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Secretary's Authority To Resolve Cost Issues
This Court and others have struck down regulations that did
not harmonize with the language, origin, and purpose of the
statute which they purported to interpret. United States v.
Vogel Fertilizer Co., 455 U.S. 16, 24-25 (1982); Western Natl.
Mut. Ins. Co. v. Commissioner, 102 T.C. 338 (1994); Hughes Intl.
Sales Corp. v. Commissioner, 100 T.C. 293 (1993); Jackson Family
Found. v. Commissioner, 97 T.C. 534 (1991), affd. 15 F.3d 917
(9th Cir. 1994); Durbin Paper Stock Co. v. Commissioner, 80 T.C.
252 (1983). Petitioners have attempted to cast these cases in
the mold of those decisions. Thus, petitioners argue that the
Regulation represents an impermissible attempt to amend rather
than merely interpret the statute, quoting language from our
3(...continued)
the tax return for the year to which the election applies. From
the context it is quite clear that Congress did not intend this
provision as a substantive limitation on the Secretary's
rule-making authority.
It is likely that Congress added this provision out of a
consideration for administrative efficiency. Sec. 458(c)(4)
provides that computation of taxable income under an election
shall be treated as a method of accounting. The election would
therefore constitute a change in method of accounting, which
ordinarily would require the taxpayer to follow procedures for
obtaining the Secretary's consent. Sec. 446(e). Congress
anticipated a large number of similarly situated taxpayers would
make the election and did not believe that review of each
applicant's particular circumstances would be necessary.
Petitioners' reading would imply that the Secretary could not
disallow use of the method of accounting under sec. 458 even if
the taxpayer was using it in a manner that conflicted with other
provisions of the Code and regulations. There is no evidence
that Congress intended sec. 458 to supersede all other tax law.
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