United States v. Home Concrete & Supply, LLC , 132 S. Ct. 1836 ( 2012 )

(Slip Opinion) OCTOBER TERM, 2011 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
UNITED STATES v. HOME CONCRETE & SUPPLY,
LLC, ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE FOURTH CIRCUIT
No. 11–139. Argued January 17, 2012—Decided April 25, 2012
Ordinarily, the Government must assess a deficiency against a tax-
payer within “3 years after the return was filed,” 26 U. S. C. §6501(a),
but that period is extended to 6 years when a taxpayer “omits from
gross income an amount properly includible therein which is in ex-
cess of 25 percent of the amount of gross income stated in the return,”
§6501(e)(1)(A). Respondent taxpayers overstated the basis of certain
property that they had sold. As a result, their returns understated
the gross income they received from the sale by an amount in excess
of 25%. The Commissioner asserted the deficiency outside the 3-year
limitations period but within the 6-year period. The Fourth Circuit
concluded that the taxpayers’ overstatements of basis, and resulting
understatements of gross income, did not trigger the extended limita-
tions period.
Held: The judgment is affirmed.
634 F. 3d 249, affirmed.
JUSTICE BREYER delivered the opinion of the Court, except as to
Part IV–C, concluding that §6501(e)(1)(A) does not apply to an over-
statement of basis. Pp. 2–8.
(a) In Colony, Inc. v. Commissioner, 357 U. S. 28, the Court inter-
preted a provision of the Internal Revenue Code of 1939 containing
language materially indistinguishable from the language at issue
here, holding that taxpayer misstatements that overstate the basis in
property do not fall within the statute’s scope. The Court recognized
that such an overstatement wrongly understates a taxpayer’s income,
but concluded that the phrase “omits . . . an amount” limited the
statute’s scope to situations in which specific receipts are left out of
2 UNITED STATES v. HOME CONCRETE & SUPPLY, LLC
Syllabus
the computation of gross income. The Court also noted that while the
statute’s language was not “unambiguous,” id., at 33, the statutory
history showed that Congress intended to restrict the extended limi-
tations period to situations that did not include overstatements of ba-
sis. Finally, the Court found its conclusion “in harmony with the
unambiguous language of §6501(e)(1)(A),” id., at 37, the provision
enacted as part of the Internal Revenue Code of 1954 and applicable
here. Pp. 2–4.
(b) Colony determines the outcome of this case. The operative lan-
guage of the 1939 provision and the provision at issue is identical. It
would be difficult to give the same language here a different interpre-
tation without overruling Colony, a course of action stare decisis
counsels against. John R. Sand & Gravel Co. v. United States, 552
U. S. 130, 139. The Government suggests that differences in other
nearby parts of the 1954 Code favor a different interpretation than
the one adopted in Colony. However, its arguments are too fragile to
bear the significant weight it seeks to place upon them. Pp. 4–7.
(c) The Court also rejects the Government’s argument that a re-
cently promulgated Treasury Regulation interpreting the statute’s
operative language in its favor should be granted deference under
Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467
U. S. 837. See National Cable & Telecommunications Assn. v. Brand
X Internet Services, 545 U. S. 967, 982. Colony has already interpret-
ed the statute, and there is no longer any different construction that
is consistent with Colony and available for adoption by the agency.
Pp. 7–8.
BREYER, J. delivered the opinion of the Court, except as to Part IV–C.
ROBERTS, C. J., and THOMAS and ALITO, JJ., joined that opinion in full,
and SCALIA, J., joined except for Part IV–C. SCALIA, J., filed an opinion
concurring in part and concurring in the judgment. KENNEDY, J., filed
a dissenting opinion, in which GINSBURG, SOTOMAYOR, and KAGAN, JJ.,
joined.
Cite as: 566 U. S. ____ (2012) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash-
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
No. 11–139
_________________
UNITED STATES, PETITIONER v. HOME CONCRETE
& SUPPLY, LLC, ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE FOURTH CIRCUIT
[April 25, 2012]
JUSTICE BREYER delivered the opinion of the Court,
except as to Part IV–C.
Ordinarily, the Government must assess a deficiency
against a taxpayer within “3 years after the return was
filed.” 26 U. S. C. §6501(a) (2000 ed.). The 3-year period
is extended to 6 years, however, when a taxpayer “omits
from gross income an amount properly includible therein
which is in excess of 25 percent of the amount of gross
income stated in the return.” §6501(e)(1)(A) (emphasis
added). The question before us is whether this latter
provision applies (and extends the ordinary 3-year limita-
tions period) when the taxpayer overstates his basis in
property that he has sold, thereby understating the gain
that he received from its sale. Following Colony, Inc. v.
Commissioner, 357 U. S. 28 (1958), we hold that the provi-
sion does not apply to an overstatement of basis. Hence
the 6-year period does not apply.
I
For present purposes the relevant underlying circum-
stances are not in dispute. We consequently assume that
(1) the respondent taxpayers filed their relevant tax re-
2 UNITED STATES v. HOME CONCRETE & SUPPLY, LLC
Opinion of the Court
turns in April 2000; (2) the returns overstated the basis
of certain property that the taxpayers had sold; (3) as a
result the returns understated the gross income that the
taxpayers received from the sale of the property; and
(4) the understatement exceeded the statute’s 25% thresh-
old. We also take as undisputed that the Commissioner
asserted the relevant deficiency within the extended 6-
year limitations period, but outside the default 3-year
period. Thus, unless the 6-year statute of limitations
applies, the Government’s efforts to assert a tax deficiency
came too late. Our conclusion—that the extended limita-
tions period does not apply—follows directly from this
Court’s earlier decision in Colony.
II
In Colony this Court interpreted a provision of the In-
ternal Revenue Code of 1939, the operative language of
which is identical to the language now before us. The
Commissioner there had determined
“that the taxpayer had understated the gross profits
on the sales of certain lots of land for residential pur-
poses as a result of having overstated the ‘basis’ of
such lots by erroneously including in their cost certain
unallowable items of development expense.” Id., at
30.
The Commissioner’s assessment came after the ordinary
3-year limitations period had run. And, it was conse-
quently timely only if the taxpayer, in the words of the
1939 Code, had “omit[ted] from gross income an amount
properly includible therein which is in excess of 25 per cen-
tum of the amount of gross income stated in the return . . . .”
