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all of the software loads used in all of the digital switches in
issue and that those software loads constitute tangible personal
property for purposes of the ITC and the ACRS.2 Therefore,
petitioner is entitled to the claimed investment tax credits and
accelerated depreciation deductions.
II. The Drop and Block Issue
A. Introduction
The drop and block portion of petitioner's telephone network
consists of the wire running from petitioner's transmission
network to a station protector located on the outside of a
customer's premises. We must determine the depreciation class of
the drop and block for purposes of the ACRS.
2 In accordance with Norwest Corp. & Subs. v. Commissioner,
108 T.C. ___ (1997), we hold today that the software loads in
issue constitute tangible personal property for purposes of the
investment tax credit (ITC) and tangible property for purposes of
the accelerated cost recovery system (ACRS). Although respondent
does not assert that there exists a distinction in the meaning of
the term “tangible” as it is used in the term “tangible personal
property” for purposes of the ITC and the term “tangible
property” for purposes of the ACRS, we believe that our reliance
on the legislative history of the ITC in Norwest requires at
least a brief discussion of that issue.
As a preliminary matter, sec. 168 and the regulations
thereunder do not define the term “tangible property” for
purposes of the ACRS. Sec. 168, which implements the ACRS, was
enacted by the Economic Recovery Tax Act of 1981 (ERTA), Pub. L.
97-34, sec. 201, 95 Stat. 203. The relevant committee reports
accompanying the enactment of ERTA indicate that Congress, in
substantial part, considered the ITC and the ACRS to be in pari
materia. See H. Rept. 97-201, at 73-74 (1981); S. Rept. 97-144,
at 47 (1981), 1981-2 C.B. 412, 425; H. Conf. Rept. 97-215, at
206, 213 (1981), 1981-2 C.B. 481, 487, 490. This Court will not
create a distinction unintended by Congress, and, thus, we
conclude that the software loads in issue constitute tangible
property for purposes of the ACRS.
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