I. Introduction

The corporate alternative minimum tax ("CAMT") enacted in the Inflation Reduction Act ("IRA") is remarkable not only for what it says but for what it does not say. Normally, significant tax legislation would undergo significant hearings in the House and Senate tax-writing committees, followed by one or more reports explaining the committees' recommendations. Then the legislation would move to the Conference Committee, where a conference report would be written. Due partly to the reconciliation process in which CAMT was enacted, there is no committee report or conference report, that is, there is no official legislative history. Treasury and IRS will attempt to divine Congressional intent and eventually fill in many of the gaps with regulations, but will face significant challenges in developing fair and workable rules. For tax legislation as revolutionary as CAMT, that is truly remarkable.

Meanwhile, companies subject to CAMT ("applicable corporations") are scrambling to apply a complex new tax regime that is effective for tax years beginning after December 31, 2022. Following CAMT's enactment on August 16, 2022, practitioners and commentators quickly focused on a number of provisions that were ambiguous or could lead to unintended results.1 Treasury and IRS issued interim guidance on December 27, 2022, in Notice 2023-7 (the "Notice"), addressing recognition and nonrecognition transactions, cancellation of debt income and bankruptcy, depreciation adjustments, and certain credits, among other things. This Notice, however, also included a long list of other issues—but by no means all the outstanding issues—in need of guidance.

In all likelihood, taxpayers will be forced to apply CAMT in the calendar year 2023 without the benefit of final regulations. Taxpayers are permitted to rely on the Notice until proposed regulations are issued. Conceivably, proposed regulations could be issued in 2023 and could permit taxpayers to rely on them until final regulations are issued. For any final regulations to be effective retroactively for the calendar year 2023, they must be issued within 18 months of August 16, 2022,2 which is around February 16, 2024. It is also conceivable that final regulations, when issued, will permit taxpayers to elect to apply them retroactively. But the final regulations will likely be too late to be helpful for calendar year 2023 return positions (necessitating an amended return if the taxpayer's position is changed).

This article seeks to determine how some of CAMT's international "outbound" provisions should be interpreted based solely on the statutory language as well as any extrinsic evidence from other sources of Congress's possible intent, in the absence of any official legislative history. Statutory interpretation has always been a special province of the courts. Therefore, taxpayers seeking to interpret a provision or defend their interpretation should focus on how courts would apply statutory construction principles to resolve the interpretive issues.

II. Overview of Statutory Construction Principles

Because statutory construction involves a vast body of Supreme Court case law, the basic principles are generally uniform between federal circuits. Each circuit begins with the "plain language" of the statute, applies rules called the "canons of construction" to interpret the statute's text, and looks to extrinsic aids, such as legislative history and committee reports, to resolve ambiguities. The circuits' applications of these principles may differ, however, in how the principles interact and in their relative weight.

A. Plain Meaning Rule

Courts begin statutory construction with the "plain language" of the statute.3 If the statute is clear and unambiguous, "the text of the statute is the end of the matter."4 In general, courts give words their ordinary, contemporaneous meaning in determining the plain meaning of a statute.5 Here, "contemporaneous" means contemporaneous with the enactment of the statute.6 Thus, "[w]hen the text of a statute contains undefined terms," the court will look to, among other things, dictionaries from the time of enactment.7

Where, however, Congress uses technical words or terms of art, courts generally give those rules their technical meanings. As the Supreme Court explained, "[w]here Congress has used technical words or terms of art, 'it [is] proper to explain them by reference to the art or science to which they [are] appropriate.'"8

In determining whether the statute is clear or unambiguous, it "must be viewed in the context of the statute as a whole."9 Disputed language is considered ambiguous if it is "reasonably susceptible of different interpretations."10

Finally, courts have found exceptions to the plain meaning rule, and thus have looked beyond the express language of a statute in order to give force to Congressional intent, where a literal interpretation would either "lead to an absurd result"11 or be "demonstrably at odds" with the intent of the legislators.12