26 U. S. C. §275(c) (1940 ed.). The Code provision ap-
plicable to this case, adopted in 1954, contains materially
indistinguishable language. See §6501(e)(1)(A) (2000 ed.)
(same, but replacing “per centum” with “percent”). See also
Appendix, infra.
Cite as: 566 U. S. ____ (2012) 3
Opinion of the Court
In Colony this Court held that taxpayer misstatements,
overstating the basis in property, do not fall within the
scope of the statute. But the Court recognized the Com-
missioner’s contrary argument for inclusion. 357 U. S., at
32. Then as now, the Code itself defined “gross income” in
this context as the difference between gross revenue (often
the amount the taxpayer received upon selling the prop-
erty) and basis (often the amount the taxpayer paid for the
property). Compare 26 U. S. C. §§22, 111 (1940 ed.) with
§§61(a)(3), 1001(a) (2000 ed.). And, the Commissioner
pointed out, an overstatement of basis can diminish the
“amount” of the gain just as leaving the item entirely off
the return might do. 357 U. S., at 32. Either way, the
error wrongly understates the taxpayer’s income.
But, the Court added, the Commissioner’s argument did
not fully account for the provision’s language, in particular
the word “omit.” The key phrase says “omits . . . an
amount.” The word “omits” (unlike, say, “reduces” or “un-
derstates”) means “ ‘[t]o leave out or unmentioned; not
to insert, include, or name.’ ” Ibid. (quoting Webster’s New
International Dictionary (2d ed. 1939)). Thus, taken
literally, “omit” limits the statute’s scope to situations in
which specific receipts or accruals of income are left out
of the computation of gross income; to inflate the basis,
however, is not to “omit” a specific item, not even of profit.
While finding this latter interpretation of the language
the “more plausibl[e],” the Court also noted that the lan-
guage was not “unambiguous.” Colony, 357 U. S., at 33. It
then examined various congressional Reports discussing
the relevant statutory language. It found in those Reports
“persuasive indications that Congress merely had in
mind failures to report particular income receipts and
accruals, and did not intend the [extended] limitation
to apply whenever gross income was understated . . . .”
Id., at 35.
4 UNITED STATES v. HOME CONCRETE & SUPPLY, LLC
Opinion of the Court
This “history,” the Court said, “shows . . . that the Con-
gress intended an exception to the usual three-year stat-
ute of limitations only in the restricted type of situation
already described,” a situation that did not include over-
statements of basis. Id., at 36.
The Court wrote that Congress, in enacting the
provision,
“manifested no broader purpose than to give the
Commissioner an additional two [now three] years to
investigate tax returns in cases where, because of a
taxpayer’s omission to report some taxable item, the
Commissioner is at a special disadvantage . . . [be-
cause] the return on its face provides no clue to the ex-
istence of the omitted item. . . . [W]hen, as here [i.e.,
where the overstatement of basis is at issue], the un-
derstatement of a tax arises from an error in reporting
an item disclosed on the face of the return the Com-
missioner is at no such disadvantage . . . whether the
error be one affecting ‘gross income’ or one, such as
overstated deductions, affecting other parts of the re-
turn.” Ibid. (emphasis added).
Finally, the Court noted that Congress had recently
enacted the Internal Revenue Code of 1954. And the
Court observed that “the conclusion we reach is in har-
mony with the unambiguous language of §6501(e)(1)(A),”
id., at 37, i.e., the provision relevant in this present case.
III
In our view, Colony determines the outcome in this case.
The provision before us is a 1954 reenactment of the 1939
provision that Colony interpreted. The operative language
is identical. It would be difficult, perhaps impossible, to
give the same language here a different interpretation
without effectively overruling Colony, a course of action
that basic principles of stare decisis wisely counsel us not
Cite as: 566 U. S. ____ (2012) 5
Opinion of the Court
to take. John R. Sand & Gravel Co. v. United States, 552
U. S. 130, 139 (2008) (“[S]tare decisis in respect to statu-
tory interpretation has special force, for Congress remains
free to alter what we have done” (internal quotation marks
omitted)); Patterson v. McLean Credit Union, 491 U. S.
164, 172–173 (1989).
The Government, in an effort to convince us to interpret
the operative language before us differently, points to
differences in other nearby parts of the 1954 Code. It
suggests that these differences counsel in favor of a differ-
ent interpretation than the one adopted in Colony. For
example, the Government points to a new provision,
§6501(e)(1)(A)(i), which says:
“In the case of a trade or business, the term ‘gross in-
come’ means the total of the amounts received or ac-
crued from the sale of goods or services (if such
amounts are required to be shown on the return) prior
to the diminution by the cost of such sales or services.”
If the section’s basic phrase “omi[ssion] from gross income”
does not apply to overstatements of basis (which is what
Colony held), then what need would there be for clause (i),
which leads to the same result in a specific subset of
cases?
And why, the Government adds, does a later paragraph,
referring to gifts and estates, speak of a taxpayer who
“omits . . . items includible in [the] gross estate”? See
§6501(e)(2) (emphasis added). By speaking of “items”
there does it not imply that omission of an “amount” cov-
ers more than omission of individual items—indeed that
it includes overstatements of basis, which, after all, di-
minish the amount of the profit that should have been re-
ported as gross income?
In our view, these points are too fragile to bear the sig-
nificant argumentative weight the Government seeks to
place upon them. For example, at least one plausible
6 UNITED STATES v. HOME CONCRETE & SUPPLY, LLC
Opinion of the Court
reason why Congress might have added clause (i) has
nothing to do with any desire to change the meaning of the
general rule. Rather when Congress wrote the 1954 Code
(prior to Colony), it did not yet know how the Court would
interpret the provision’s operative language. At least one
lower court had decided that the provision did not apply to
overstatements about the cost of goods that a business
later sold. See Uptegrove Lumber Co. v. Commissioner,
204 F. 2d 570 (CA3 1953). But see Reis v. Commissioner,
142 F. 2d 900, 902–903 (CA6 1944). And Congress could
well have wanted to ensure that, come what may in the
Supreme Court, Uptegrove’s interpretation would remain
the law where a “trade or business” was at issue.
