s collection actions, that:

 

"In construing federal revenue statute, Supreme Court gives no weight to Treasury regulation which attempts to add to statute something which is not there." 

 

 

Subsequently, in Water Quality Ass'n v. United States, 795 F.2d 1303 (7th Cir. 1986), where, citing and quoting Calamaro, the court added at p. 1309:

 

"It is a basic principle of statutory construction that courts have no right first to determine the legislative intent of a statute and then, under the guise of its interpretation, proceed to either add words to or eliminate other words from the statute's language. DeSoto Securities Co. v. Commissioner, 235 F.2d 409, 411 (7th Cir. 1956); see also 2A Sutherland Statutory Construction § 47.38 (4th ed. 1984). Similarly, the Secretary has no power to change the language of the revenue statutes because he thinks Congress may have overlooked something."

                                                                                                     (emphasis added)

 

In Koshland v. Helvering, 298 U.S. 441, 446-447, the court again rejected the argument that authority derives from regulation alone, without actual statutory provision:

 

“We find neither argument persuasive. In light of the above discussion, we cannot but regard this Treasury Regulation as no more than an attempted addition to the statute of something which is not there. As such the regulation can furnish no sustenance to the statute.”

 

 

And finally, in Reinecke v. Gardner, 277 U.S. 239, the court stated with finality:

 

"The extension of tax by implication is not favored"

 

 

In Hassett v. Welch., 303 US 303, pp. 314 - 315, 82 L Ed 858. (1938), the court again affirms the concept of a limited government, of clearly established powers, that if not specific and clear, should not be allowed to operate in favor of the government, to the disadvantage of the taxpayer:

 

"In view of other settled rules of statutory construction, which teach that a law is -presumed, in the absence of clear expression to the contrary, to operate prospectively;  that, if doubt exists as to the construction of a taxing statute, the doubt should be resolved in favor of the taxpayer..."

 

 

And finally, in Greyhound Corp. v. United States, 495 F2d 863, the similarly court commands,

 

"Doubt relative to statutory construction should be resolved in favor of the individual, not the government" 

 

 

 

COEXISTENCE OF STATUTORY PROVISIONS

 

 

When two statutes do not appear to be in direct conflict with one another, they are taken to coexist as equally effective. When two statutes conflict with one another regarding a Citizen and his rights, the Citizen, and not the Government and its claims, are to be favored and secured under the law.. The court recognizes and upholds this principle in Morton v Mancari, 417 US 535, 551, 41 L Ed. 2d 290, 94 S Ct. 2474 (1974). County of Yakima v Yakima Nation, 502 US ____, p.   ____, 116 L Ed 687 (1992, where the court held:

 

 Judges "are not at liberty to pick and choose among congressional enactments, and when two [or more] statutes are capable of coexistence, it is the duty of the courts, absent a clearly expressed congressional intention to the contrary, to regard each as effective."

 

 

CONCLUSION

 

 

Thus, as we enter into the labyrinth of the Internal Revenue Code and its related regulations, we must do so mindful of the hornbook rule that tax laws are strictly construed, and that when the letter of the law is subject to more than one interpretation, it must be construed against the imposition of the tax and for the individual, the rule of interpretation of taxes being against the implication of tax by presumption.  This rule of strict construction, and against presumptions made by the taxing authorities, was reiterated in Tandy Leather Company v. United States, 347 F.2d 693 (5th Cir. 1965), where Judge Hutcheson of the 5th Circuit eloquently and unequivocally proclaimed at p. 694-5:

 

"that the burden in such a case is always on the collector to show, in justification of his levy and collection of an excise tax, that the statute plainly and clearly lays the tax; that, in short, the fundamental rule is that taxes to be collectible must be clearly laid."  Tandy Leather Company, supra, at 694.