*1 392 previ injuries, specifically excluded under the CGL

Although Rule has not the Six-Foot context,5 ously interpreted Policy, grant in this we do court’s been we AFFIRM district Supreme Liberty summary judgment not believe that the Oklahoma on its de- prohi would determine that the Rule’s claratory judgment Court claim. any activity within six feet of an

bition operator’s power line creates

owner or property right operator owner or a real surrounding power

in the six feet its line. clearly grant Rule Six-Foot airspace title to within six

East Central lines, designed of its but instead is

feet airspace,

penalize those who come within 63, § (making tit. violation see Okla.Stat. 984 ANTONIO, INC.; ABC RENTALS OF SAN misdemeanor); law a Trett v. Okla Peters; Peters; David R. Diana L. John (Okla Elec., 275, & 775 P.2d homa Gas Parsons; Parsons, P. Melba R. Petition- .1989) 63, 984), (citing and to Okla.Stat. tit. ers-Appellants, liability” indemnify power companies for “all they v. incur as a result of violations of the 63, Rule, (making see Okla.Stat. tit. INTERNAL COMMISSIONER OF violators of the law liable the owner REVENUE, Respondent power damage to operator of the line “for all Appellee. operator’s] owner’s or facilities and for [the liability opera all incurred owner or [the] Inc., Enterprises, Amicus Curiae. Grauel any ... accidental con tor as a result of Nos. 95-9008 to 95-9010. tact”). Appeals, United States Court of III. CONCLUSION Tenth Circuit. injury Through personal claim that the provision in Part II of the Broad Form Com- 27, Sept. 1996. Liability prehensive Endorsement to General Policy provides coverage for its the CGL

loss, attempted expand East Central has County coverage of Creek Well Service’s Policy payment in an effort to secure

CGL $4,000,000 greater portion judgment

a of its

against County Howev- Creek Well Service.

er, Policy under the between Creek CGL Liberty,

County Well Service Creek

County paid premiums to cover Well Service risks, Liberty

a defined set of cannot expand

now be forced to that set. Mar- Cf. tin, (refusing F.Supp. expand at 171 coverage

coverage beyond categories

specified policy for the insured

paid premium). Because East Central’s bodily

claim is one indemnification ing immunity employer Supreme interpreted un Oklahoma Court has afforded an Act, constitutionality, Kimery Compensation see der the Workers’ OHa.Stat. the statute's 12, Co., (Okla liability does not shield it from to a Public Serv. 622 P.2d 1070-71 tit. Rule, .1980) power company paid by employer (holding that the Six-Foot Okla.Stat. loss Rule, constitutional), Okla. tit. and its interac because of violation of Six-Foot 981); Compensation v. L.V. Workers Stat. tit. Travelers Ins. Co. tion with Oklahoma's Act, Serv., (Okla Ring French Truck 770 P.2d Okla.Stat. tit. see Public Co., (Okla.1989) (hold- .1988)(same). 775 P.2d Serv. *2 satisfy require- To

available them. (c), ments of an alternative method must be a reasonable and consis- determining tent method of a reasonable al- *3 (2) depreciation; for be no faster lowance declining than the balance method of 167(b)(2) the first of the over two-thirds (3) property; useful life of the and property with a useful life of at least three years. Section relaxes the second requirement by requiring only prop- erty properly under a method (Lyndon Timothy P. Vix and O’Sullivan W. years a term of for the first Gerdes, brief), R. with him on the John year taxpayer can taxable for which the take Fleeson, Kitch, Wichita, Gooing, Coulson & depreciation a deduction for the Kansas, petitioners-appellants. Accordingly, properly to be depreciated by expressed in a method not a (Jonathan Cohen, Linda E. Mosakowski S. 168(f)(1), years term the method Division, brief), Depart- Tax with her on the (2) consistent; must be reasonable and Justice, D.C., Washington, ment of for re- produce greater depreciation no in the first spondent-appellee. year declining taxable than the balance meth- Jeffrey Fergu- Michael J. Henke and W. od; applied and with a son, Elkins, L.L.P., Washington, of Vinson & years. at useful life of least three D.C., Inc., Enterprises, amicus Grauel by The income forecast method as limited curiae. 167(b)(4) is a reasonable and con- PORFILIO, KELLY and Before depreciating taxpay- sistent method for BRISCOE, Judges. Circuit inventory. ers’ to be depreciated by expressed in a method not