Nor does our interpretation leave clause (i) without
work to do. TRW Inc. v. Andrews, 534 U. S. 19, 31 (2001)
(noting canon that statutes should be read to avoid mak-
ing any provision “superfluous, void, or insignificant”
(internal quotation marks omitted)). That provision also
explains how to calculate the denominator for purposes of
determining whether a conceded omission amounts to 25%
of “gross income.” For example, it tells us that a merchant
who fails to include $10,000 of revenue from sold goods
has not met the 25% test if total revenue is more than
$40,000, regardless of the cost paid by the merchant to
acquire those goods. But without clause (i), the general
statutory definition of “gross income” requires subtracting
the cost from the sales price. See 26 U. S. C. §§61(a)(3),
1012. Under such a definition of “gross income,” the cal-
culation would take (1) total revenue from sales, $40,000,
minus (2) “the cost of such sales,” say, $25,000. The
$10,000 of revenue would thus amount to 67% of the
“gross income” of $15,000. And the clause does this work
in respect to omissions from gross income irrespective of
our interpretation regarding overstatements of basis.
The Government’s argument about subsection (e)(2)’s
use of the word “item” instead of “amount” is yet weaker.
Cite as: 566 U. S. ____ (2012) 7
Opinion of the Court
The Court in Colony addressed a similar argument about
the word “amount.” It wrote:
“The Commissioner states that the draftsman’s use
of the word ‘amount’ (instead of, for example, ‘item’)
suggests a concentration on the quantitative aspect of
the error—that is whether or not gross income was
understated by as much as 25%.” 357 U. S., at 32.
But the Court, while recognizing the Commissioner’s logic,
rejected the argument (and the significance of the word
“amount”) as insufficient to prove the Commissioner’s
conclusion. And the addition of the word “item” in a dif-
ferent subsection similarly fails to exert an interpretive
force sufficiently strong to affect our conclusion. The
word’s appearance in subsection (e)(2), we concede, is new.
But to rely in the case before us on this solitary word
change in a different subsection is like hoping that a new
batboy will change the outcome of the World Series.
IV
A
Finally, the Government points to Treasury Regulation
§301.6501(e)–1, which was promulgated in final form in
December 2010. See 26 CFR §301.6501(e)–1 (2011). The
regulation, as relevant here, departs from Colony and
interprets the operative language of the statute in the
Government’s favor. The regulation says that “an un-
derstated amount of gross income resulting from an over-
statement of unrecovered cost or other basis constitutes an
omission from gross income.” §301.6501(e)–1(a)(1)(iii). In
the Government’s view this new regulation in effect over-
turns Colony’s interpretation of this statute.
The Government points out that the Treasury Regula-
tion constitutes “an agency’s construction of a statute
which it administers.” Chevron, U. S. A. Inc. v. Natural
Resources Defense Council, Inc., 467 U. S. 837, 842 (1984).
8 UNITED STATES v. HOME CONCRETE & SUPPLY, LLC
Opinion of the Court
Opinion of BREYER, J.
See also Mayo Foundation for Medical Ed. and Research v.
United States, 562 U. S. ___ (2011) (applying Chevron in
the tax context). The Court has written that a “court’s
prior judicial construction of a statute trumps an agency
construction otherwise entitled to Chevron deference only
if the prior court decision holds that its construction fol-
lows from the unambiguous terms of the statute . . . .”
National Cable & Telecommunications Assn. v. Brand X
Internet Services, 545 U. S. 967, 982 (2005) (emphasis
added). And, as the Government notes, in Colony itself
the Court wrote that “it cannot be said that the language
is unambiguous.” 357 U. S., at 33. Hence, the Government
concludes, Colony cannot govern the outcome in this case.
The question, rather, is whether the agency’s construction
is a “permissible construction of the statute.” Chevron,
supra, at 843. And, since the Government argues that the
regulation embodies a reasonable, hence permissible,
construction of the statute, the Government believes it
must win.
B
We do not accept this argument. In our view, Colony
has already interpreted the statute, and there is no longer
any different construction that is consistent with Colony
and available for adoption by the agency.
C
The fatal flaw in the Government’s contrary argument
is that it overlooks the reason why Brand X held that a
“prior judicial construction,” unless reflecting an “unam-
biguous” statute, does not trump a different agency con-
struction of that statute. 545 U. S., at 982. The Court
reveals that reason when it points out that “it is for agen-
cies, not courts, to fill statutory gaps.” Ibid. The fact that
a statute is unambiguous means that there is “no gap for
the agency to fill” and thus “no room for agency discre-
Cite as: 566 U. S. ____ (2012) 9
Opinion of the Court
Opinion of BREYER, J.
tion.” Id., at 982–983.
In so stating, the Court sought to encapsulate what
earlier opinions, including Chevron, made clear. Those
opinions identify the underlying interpretive problem as
that of deciding whether, or when, a particular statute in
effect delegates to an agency the power to fill a gap, there-
by implicitly taking from a court the power to void a rea-
sonable gap-filling interpretation. Thus, in Chevron the
Court said that, when
“Congress has explicitly left a gap for the agency to
fill, there is an express delegation of authority to the
agency to elucidate a specific provision of the statute
by regulation. . . . Sometimes the legislative delega-
tion to an agency on a particular question is implicit
rather than explicit. [But in either instance], a court
may not substitute its own construction of a statutory
provision for a reasonable interpretation made by the
administrator of an agency.” 467 U. S., at 843–844.
See also United States v. Mead Corp., 533 U. S. 218, 229
(2001); Smiley v. Citibank (South Dakota), N. A., 517 U. S.
735, 741 (1996); INS v. Cardoza-Fonseca, 480 U. S. 421,
448 (1987); Morton v. Ruiz, 415 U. S. 199, 231 (1974).
Chevron and later cases find in unambiguous language
a clear sign that Congress did not delegate gap-filling
authority to an agency; and they find in ambiguous lan-
guage at least a presumptive indication that Congress did
delegate that gap-filling authority. Thus, in Chevron the
Court wrote that a statute’s silence or ambiguity as to
a particular issue means that Congress has not “directly
addressed the precise question at issue” (thus likely dele-
gating gap-filling power to the agency). 467 U. S., at 843.
In Mead the Court, describing Chevron, explained:
“Congress . . . may not have expressly delegated au-
thority or responsibility to implement a particular
provision or fill a particular gap. Yet it can still be
10 UNITED STATES v. HOME CONCRETE & SUPPLY, LLC
Opinion of the Court
Opinion of BREYER, J.
apparent from the agency’s generally conferred au-
thority and other statutory circumstances that Con-
gress would expect the agency to be able to speak with
the force of law when it addresses ambiguity in the
statute or fills a space in the enacted law, even one
about which Congress did not actually have an intent
as to a particular result.” 533 U. S., at 229 (internal
quotation marks omitted).
