- 18 -
In this step, we defer to the agency’s choice between
“conflicting reasonable interpretations” of the statute. Holly
Farms Corp. v. NLRB, 517 U.S. at 398-399. We examine, inter
alia, legislative history in the second step of the Chevron
inquiry.6 See id. at 402 n.8.
A close examination of the legislative history reveals that
Congress intended the Secretary’s authority under section
267(a)(3) to encompass imposition of the cash method on the payor
where the foreign payee does not have a U.S. method of accounting
with respect to the amounts owed. Section 267(a)(3) was added to
the Code because Congress felt “The application of * * * [section
267(a)(2)] is unclear when the related payee is a foreign person
that does not, for many Code purposes, include in gross income
foreign source income that is not effectively connected with a
U.S. trade or business.” H. Rept. 99-426, at 939 (1985), 1986-3
6 The extent to which extrinsic factors (i.e., factors
outside the statutory language itself) may be considered in step
one of a Chevron analysis may not be entirely clear after FDA v.
Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000). There,
the Supreme Court clearly considered an extrinsic factor, namely,
subsequent Congressional actions, as part of step one. With
respect to legislative history, however, the Court of Appeals for
the Seventh Circuit, to which an appeal in this case would
ordinarily lie, generally adheres to the view that legislative
history may not be considered in step one. See MBH Commodity
Advisors, Inc. v. CFTC, 250 F.3d 1052, 1060-1061, 1061-1062 (7th
Cir. 2001); Bankers Life & Cas. Co. v. United States, 142 F.3d
973, 983 (7th Cir. 1998). In light of the position of the Court
of Appeals, we do not consider legislative history as part of our
analysis of step one of Chevron in the instant case. See Golsen
v. Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th
Cir. 1971).
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