BRISCOE, Judge. Circuit years term of the method produce greater depreciation must also appeals, In these consolidated we decide year than first taxable balance industry may prop- whether the rent-to-own 167(b)(2), method of and the life of useful erly depreciate inventory purposes for tax must be at least three using the income forecast method rather tax We remand court for determina- Recovery than the Modified Accelerated Cost (MACRS) tion of those issues. System under I.R.C. appellants’

The Tax Court held rent-to- inventory Background properly depreciable own was not under the income forecast and thus At issue are deductions upheld the notice of Commissioner’s deficien- companies claimed two rent-to-own on cy. pro- We reverse and remand for further inventory their tax rental units for the ceedings. 31,1987, years ending December and Decem- Antonio, analysis Based on our ber Rentals of ABC San (ABC) language legislative history, subchapter corporation we conclude Inc. was a C 31, 1987, preclude May use of the for its ended fiscal subchapter corporation income forecast method for like tax- was a S thereafter. payers’ inventory, provided other P. John Parsons was ABC’s sole shareholder. (Guaranteed) Rental, taxpayers conditions are met. If the can Guaranteed Inc. was a subchapter corporation establish that the income forecast method is S Parsons and a reasonable and consistent method under Diana L. Peters were shareholders in Guar- 167(b)(4) joint complies and that it with the Parsons and anteed. Peters each filed (c), limitations of as modified tax at returns issue with their and Guaran- particular unit. Both ABC R. Parsons Melba respective spouses, forecast method used the income teed R. Peters. David depreciation deductions for their determine issue, at ABC and Guar- During question. years in businesses operated rent-to-own anteed a notice of defi- televisions, The Commissioner served furniture, ster- appliances, leased ciency portion appellants on and disallowed eos, to custom- recorders and videocassette claimed deductions agreements, the rental Texas. Under ers in Guaranteed, contending tax- ABC property for a the rental leased customers using the in- prohibited were payers based on period, which varied specified time method; rather, they were come forecast of times property and the number type calculate their de- required to Generally, had been leased. The Commissioner ductions MACRS. unit was term on rental the initial lease *4 MACRS, that, the rental determined If twenty-one months. a and between twelve inventory had a class life of nine monthly weekly rental paid the customer recovery applicable period was therefore the rental con- full term of the amount Obviously, longer recovery this five tract, full title to would obtain the customer results smaller period under MACRS additional cost. property at no the rental Appellants yearly depreciation deductions. right under the had the The customer also challenge petitioned the Tax Court the property before to return the contract rental deficiency. Tax Court notices with no further of the full term expiration reasoning adopted the Commissioner’s particular rental unit would Each obligation. deficiency, holding the upheld the notices subsequent until a customers be leased to units were not rental the entire the unit for retained customer method. the income forecast to the title term and obtained lease dispose of average, and Guaranteed ABC On Discussion purchase, units within two rental 90% of all rental they dispose of about I. pur- years of three and one-half within units “in the We review tax decisions court chase. same extent as same manner and the companies gen- rent-to-own Prior in civil actions of the district courts decisions twenty-one, or twen- erally eighteen, an used 7482(a)(1). jury.” a I.R.C. without tried depre- ty-four straight month line Therefore, findings tax court’s we review the inventory -units. With their rental ciate standard clearly a erroneous of fact under Recovery Cost of the Accelerated enactment de novo. questions of law reviewed are while (ACRS) by Congress System (10th C.I.R., Cir. F.3d Worden 1986, industry practice has been MACRS 1993). depreciation deduction on the to calculate disagree as to whether parties meth- using the income forecast units rental legal method, a factual or a appeal presents the this income forecast od. Under the argues a deter particular The Commissioner question. for a yearly depreciation deduction rent-to-own invento of whether