Chevron added that “[i]f a court, employing traditional
tools of statutory construction, ascertains that Congress
had an intention on the precise question at issue, that
intention is the law and must be given effect.” 467 U. S.,
at 843, n. 9 (emphasis added).
As the Government points out, the Court in Colony
stated that the statutory language at issue is not “unam-
biguous.” 357 U. S., at 33. But the Court decided that
case nearly 30 years before it decided Chevron. There is
no reason to believe that the linguistic ambiguity noted by
Colony reflects a post-Chevron conclusion that Congress
had delegated gap-filling power to the agency. At the
same time, there is every reason to believe that the Court
thought that Congress had “directly spoken to the ques-
tion at hand,” and thus left “[no] gap for the agency to fill.”
Chevron, supra, at 842–843.
For one thing, the Court said that the taxpayer had the
better side of the textual argument. Colony, 357 U. S., at
33. For another, its examination of legislative history led
it to believe that Congress had decided the question defini-
tively, leaving no room for the agency to reach a contrary
result. It found in that history “persuasive indications”
that Congress intended overstatements of basis to fall
outside the statute’s scope, and it said that it was satisfied
that Congress “intended an exception . . . only in the re-
stricted type of situation” it had already described. Id., at
35–36. Further, it thought that the Commissioner’s inter-
Cite as: 566 U. S. ____ (2012) 11
Opinion of the Court
Opinion of BREYER, J.
pretation (the interpretation once again advanced here)
would “create a patent incongruity in the tax law.” Id., at
36–37. And it reached this conclusion despite the fact
that, in the years leading up to Colony, the Commissioner
had consistently advocated the opposite in the circuit
courts. See, e.g., Uptegrove, 204 F. 2d 570; Reis, 142 F. 2d
900; Goodenow v. Commisioner, 238 F. 2d 20 (CA8 1956);
American Liberty Oil Co. v. Commissioner, 1 T. C. 386(1942). Cf. Slaff v. Commisioner, 220 F. 2d 65 (CA9 1955);
Davis v. Hightower, 230 F. 2d 549 (CA5 1956). Thus, the
Court was aware it was rejecting the expert opinion of the
Commissioner of Internal Revenue. And finally, after
completing its analysis, Colony found its interpretation of
the 1939 Code “in harmony with the [now] unambiguous
language” of the 1954 Code, which at a minimum suggests
that the Court saw nothing in the 1954 Code as incon-
sistent with its conclusion. 357 U. S., at 37.
It may be that judges today would use other methods to
determine whether Congress left a gap to fill. But that
is beside the point. The question is whether the Court in
Colony concluded that the statute left such a gap. And, in
our view, the opinion (written by Justice Harlan for the
Court) makes clear that it did not.
Given principles of stare decisis, we must follow that
interpretation. And there being no gap to fill, the Gov-
ernment’s gap-filling regulation cannot change Colony’s
interpretation of the statute. We agree with the taxpayer
that overstatements of basis, and the resulting under-
statement of gross income, do not trigger the extended
limitations period of §6501(e)(1)(A). The Court of Appeals
reached the same conclusion. See 634 F. 3d 249 (CA4
2011). And its judgment is affirmed.
It is so ordered.
12 UNITED STATES v. HOME CONCRETE & SUPPLY, LLC
Opinion of the Court
Appendix to opinion of the Court
APPENDIX
We reproduce the applicable sections of the two relevant
versions of the U. S. Code below. Section 6501 was
amended and reorganized in 2010. See Hiring Incentives
to Restore Employment Act, §513, 124 Stat. 111. But the
parties agree that the amendments do not affect this case.
We therefore have referred to, and reproduce here, the
section as it appears in the 2000 edition of the U. S. Code.
Title 26 U. S. C. §275 (1940 ed.)
“Period of limitation upon assessment and collection.
. . . . .
“(a) General rule.
“The amount of income taxes imposed by this chapter
shall be assessed within three years after the return was
filed, and no proceeding in court without assessment for
the collection of such taxes shall be begun after the expira-
tion of such period.
. . . . .
“(c) Omission from gross income.
“If the taxpayer omits from gross income an amount
properly includible therein which is in excess of 25 per
centum of the amount of gross income stated in the return,
the tax may be assessed, or a proceeding in court for the
collection of such tax may be begun without assessment,
at any time within 5 years after the return was filed.”
Title 26 U. S. C. §6501 (2000 ed.)
“Limitations on assessment and collection.
“(a) General rule
“Except as otherwise provided in this section, the
amount of any tax imposed by this title shall be assessed
Cite as: 566 U. S. ____ (2012) 13
Opinion of the Court
Appendix to opinion of the Court
within 3 years after the return was filed (whether or not
such return was filed on or after the date prescribed) or, if
the tax is payable by stamp, at any time after such tax
became due and before the expiration of 3 years after the
date on which any part of such tax was paid, and no pro-
ceeding in court without assessment for the collection
of such tax shall be begun after the expiration of such
period. . . .
. . . . .
“(e) Substantial omission of items
“Except as otherwise provided in subsection (c)—
“(1) Income taxes
“In the case of any tax imposed by subtitle A—
“(A) General rule
“If the taxpayer omits from gross income an amount
properly includible therein which is in excess of 25
percent of the amount of gross income stated in the
return, the tax may be assessed, or a proceeding in
court for the collection of such tax may be begun with-
out assessment, at any time within 6 years after the
return was filed. For purposes of this subparagraph—
“(i) In the case of a trade or business, the term
‘gross income’ means the total of the amounts re-
ceived or accrued from the sale of goods or services
(if such amounts are required to be shown on the re-
turn) prior to diminution by the cost of such sales or
services; and
“(ii) In determining the amount omitted from
gross income, there shall not be taken into account
any amount which is omitted from gross income
stated in the return if such amount is disclosed in
the return, or in a statement attached to the return,
in a manner adequate to apprise the Secretary of
the nature and amount of such item.
. . . . .