B. Canons of Construction

In interpreting statutes (including the Code), courts apply rules referred to as "canons of construction."13 Courts also refer to these rules as "canons of interpretation" or "maxims."14 The canons are a series of common law rules, often stated in Latin, that apply to statutes, regulations, and other legal writings. There are a large number of canons: the late Justice Scalia and Brian Garner explored 57 canons in their 2012 book on statutory interpretation without purporting to have assembled a comprehensive list.15 The following are examples of some common canons of construction that courts use to interpret a tax statute's plain meaning (the list is not exhaustive):

  • Surplusage. Statutes should be construed "so that no clause, sentence, or word is rendered superfluous, void, or insignificant."16
  • Presumption of Consistent Usage. The same word used in a statute should be presumed to have the same meaning.17
  • Noscitur a Sociis (it is known by its associates). "[T]he meaning of an unclear word or phrase should be determined by the words immediately surrounding it."18
  • Ejusdem Generis (of the same kind). "Where an enumeration of specific things is followed by a general word or phrase, the general word or phrase is held to refer to things of the same kind as those specified."19
  • Expressio Unius est Exclusio Alterius (negative implication). When a statute names one item of an associated group, it excludes others not mentioned.20
  • Generalia Specialibus Non Derogant (specific controls over the general). If there is a conflict between a general provision and a specific provision, the specific provision prevails.21

The canons are not mandatory rules.22 Instead, as the Supreme Court has explained, "[t]hey are guides that 'need not be conclusive.'"23 They "are designed to help judges determine the Legislature's intent as embodied in particular statutory language."24 For that reason, combined with the sheer number of canons, different canons often point toward different conclusions.25 In addition, other considerations may overcome the conclusion that would otherwise be reached by applying one or more of the canons.26

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Footnotes

1. E.g., ABA Tax Section, Comments on Corporate Alternative Minimum Tax Under Section 59(k) (March 20, 2023); NYSBA Tax Section, Report No. 1473—Report on Selected Issues Relating to the Corporate Alternative Minimum Tax (March 20, 2023); U.S. Chamber of Commerce, New Corporate Alternative Minimum Tax— Implementation Issues and Priority Guidance Recommendations (March 21, 2023).

2. Code Sec. 7805(b)(2).

3. See, e.g., Am. Tobacco Co. v. Patterson, SCt, 456 US 63, 68, 102 SCt 1534 (1982) ("As in all cases involving statutory construction, 'our starting point must be the language employed by Congress ....'"), quoting Reiter v. Sonotone Corp., SCt, 442 US 330, 337, 99 SCt 2326 (1979); Watt v. Alaska, SCt, 451 US 259, 265–66, 101 SCt 1673 (1981), quoting Blue Chip Stamps v. Manor Drug Stores, SCt, 421 US 723, 756, 95 SCt 1917 (1975) (Powell, J. concurring).

4. Steele v. Blackman, CA-3, 236 F3d 130, 133 (2001).

5. Metro One Telecommunications, Inc., CA-9, 2013-1 ustc ¶50,107, 704 F3d 1057, 1061 (2012) ("Moreover, '[i]n the absence of an indication to the contrary, words in a statute are assumed to bear their ordinary contemporary meaning'"), quoting Walters v. Metro Educ. Enters., Inc., SCt, 519 US 202, 207, 117 SCt 660 (1997); Microsoft Corp., CA-9, 2002-2 ustc ¶50,800, 311 F3d 1178, 1183 (2002), citing Fed. Deposit Ins. Corp. v. Meyer, SCt, 510 US 471, 476, 114 SCt 996 (1994).

6. See, e.g., Microsoft Corp., CA-9, 2002-2 ustc ¶50,800, 311 F3d at 1183 (looking to "[d]ictionary definitions contemporary to the original enactment of [Code Sec.] 927(a)(2)(B)" in interpreting the provision).

7. Id.; see also Z. Siddiqui, CA-9, 2004-1 ustc ¶50,193, 359 F3d 1200, 1202–03 (2004) (applying the statutory definition to a defined term, "disclosure," in Code Sec. 6103(b)(8) but looking to a 1976 dictionary to interpret an undefined term, "act.").