the cost of the rental mination the equal unit is rental exception to MACRS ry fits into the by at issue by percentage a obtained multiplied unit by is a factual issue I.R.C. produced by that rental created dividing income the proper (numerator) regarding the nature of 300% of the during the out, however, (denominator), correctly point repre- Appellants ty. which of the unit cost facts, question given stipulated reve- anticipated gross rental the total sents inventory excep into the fits whether the Under nue for the life of unit. legal a issue re presents depreciated in full tion to MACRS unit is a rental interpretation of application garding a during income-producing life. When its stipu Even if facts were inventory company’s unit leaves the rental lated, present a mixed income, this case still would company stops producing legal of law and which question on fact claiming a deduction ceases predominate. legal issues agreed, Because this is a Tax Court question, incorrectly the Commissioner con- whose economic adequate- usefulness cannot appellants ly proof physical tends be measured its had burden of at condition or passage may produce inventory. trial to establish the nature of time and that an uneven stream of income based on popu- larity properly depreciated is in- II. come forecast argument method. This 167(a) of the Code establishes reasoning based on the of Rev. Rul. right to claim “as deduc 1960-2 ruling, pre- C.B. 68. tion reasonable allowance for the exhaus dated the IRS held that television tion, (including wear and tear a reasonable adequately depreciated by films cannot be obsolescence)” allowance for used the usual methods of because their in trade or business or held economic adequately usefulness cannot production of income. The amount of the by physical passage measured condition or tangible deduction time, they may produce an uneven MACRS, governed by which is set out in stream of popularity. income based on their Nevertheless, I.R.C. MACRS does The IRS limited the income forecast method tangible property; § to all application in its to television films oth- “and exception whereby an creates other methods er of a similar character.” *5 depreciation prescribed than that In a series rulings, of later revenue permitted. are MACRS permitted IRS use of the income forecast part: states in depreciate films, method to picture motion (f) Property to which section does not 64-273, 62, Rev. Rul. 1964-2 C.B. book apply. shall not section to— —This manuscripts, patents, recordings, and master depreciation.— Certain methods of 79-285, Rev. Rul. 1979-2 C.B. 91. These Any property if— rulings predated also the 1981 enactment of (A) elects to exclude 167, 168 and entirely were based on such application from the of which only provision was then governing section, depreciation methods. After enactment of (B) 168, taxable 1st for which the IRS to follow continued its initial deduction would be ruling allow- revenue and extended the income fore- respect able with videoeassettes, to such cast method to Rev. 89- Rul. 62, taxpayer, 78, hands of the games, is 1989-1 C.B. and video Priv. properly depreciated (June 11, 1993), the unit Ltr. Rul. 9323007 on the production or ground method of they are similar to television in Taxpayers a term films. could elect to use the income forecast method rather than the ACRS. it was not added.) (Emphasis until 1995 that the IRS issued a revenue concluded, Tax correctly Court ruling that denied use of the income forecast parties dispute, do not that the income depreciate property subject method to forecast “method 95-52, normal wear and tear. Rev. Rul. years,” in a term required (consumer 1995-34 I.R.B. goods 16 leased 168(f)(1)(B). remaining inquiry is contracts).1 under rent-to-own whether inventory the rent-to-own is “prop- erly depreciated” the income rulings IRS revenue are not bind government contended, method. The ing precedent on this court. “Unlike trea- C.I.R., 505, 1. In Carland v. grounds 90 T.C. 1988 expressly WL Circuit affirmed on other 26055 the Tax Court held that the income declined to decide whether the income forecast depreciate forecast method could not be used to appropriate method can ever be for assets whose physical assets whose economic usefulness could through usefulness over declines time normal adequately by physical be measured condition C.I.R., 1101, wear and tear. Carland v. 909 F.2d time, passage but the tax at issue (8th 1990). 1105 Cir. and, case, preceded Eighth the ACRS