14 UNITED STATES v. HOME CONCRETE & SUPPLY, LLC
Opinion of the Court
Appendix to opinion of the Court
“(2) Estate and gift taxes
“In the case of a return of estate tax under chapter 11
or a return of gift tax under chapter 12, if the taxpayer
omits from the gross estate or from the total amount of
the gifts made during the period for which the return
was filed items includible in such gross estate or such
total gifts, as the case may be, as exceed in amount 25
percent of the gross estate stated in the return or the
total amount of gifts stated in the return, the tax may be
assessed, or a proceeding in court for the collection of
such tax may be begun without assessment, at any time
within 6 years after the return was filed. . . .”
Cite as: 566 U. S. ____ (2012) 1
Opinion of SCALIA, J.
SUPREME COURT OF THE UNITED STATES
_________________
No. 11–139
_________________
UNITED STATES, PETITIONER v. HOME CONCRETE
& SUPPLY, LLC, ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE FOURTH CIRCUIT
[April 25, 2012]
JUSTICE SCALIA, concurring in part and concurring in
the judgment.
It would be reasonable, I think, to deny all precedential
effect to Colony, Inc. v. Commissioner, 357 U. S. 28(1958)—to overrule its holding as obviously contrary to our
later law that agency resolutions of ambiguities are to be
accorded deference. Because of justifiable taxpayer reli-
ance I would not take that course—and neither does the
Court’s opinion, which says that “Colony determines the
outcome in this case.” Ante, at 4. That should be the end
of the matter.
The plurality, however, goes on to address the Govern-
ment’s argument that Treasury Regulation §301.6501(e)–1
effectively overturned Colony. See 26 CFR §301.6501(e)–1
(2011). In my view, that cannot be: “Once a court has
decided upon its de novo construction of the statute, there
no longer is a different construction that is consistent with
the court’s holding and available for adoption by the agen-
cy.” National Cable & Telecommunications Assn. v. Brand
X Internet Services, 545 U. S. 967, 1018, n. 12 (2005)
(SCALIA, J., dissenting) (citation and internal quotation
marks omitted). That view, of course, did not carry the
day in Brand X, and the Government quite reasonably
relies on the Brand X majority’s innovative pronounce-
ment that a “court’s prior judicial construction of a statute
2 UNITED STATES v. HOME CONCRETE & SUPPLY, LLC
Opinion of SCALIA, J.
trumps an agency construction otherwise entitled to Chev­
ron deference only if the prior court decision holds that its
construction follows from the unambiguous terms of the
statute.” Id., at 982.
In cases decided pre-Brand X, the Court had no inkling
that it must utter the magic words “ambiguous” or “un-
ambiguous” in order to (poof !) expand or abridge execu-
tive power, and (poof !) enable or disable administrative
contradiction of the Supreme Court. Indeed, the Court
was unaware of even the utility (much less the necessity)
of making the ambiguous/nonambiguous determination in
cases decided pre-Chevron, before that opinion made the
so-called “Step 1” determination of ambiguity vel non a
customary (though hardly mandatory1) part of judicial-
review analysis. For many of those earlier cases, there-
fore, it will be incredibly difficult to determine whether the
decision purported to be giving meaning to an ambiguous,
or rather an unambiguous, statute.
Thus, one would have thought that the Brand X major-
ity would breathe a sigh of relief in the present case, in-
volving a pre-Chevron opinion that (mirabile dictu) makes
it inescapably clear that the Court thought the statute
ambiguous: “It cannot be said that the language is unam­
biguous.” Colony, supra, at 33 (emphasis added). As
today’s plurality opinion explains, Colony “said that the
taxpayer had the better side of the textual argument,”
ante, at 10 (emphasis added)—not what Brand X requires
——————
1 “Step 1” has never been an essential part of Chevron analysis.
Whether a particular statute is ambiguous makes no difference if the
interpretation adopted by the agency is clearly reasonable—and it
would be a waste of time to conduct that inquiry. See Entergy Corp. v.
Riverkeeper, Inc., 556 U. S. 208, 218, and n. 4 (2009). The same would
be true if the agency interpretation is clearly beyond the scope of any
conceivable ambiguity. It does not matter whether the word “yellow” is
ambiguous when the agency has interpreted it to mean “purple.” See
Stephenson & Vermeule, Chevron Has Only One Step, 95 Va. L. Rev.
597, 599 (2009).
Cite as: 566 U. S. ____ (2012) 3
Opinion of SCALIA, J.
to foreclose administrative revision of our decisions: “the
only permissible reading of the statute.” 545 U. S., at 984.
Thus, having decided to stand by Colony and to stand by
Brand X as well, the plurality should have found—in order
to reach the decision it did—that the Treasury Depart-
ment’s current interpretation was unreasonable.
Instead of doing what Brand X would require, however,
the plurality manages to sustain the justifiable reliance of
taxpayers by revising yet again the meaning of Chevron—
and revising it yet again in a direction that will create
confusion and uncertainty. See United States v. Mead
Corp., 533 U. S. 218, 245–246 (2001) (SCALIA, J., dissent-
ing); Bressman, How Mead Has Muddled Judicial Review
of Agency Action, 58 Vand. L. Rev. 1443, 1457–1475
(2005). Of course there is no doubt that, with regard to
the Internal Revenue Code, the Treasury Department
satisfies the Mead requirement of some indication “that
Congress delegated authority to the agency generally to
make rules carrying the force of law.” 533 U. S., at 226–
227. We have given Chevron deference to a Treasury
Regulation before. See Mayo Foundation for Medical Ed.
and Research v. United States, 562 U. S. ___, ___ (2011)
(slip op., at 11–12). But in order to evade Brand X and yet
reaffirm Colony, the plurality would add yet another lop-
sided story to the ugly and improbable structure that our
law of administrative review has become: To trigger the
Brand X power of an authorized “gap-filling” agency to
give content to an ambiguous text, a pre-Chevron determi-
nation that language is ambiguous does not alone suffice;
the pre-Chevron Court must in addition have found that
Congress wanted the particular ambiguity in question to
be resolved by the agency. And here, today’s plurality
opinion finds, “[t]here is no reason to believe that the
linguistic ambiguity noted by Colony reflects a post-
Chevron conclusion that Congress had delegated gap-
filling power to the agency.” Ante, at 10. The notion,
4 UNITED STATES v. HOME CONCRETE & SUPPLY, LLC
Opinion of SCALIA, J.
seemingly, is that post-Chevron a finding of ambiguity is
accompanied by a finding of agency authority to resolve
the ambiguity, but pre-Chevron that was not so. The
premise is false. Post-Chevron cases do not “conclude”
that Congress wanted the particular ambiguity resolved
by the agency; that is simply the legal effect of ambi-
guity—a legal effect that should obtain whenever the
language is in fact (as Colony found) ambiguous.