8. Corning Glass Works v. Brennan, SCt, 417 US 188, 201, 94 SCt 2223 (1974).

9. Robinson v. Shell Oil Co., SCt, 519 US 337, 341, 117 SCt 843, 846 (1997) ("The plainness or ambiguity of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole").

10. Nat'l R.R. Passenger Corp. v. Atchison Topeka & Santa Fe Ry. Co., SCt, 470 US 451, 473 n. 27, 105 SCt 1441 (1985).

11. American Trucking Association, SCt, 310 US 534, 543, 60 SCt 1059 (1940).

12. Ron Pair Enters., Inc., SCt, 89-1 ustc ¶9179, 489 US 235, 109 SCt 1026 (1989), citing Griffin v. Oceanic Contractors, Inc., SCt, 458 US 564, 571, 102 SCt 3245 (1982) ("[T]he plain meaning of legislation should be conclusive, except in the 'rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters'").

13. See, e.g., Guardian Industries Corp., 143 TC 1, 14–15, Dec. 59,965 (2014).

14. See, e.g. Chickasaw Nation, SCt, 2001-2 ustc ¶50,765, 534 US 84, 93, 122 SCt 528 (2001) (using the phrase "canons of statutory interpretation"); Hewlett-Packard Co., 139 TC 255, 268, Dec. 59,200 (2012) ("the venerable rule of statutory construction, commonly referred to as the maxim 'expressio unius est exclusion alterius'").

15. Scalia & Garner, Reading Law: The Interpretation of Legal Texts (2012).

16. See, e.g., Gorospe, CA-9, 451 F3d 966, 960 (2006); Guardian, supra at 14–15.

17. See, e.g., Blue Lake Rancheria, CA-9, 653 F3d 1112, 1117 (2011) ("[i]t is a normal rule of statutory construction that identical words used in different parts of the same act are intended to have the same meaning."), quoting Keystone Consol. Indus., Inc., SCt, 508 US 152, 159, 93-1 ustc ¶50,298, 113 SCt 2006 (1993).

18. Microsoft Corp., CA-9, 2002-2 ustc ¶50,800, 311 F3d 1178, 1184 (2002), citing Gustafson v. Alloyd Co., SCt, 513 US 561, 575, 115 SCt 1061 (1995).

19. Lacy, CA-9, 119 F3d 742, 748 (1997) ("[Ejusdem generis means] that a general term following more specific terms means that the things embraced in the general term are of the same kind as those denoted by the specific terms"), citing Baird, CA-9, 85 F3d 450, 453 (1996).

20. Silvers v. Sony Pictures Entertainment, Inc., CA-9, 402 F3d 881, 885 (2005) ("The doctrine of expression unius est exclusion alterius 'as applied to statutory interpretation creates a presumption that[,] when a statute designates certain persons, things, or manners of operation, all omissions should be understood as exclusions'"), quoting Boudette v. Barnette, CA-9, 923 F2d 754, 756–57 (1991).

21. Radzanower v. Touche Ross & Co., SCt, 426 US 148, 153–54, 96 SCt 1989 (1976) ("It is a basic principle of statutory construction that a statute dealing with a narrow, precise, and specific subject is not submerged by a later enacted statute covering a more generalized spectrum."); Morton v. Mancari, SCt, 417 US 535, 550–51, 94 SCt 2474 (1974) ("Where there is no clear intention otherwise, a specific statute will not be controlled or nullified by a general one, regardless of the priority of enactment").

22. Chickasaw Nation, supra at 94.

23. Chickasaw, supra at 94 Nation, SCt, 2001-2 ustc ¶50,765, 534 US at 93, 122 SCt 528, quoting Circuit City Stores, Inc. v. Adams, SCt, 532 US 105, 115, 121 SCt 1302 (2001).

24. Id.

25. Id.

26. See, e.g., Xilinx, Inc., CA-9, 2010-1 ustc ¶50,302, 598 F3d 1191, 1196–1197 (2010) (applying principles of statutory interpretation to the Code Sec. 482 regulations and concluding that the canon the specific controls over the general did not apply, because it would conflict with the overall purpose of the Code Sec. 482 regulations).

Originally published by Wolters Kluwer.

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