397 1439, 1452-53, -, 114 128 S.Ct. promulgated which are sury regulations, (1994); re L.Ed.2d 119 C.I.R. v. Glenshaw notice and comment accordance with 473, Co., 426, 431, Procedure 348 U.S. 75 S.Ct. Administrative Glass quirements (1955). 476-77, force Act, rulings not have the L.Ed. 483 See also S.E.C. ‘do 99 revenue Sloan, 103, 120-21, 1702, ‘accorded therefore are 436 U.S. 98 S.Ct. of law’ and and effect ” 1712-13, (1978); American weight regulations.’ then United less Sheffield, Co. Retire v. American Stores v. Board Com’rs 435 Co. States Stores Cir.1991) (10th Plan, 965, 980-81, 110, 134, F.2d 994 ment 928 98 55 S.Ct. States, F.2d (1978). Flanagan v. United (quoting The inference of Con L.Ed.2d 148 Cir.1987)). (10th rulings Revenue legisla gressional approval stronger when regula force and effect not have the history do tive contains some indication plain alter the may not be used to approved tions Congress was aware of and — Schleier, C.I.R. language of statute. construction. See Central administrative n. U.S. -,-n. 115 S.Ct. at -, Bank, 114 S.Ct. at 511 U.S. (1995). 8, 132 L.Ed.2d 294 1452-53; Bayview United States v. Riverside Homes, 121, 137, 106 464- 474 U.S. rulings given are considera Revenue (1985); Fletcher v. 88 L.Ed.2d War contempora they are issued weight when ble den, Penitentiary, 641 F.2d United States of the statute neously the enactment with (10th Cir.), cert. denied 453 U.S. use, long and the have been (1981). 3145, 69 L.Ed.2d 995 101 S.Ct. change, without language has reenacted been congressional satisfaction find no indication indicating apparent We interpretation. Congress approved lim prevailing history of 168 that States, 472, 481-85, method or 495 U.S. itation of the income forecast Davis v. United assets, 457 § 109 L.Ed.2d similar to movies and doctrine as (legislative reenactment revenue rul that it was even aware of the *6 generally rulings). history See applied contrary, legislative to revenue ings. To the Galler, Emerging Judi Standards suggests Congress permit intended to Linda Rulings, 72 Revenue cial Review IRS property” from taxpayers to exclude “most of (1992). Here, rulings 168(f)(1). B.U.L.Rev. 841 and MACRS under ACRS contemporaneous the enact not with 144, were Cong., 1st at 82- S.Rep. No. 97th Sess. Athough § 167 or ment of either (1981), reprinted in 1981 83 U.S.C.C.A.N. in permitted the thirty years has 841, IRS for 105, Rep. No. H.R. Conf. 187-188. See and similar forecast method movies (1986), come reprinted Cong., 99th 2d Sess. at 106 method and has indicated the property, 4075, 4194; Prt. S. 98- in 1986 U.S.C.C.A.N. property, it permitted only for such would be (1984), Sess., 169, Cong., 2d at 467 98th cannot be used for recently ruled the method Antonio v. (quoted in Rentals San ABC of 168 was property unlike movies. Section (Tax C.I.R., 682914, *20 Court 1994 WL rulings, revenue but after the initial enacted 1994)). 167, rulings, for those has the basis history of amend- Nor does the Congress simply left it has been reenacted. approval Congressional ments to 167 show “legislative unchanged. The reenactment” rulings. Congress was aware of the revenue inapplicable here. doctrine is of rulings permitting the use the revenue of depreciate method to case, the income forecast any without reenactment it movies when made films and statutory language and television change in relevant minor technical amendment at best un Congressional inaction are mere 1976, No. 94- Act of Pub.L. the Tax Reform Congressional intent to indications of reliable 1906(b)(13)(A), 455, 1520.2 How- 90 Stat. of a construction adopt an administrative Congress concerned ever, although was v. First Bank Denver statute. See Central of to which Denver, 164, industry tax shelters about movie Bank 511 U.S. Interstate “or his the amendment struck tion; phrase the Sec- earlier version had 2. The provided delegate” delegate.” could "or his retary Treasury regulations computing promulgate deprecia- 398 contributed,