Does the plurality feel that it ought not give effect to
Colony’s determination of ambiguity because the Court did
not know, in that era, the importance of that determina-
tion—that it would empower the agency to (in effect)
revise the Court’s determination of statutory meaning?
But as I suggested earlier, that was an ignorance which all
of our cases shared not just pre-Chevron, but pre-Brand X.
Before then it did not really matter whether the Court was
resolving an ambiguity or setting forth the statute’s clear
meaning. The opinion might (or might not) advert to
that point in the course of its analysis, but either way
the Court’s interpretation of the statute would be the law.
So it is no small number of still-authoritative cases
that today’s plurality opinion would exile to the Land of
Uncertainty.
Perhaps sensing the fragility of its new approach, the
plurality opinion then pivots (as the à la mode vernacular
has it)—from focusing on whether Colony concluded that
there was gap-filling authority to focusing on whether
Colony concluded that there was any gap to be filled: “The
question is whether the Court in Colony concluded that
the statute left such a gap. And, in our view, the opinion
. . . makes clear that it did not.” Ante, at 11. How does the
plurality know this? Because Justice Harlan’s opinion
“said that the taxpayer had the better side of the textual
argument”; because it found that legislative history indi-
cated “that Congress intended overstatements of basis to
fall outside the statute’s scope”; because it concluded that
Cite as: 566 U. S. ____ (2012) 5
Opinion of SCALIA, J.
the Commissioner’s interpretation would “create a patent
incongruity in the tax law”; and because it found its inter-
pretation “in harmony with the [now] unambiguous lan-
guage” of the 1954 Code. Ante, at 10–11 (internal quota-
tion marks omitted). But these are the sorts of arguments
that courts always use in resolving ambiguities. They do
not prove that no ambiguity existed, unless one believes
that an ambiguity resolved is an ambiguity that never
existed in the first place. Colony said unambiguously that
the text was ambiguous, and that should be an end of the
matter—unless one wants simply to deny stare decisis
effect to Colony as a pre-Chevron decision.
Rather than making our judicial-review jurisprudence
curiouser and curiouser, the Court should abandon the
opinion that produces these contortions, Brand X. I join
the judgment announced by the Court because it is indis-
putable that Colony resolved the construction of the statu-
tory language at issue here, and that construction must
therefore control. And I join the Court’s opinion except for
Part IV–C.
* * *
I must add a word about the peroration of the dissent,
which asserts that “[o]ur legal system presumes there
will be continuing dialogue among the three branches of
Government on questions of statutory interpretation and
application,” and that the “constructive discourse,” “ ‘con-
vers[ations],’ ” and “instructive exchanges” would be “fore-
closed by an insistence on adhering to earlier interpreta-
tions of a statute even in light of new, relevant statutory
amendments.” Post, at 7–8 (opinion of KENNEDY, J.). This
passage is reminiscent of Professor K. C. Davis’s vision
that administrative procedure is developed by “a partner-
ship between legislators and judges,” who “working [as]
partners produce better law than legislators alone could
6 UNITED STATES v. HOME CONCRETE & SUPPLY, LLC
Opinion of SCALIA, J.
possibly produce.”2 That romantic, judge-empowering
image was obliterated by this Court in Vermont Yankee
Nuclear Power Corp. v. Natural Resources Defense Coun­
cil, Inc., 435 U. S. 519 (1978), which held that Congress
prescribes and we obey, with no discretion to add to the
administrative procedures that Congress has created. It
seems to me that the dissent’s vision of a troika partner-
ship (legislative-executive-judicial) is a similar mirage.
The discourse, conversation, and exchange that the dis-
sent perceives is peculiarly one-sided. Congress pre-
scribes; and where Congress’s prescription is ambiguous
the Executive can (within the scope of the ambiguity)
clarify that prescription; and if the product is constitu-
tional the courts obey. I hardly think it amounts to a
“discourse” that Congress or (as this Court would allow in
its Brand X decision) the Executive can change its pre-
scription so as to render our prior holding irrelevant.
What is needed for the system to work is that Congress,
the Executive, and the private parties subject to their
dispositions, be able to predict the meaning that the courts
will give to their instructions. That goal would be ob-
structed if the judicially established meaning of a tech-
nical legal term used in a very specific context could be
overturned on the basis of statutory indications as feeble
as those asserted here.
——————
21 K. Davis, Administrative Law Treatise §2.17, p. 138 (1978).
Cite as: 566 U. S. ____ (2012) 1
KENNEDY, J., dissenting
SUPREME COURT OF THE UNITED STATES
_________________
No. 11–139
_________________
UNITED STATES, PETITIONER v. HOME CONCRETE
& SUPPLY, LLC, ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE FOURTH CIRCUIT
[April 25, 2012]
JUSTICE KENNEDY, with whom JUSTICE GINSBURG,
JUSTICE SOTOMAYOR, and JUSTICE KAGAN join,
dissenting.
This case involves a provision of the Internal Revenue
Code establishing an extended statute of limitations for
tax assessment in cases where substantial income has
been omitted from a tax return. See 26 U. S. C.
§6501(e)(1)(A) (2006 ed., Supp. IV). The Treasury De-
partment has determined that taxpayers omit income
under this section not only when they fail to report a sale
of property but also when they overstate their basis in
the property sold. See Treas. Reg. §301.6501(e)–1, 26
CFR §301.6501(e)–1 (2011). The question is whether this
otherwise reasonable interpretation is foreclosed by the
Court’s contrary reading of an earlier version of the stat-
ute in Colony, Inc. v. Commissioner, 357 U. S. 28 (1958).
In Colony there was no need to decide whether the
meaning of the provision changed when Congress reen-
acted it as part of the 1954 revision of the Tax Code. Al-
though the main text of the statute remained the same,
Congress added new provisions leading to the permissible
conclusion that it would have a different meaning going
forward. The Colony decision reserved judgment on this
issue. In my view, the amended statute leaves room for
the Department’s reading. A summary of the reasons for
2 UNITED STATES v. HOME CONCRETE & SUPPLY, LLC
KENNEDY, J., dissenting
concluding the Department’s interpretation is permissible,
and for this respectful dissent, now follows.
I
The statute at issue in Colony, 26 U. S. C. §275(c) (1940
ed.), was enacted as part of the Internal Revenue Code of
1939. It provided for a longer period of limitations if
the Government assessed income taxes against a taxpayer
who had “omit[ted] from gross income an amount . . . in
excess of 25 per centum of the amount of gross income
stated in the return.”
There was disagreement in the courts about the mean-
ing of this provision in the statute as first enacted. The
Tax Court of the United States, and the United States
Court of Appeals for the Sixth Circuit, held that an over-
statement of basis constituted an omission from gross
income and could trigger the extended limitations period.
See, e.g., Reis v. Commissioner, 142 F. 2d 900, 902–903
(1944); American Liberty Oil Co. v. Commissioner, 1 T. C.
386 (1942). The United States Court of Appeals for the
Third Circuit came to the opposite conclusion in a case
where a corporation misreported its income after inflating
the cost of goods it sold from inventory. See Uptegrove
Lumber Co. v. Commissioner, 204 F. 2d 570, 571–573
(1953). In the Third Circuit’s view there could be an
omission only where the taxpayer had left an entire “item
of gain out of his computation of gross income.” Id., at
571. In the Colony decision, issued in 1958, this Court
resolved that dispute against the Government. Acknowl-
edging that “it cannot be said that the language is unam-
biguous,” 357 U. S., at 33, and relying in large part on the
legislative history of the 1939 Code, the Court concluded
that the mere overstatement of basis did not constitute an
omission from gross income under §275(c).
If the Government is to prevail in the instant case the
regulation in question must be a proper implementation of
Cite as: 566 U. S. ____ (2012) 3
KENNEDY, J., dissenting
the same language the Court considered in Colony; but the
statutory interpretation issue here cannot be resolved, and
the Colony decision cannot be deemed controlling, without
first considering the inferences that should be drawn from
added statutory text. The additional language was not
part of the statute that governed the taxpayer’s liability in
Colony, and the Court did not consider it in that case.
Congress revised the Internal Revenue Code in 1954,
several years before Colony was decided but after the tax
years in question in that case. Although the interpreta-
tion adopted by the Court in Colony can be a proper be-
ginning point for the interpretation of the revised statute,
it ought not to be the end.
The central language of the new provision remained
the same as the old, with the longer period of limitations
still applicable where a taxpayer had “omit[ted] from gross
income an amount . . . in excess of 25 per[cent] of the
amount of gross income stated in the return.” In Colony,
however, the Court left open whether Congress had none-
theless “manifested an intention to clarify or to change the
1939 Code.” Id., at 37. The 1954 revisions, of course,
could not provide a direct response to Colony, which had
not yet been decided. But there were indications that,
whatever the earlier version of the statute had meant,
Congress expected that the overstatement of basis would
be considered an omission from gross income as a general
rule going forward.
For example, the new law created a special exception for
businesses by defining their gross income to be “the total
of the amounts received or accrued from the sale of goods
or services” without factoring in “the cost of such sales or
services.” 26 U. S. C. §6501(e)(1)(A)(i) (1958 ed.) (cur-
rently §6501(e)(1)(B)(i) (2006 ed., Supp. IV)). The prin-
cipal purpose of this provision, perhaps motivated by the
facts in the Third Circuit’s Uptegrove decision, seems to have
been to ensure that the extended statute of limitations
4 UNITED STATES v. HOME CONCRETE & SUPPLY, LLC
KENNEDY, J., dissenting
would not be activated by a business’s overstatement of
the cost of goods sold. This did important work. There
are, after all, unique complexities involved in calculating
inventory costs. See, e.g., O. Whittington & K. Pany,
Principles of Auditing and Other Assurance Services 488
(15th ed. 2006) (“The audit of inventories presents the
auditors with significant risk because: (a) they often rep-
resent a very substantial portion of current assets, (b)
numerous valuation methods are used for inventories, (c)
the valuation of inventories directly affects cost of goods
sold, and (d) the determination of inventory quality, condi-
tion, and value is inherently complex”); see also Internal
Revenue Service, Publication 538, Accounting Periods and
Methods 17 (rev. Mar. 2008) (discussing methods for
identifying the cost of items in inventory). Congress
sought fit to make clear that errors in these kinds of calcu-
lations would not extend the limitations period.
Colony itself might be classified as a special “business
inventory” case. Unlike the taxpayers here, the taxpayer
in Colony claimed to be a business with income from the
sale of goods, though the “goods” it held for sale were real
estate lots. See Intermountain Ins. Serv. of Vail v. Com-
missioner, 650 F. 3d 691, 703 (CADC 2011) (Tatel, J.)
(“Colony described itself as a taxpayer in a trade or busi-
ness with income from the sale of goods or services—i.e.,
as falling within [clause] (i)’s scope had the subsection
applied pre-1954 . . .”). The Court, in turn, observed that
its construction of the pre-1954 statute in favor of the
taxpayer was “in harmony with the unambiguous lan-
guage of [newly enacted] §6501(e)(1)(A).” 357 U. S., at 37.
Clause (i) of the new provision, as just noted, ensured that
the extended limitations period would not cover overstated
costs of goods sold. The revised statute’s special treatment
of these costs suggests that overstatements of basis in
other cases could have the effect of extending the limita-
tions period.
Cite as: 566 U. S. ____ (2012) 5
KENNEDY, J., dissenting
It is also significant that, after 1954, the statute contin-
ued to address the omission of a substantial “amount” that
should have been included in gross income. In the same
round of revisions to the Tax Code, Congress established
an extended limitations period in certain cases where
“items” had been omitted from an estate or gift tax return.
26 U. S. C. §6501(e)(2) (1958 ed.). There is at least some
evidence that this term was used at that time to “mak[e]
it clear” that the extended limitations period would not
apply “merely because of differences between the taxpayer
and the Government as to the valuation of property.”
Staff of the Joint Committee on Internal Revenue Taxa-
tion, Summary of the New Provisions of the Internal
Revenue Code of 1954, 84th Cong., 1st Sess., 130 (Comm.