the income forecast method it limitation of the income forecast method to property. did not consider movies and similar whether the method was or should be limited to similar char taxpayers contend that kind of 658, H.R.Rep. acter to movies. See 94th properly depreciated can be Cong., (1976), reprinted 2d Sess. 116-18 the income forecast method.4 Based on our 1976 U.S.C.C.A.N. 3010-3013. analysis language and the legislative history, we conclude part As of the Small Business Job preclude does not use of the income forecast Act Protection Pub.L. No. types property, method for other such as has added rules to 167 to taxpayers’ inventory. govern use of the income forecast method. Although agree taxpay we Ways The House and Means Committee Re preclude ers that does not them port legislation on this noted the revenue using from the income forecast we rulings permitting use of the income Massey find their reliance on Motors v. Unit property, method for films and similar States, ed 364 U.S. 80 S.Ct. judicial holding well as the two decisions3 misplaced. L.Ed.2d 1592 to be As subject inapplicable case, Massey pre-ACRS was a it has limited ordinary wear and tear. the re relevance to the issue before us—construc port expressed approval disap neither nor issue, tion of To resolve that we and, proval of although those decisions some language must start with the of the statute. special provisions apply to movies and Shalala, Hosp. Good Samaritan v. types property, provisions similar the new L.Ed.2d 368 types do not limit the method to those (1993); Phillips Lujan, Petroleum Co. Moreover, report indicated (10th Cir.1993). language F.3d 858 If the scope was broad: “MACRS clear, inquiry plain is over. The meaning property, including to certain conclusive, statutory language except film, picture motion tape, video or sound the rare case in which literal construction recording [any or to other] if produce demonstrably will a result at odds elects to exclude such with the intention of its drafters. See United taxpayer applies and the MACRS Enterprises, States Ron Pair 489 U.S. unit-of-production method or other method of (1989); Ute States, Corp. Distribution v. United 938 F.2d added.) years." (Emphasis H.R.Rep. No. *7 (10th Cir.1991), 1157 cert. denied 504 U.S. 586, Sess., 272189, Cong., 104th 2d 1996 WL (1992). 112 S.Ct. 119 L.Ed.2d 200 (1996). *378-79 This broad construction of ambiguity As we find no 168(f)(1) § is not determinative because the here, required scheme at issue we are not to Congress meaning views of on the of a stat defer interpretation. to the Commissioner’s passed by ute an earlier are ordi Chevron, See v. U.S.A. Natural Resources narily great not weight. entitled to See Council, 837, 842-43, 467 U.S. 104 Defense —Video, United States X-Citement U.S. 2778, 2781-82, (1984). 81 L.Ed.2d 694 -,-, 464, 471, 115 S.Ct. 130 L.Ed.2d (1994). However, report 372 does not applies “any Section Congressional approval indicate property” of the “properly depreciated IRS’s if it is under narrow construction of any and the ... method of not ex Carland, report 3. pose The cases noted in the are of of all units within three and a 90% half However, T.C. 1988 WL and the Tax Court purchase. they argue of do not opinion in this case. three-year the rental units should be treated as three-year recovery period with a under Taxpayers argue nine-year 4. class life to 168(e)(1), period recognized the shortest inventory assigned which their rent-to-own They argue only the MACRS. that under reasonably anticipated reflect useful life 168(f)(1),they can elect out of the MACRSand time, anticipated decline in value over as depreciate by the units the income forecast meth 168(i). required by § supports The record od. argument; average taxpayers dispose on of rent- purchase, al units within two and dis- provided that methods of broad Until years.” The in a term pressed require- that satisfied certain taxpay- supports the “any property” phrase presumptively reasonable. The must were ments position. ers’ (c) 167(b) during in effect not by method version depreciated” (I.R.C. (West years at issue Section the tax in a term 1988) 1990)) (amended provided: “properly depreciat- does not define statutory lan- nothing in the There is ed.” (b) of certain and rates— Use methods Congress intended suggests guage that years ending after December taxable For by meth- depreciable limit 31, 1953, allowance” the term “reasonable years to ods (but (a) include in subsection shall as used to movies in character property similar to) com- limited an allowance shall not be reasoning of adopt the intended otherwise regulations pre- in accordance puted with phrase “properly For the Rui. 60-358. Rev. Secretary, under of the scribed meaning, there have some depreciated” following methods: on use of alternative limitation must be some (1) method, straight line method. as the income methods such (2) method, using balance (c). that limitation findWe exceeding rate which rate twice statute, the meaning of a determining the had the annual al- have been would used at specific statute at the look not courts computed under the method lowance been issue, of related statutes. at its context but paragraph described Colony, 506 Men’s Rowland v. California (3) years-digits the sum of the Babbitt, (1993); 53 F.3d State Utah produc- consistent method other Cir.1995). (10th which, when tive of an annual allowance closely 167 are related. 168 and Sections period com- all added to allowances part Inter- of the 167 was enacted use of the mencing taxpayer’s of 1954. 68A Stat. Code nal Revenue year, including the taxable property and (1954). depreciation until enact- governed It not, of the during first two-thirds does Re- part of the Economic 168 as ment the total property, exceed useful life Pub.L. covery Tax Act have been allowances which would of such 167(a) 201(a), 172, 203. Section 95 Stat. computed been used had such allowances 168 shall provides paragraph the method described reasonable al- deemed to constitute (2). 168(a) pro- § 167. Section lowance under shall be con- Nothing in this subsection that, except provided as otherwise vides allowance oth- limit or an reduce strued provided depreciation deduction (a). subsection allowable under erwise 167(a) by the be determined shall certain meth- on Limitations use 1981, depre- §of Since ACRS methods (2), (3), and Paragraphs ods and rates. — § 168 is excluded ciation *8 (b) only apply of subsection shall In Rul. 89-62. by § 167. Rev. governed See (other intangible than of ease 168(f)(1), §in we absence of a definition (a) with subsection described in property) property is that whether conclude years or more.... life of 3 a useful expressed in a not depreciated” a method (2), (3), 168(f)(1) and of subsection Paragraphs depends on § of under term (b) any picture apply motion shall could be whether recording.5 film, tape, or sound § video 167. by such a method depreciated 168(f)(1) pro- those § because application of Congress former sections eliminated 5. Code as obsolete (b) (c) were stricken from visions Revenue Reconciliation and as obsolete. 168(f)(1) unchanged. § left was 1990 while § Act of Pub.L. No. However, understanding § Congress’ of governs agrees § that 400. The dissent Stat. determining weight the in- little un- in 1990 has propriety forecast method of the income provision Congress enacted that when it unlikely tent of § but 167(b) it der considers (c) See X-Citement part in 1981. integral of the ACRS § provisions can be and (b)(4) Subparagraph 167(b) includes statutory other con- basis in language § or method, including sistent methods not ex- pressed years. in a term of The 167(b)(4) The language of does 167(b)(4) history Congress shows intended not limit use the income forecast method to include expressed methods not in a term or expressed other methods not in a term of years. The unit production method is years to movies or similar The years, in a term of and Con- legislative history §of 167 shows that (b)(4) gress intended to include that method. 