Print 1955). Congress’s decision not to use the term
“items” to achieve the same result when it reenacted the
statutory provision at issue is presumed to have been
purposeful. See Russello v. United States, 464 U. S. 16, 23
(1983). This consideration casts further doubt on the
premise that the new version of the statute, §6501(e)(1)(A)
(2006 ed., Supp. IV), necessarily has the same meaning as
its predecessor.
II
In the instant case the Court concludes these statutory
changes are “too fragile to bear the significant argumenta-
tive weight the Government seeks to place upon them.”
Ante, at 5. But in this context, the changes are meaning-
ful. Colony made clear that the text of the earlier version
of the statute could not be described as unambiguous, al-
though it ultimately concluded that an overstatement of
basis was not an omission from gross income. See 357
U. S., at 33. The statutory revisions, which were not
considered in Colony, may not compel the opposite conclu-
sion under the new statute; but they strongly favor it. As
a result, there was room for the Treasury Department to
6 UNITED STATES v. HOME CONCRETE & SUPPLY, LLC
KENNEDY, J., dissenting
interpret the new provision in that manner. See Chevron
U. S. A. Inc. v. Natural Resources Defense Council, Inc.,
467 U. S. 837, 843–845 (1984).
In an earlier case, and in an unrelated controversy not
implicating the Internal Revenue Code, the Court held
that a judicial construction of an ambiguous statute did
not foreclose an agency’s later, inconsistent interpretation
of the same provision. National Cable & Telecommunica-
tions Assn. v. Brand X Internet Services, 545 U. S. 967,
982–983 (2005) (“Only a judicial precedent holding that
the statute unambiguously forecloses the agency’s inter-
pretation, and therefore contains no gap for the agency to
fill, displaces a conflicting agency construction”). This
general rule recognizes that filling gaps left by ambigu-
ities in a statute “involves difficult policy choices that
agencies are better equipped to make than courts.” Id., at
980. There has been no opportunity to decide whether the
analysis would be any different if an agency sought to
interpret an ambiguous statute in a way that was incon-
sistent with this Court’s own, earlier reading of the law.
See id., at 1003 (Stevens, J., concurring).
These issues are not implicated here. In Colony the
Court did interpret the same phrase that must be inter-
preted in this case. The language was in a predecessor
statute, however, and Congress has added new language
that, in my view, controls the analysis and should instruct
the Court to reach a different outcome today. The Treas-
ury Department’s regulations were promulgated in light of
these statutory revisions, which were not at issue in Col-
ony. There is a serious difficulty to insisting, as the Court
does today, that an ambiguous provision must continue to
be read the same way even after it has been reenacted
with additional language suggesting Congress would
permit a different interpretation. Agencies with the re-
sponsibility and expertise necessary to administer ongoing
regulatory schemes should have the latitude and discre-
Cite as: 566 U. S. ____ (2012) 7
KENNEDY, J., dissenting
tion to implement their interpretation of provisions reen-
acted in a new statutory framework. And this is especially
so when the new language enacted by Congress seems to
favor the very interpretation at issue. The approach taken
by the Court instead forecloses later interpretations of a
law that has changed in relevant ways. Cf. United States
v. Mead Corp., 533 U. S. 218, 247 (2001) (SCALIA, J., dis-
senting) (“Worst of all, the majority’s approach will lead
to the ossification of large portions of our statutory law.
Where Chevron applies, statutory ambiguities remain am-
biguities subject to the agency’s ongoing clarification”).
The Court goes too far, in my respectful view, in constrict-
ing Congress’s ability to leave agencies in charge of filling
statutory gaps.
Our legal system presumes there will be continuing
dialogue among the three branches of Government on
questions of statutory interpretation and application. See
Blakely v. Washington, 542 U. S. 296, 326 (2004)
(KENNEDY, J., dissenting) (“Constant, constructive dis-
course between our courts and our legislatures is an inte-
gral and admirable part of the constitutional design”);
Mistretta v. United States, 488 U. S. 361, 408 (1989) (“Our
principle of separation of powers anticipates that the
coordinate Branches will converse with each other on
matters of vital common interest”). In some cases Con-
gress will set out a general principle, to be administered in
more detail by an agency in the exercise of its discretion.
The agency may be in a proper position to evaluate the
best means of implementing the statute in its practical
application. Where the agency exceeds its authority, of
course, courts must invalidate the regulation. And agency
interpretations that lead to unjust or unfair consequences
can be corrected, much like disfavored judicial interpreta-
tions, by congressional action. These instructive ex-
changes would be foreclosed by an insistence on adhering
to earlier interpretations of a statute even in light of new,
8 UNITED STATES v. HOME CONCRETE & SUPPLY, LLC
KENNEDY, J., dissenting
relevant statutory amendments. Courts instead should be
open to an agency’s adoption of a different interpretation
where, as here, Congress has given new instruction by an
amended statute.
Under the circumstances, the Treasury Department had
authority to adopt its reasonable interpretation of the new
tax provision at issue. See Mayo Foundation for Medical
Ed. and Research v. United States, 562 U. S. __, __ (2011)
(slip op., at 10). This was also the conclusion reached in
well-reasoned opinions issued in several cases before the
Courts of Appeals. E.g., Intermountain, 650 F. 3d, at 705–
706 (reaching this conclusion “because the Court in Colony
never purported to interpret [the new provision]; because
[the new provision]’s ‘omits from gross income’ text is at
least ambiguous, if not best read to include overstate-
ments of basis; and because neither the section’s structure
nor its [history and context] removes this ambiguity”).
The Department’s clarification of an ambiguous statute,
applicable to these taxpayers, did not upset legitimate
settled expectations. Given the statutory changes de-
scribed above, taxpayers had reason to question whether
Colony’s holding extended to the revised §6501(e)(1). See,
e.g., CC & F Western Operations L. P. v. Commissioner,
273 F. 3d 402, 406, n. 2 (CA1 2001) (“Whether Colony’s
main holding carries over to section 6501(e)(1) is at least
doubtful”). Having worked no change in the law, and
instead having interpreted a statutory provision without
an established meaning, the Department’s regulation does
not have an impermissible retroactive effect. Cf. Smiley v.
Citibank (South Dakota), N. A., 517 U. S. 735, 741, 744,
n. 3 (1996) (rejecting retroactivity argument); Manhattan
Gen. Equipment Co. v. Commissioner, 297 U. S. 129, 135
(1936) (same). It controls in this case.
* * *
For these reasons, and with respect, I dissent.