167(b) methods set out in were intended H.R.Rep. Cong., No. 83d 2d Sess. types “to to all tangible depreciable (1954), reprinted in 1954 U.S.C.C.A.N. S.Rep. assets.” Cong. U.S.Code & 4047; S.Rep. No. Cong., 83d 2d Sess. 1954, p. Admin.News 4655. pre Nor do the (1954), reprinted in 1954 U.S.C.C.A.N. regulations scribed limit any spe methods to Thus, any method, 4655. including in- types property. They cific require only come forecast that satisfies the re- establish that an alterna (b)(4) (c) quirements of presumptively is (b)(4) tive method under is “both a reason reasonable. able and consistent method” and that it com 168(f)(1) plies 167(b)(4) position The IRS takes with the limitations of (c). 1.167(b)-4 (1960) applies only Reg. §§ See Treas. such as movies that (c)-1 (1972) (amended 1995). can depreciated only be under a method not Any expressed in method that years. Here, requirements a term satisfies these presumptively income reasonable forecast method is not the rea- County See St. Louis sonable and Water Co. v. consistent method United depreciat- States, 1022, 1027-28 ing Ct.Cl. 452 F.2d taxpayers’ inventory. Because the inven- (1971) (modified straight tory’s line method based useful life can adequately be measured fully on costs not incurred time, held reasonable passage of the usual time-based because allowances claimed did meaningfully methods also allocate the cost not exceed those from balance periods to the to which the assets contribute. method). However, provide does not that a taxpayer may elect to use a method not satisfy Methods that do not require- expressed in years only a term of proper- (c) may ments of nonetheless ty such as movies that cannot be permitted 167(b) by § pro- 167. Section by a years. vides that a reasonable depreci- allowance for 167(b) expressly provides (but ation “shall include shall not be limited the methods listed in that to)” subsection are (b), the methods set out in and that acceptable. provide It does not that a tax- “[njothing in this subsection shall be con- payer may an use alternative method under strued to limit or reduce an allowance other- (b)(4) only (b)(1) when the methods under (a).” wise allowable under subsection Con- through cannot be used. Nor do the gress language included this in 1954 to make treasury regulations impose any such limita- it clear that preclude use of 1.167(b)-0 tion. Reg. See Treas. that, law, other existing methods had (b)-4 (c)-l.6 position The IRS might has no been proved reasonable. See Video, U.S. at -, - jority opinion 115 S.Ct. at 471. contrary interpretation. to that provisions §of were stricken us; that issue is not before we do not in 1990 were in existence when enact decide the effect of the 1990 amendment on ed applicable the ACRS in 1981 and are to the in later tax 1987 and 1988 tax at issue in this case. expresses *9 majori- dissent concern that the 4(b), Proposed Reg. 6. § Treas. 49 F.R. 1.168— ty opinion incorporates provi- the now-stricken (1984), permit would exclusion of 168(f)(1) sions of former and into (f)(1) property only from 168 under aif method post-amendment for years. tax That does not expressed not recog- in a term of "was a necessarily majority opinion. follow from the It particular industry nized method within the for may depreciated” be that in type property question” the of in and the "tax- 168(f)(1) properly depreciated means under payer properly elects such ... for the first tax- § 167 as amended rather than as it existed be- year.” able Nothing

fore the 1990 amendment. in the ma- declining balance 1622; depreciation than the H.R. er 1337; S.Rep. No. H.R.Rep. No. year of the first two-thirds Cong., 2d Sess. for each method 83d Rep. Conf. property. 5288. Section in U.S.C.C.A.N. of the useful life reprinted 168(f)(1) that do Thus, may only property use methods taxpayers requires be (b)(4) and on facts based comply depreciated with under a method not properly not rapid a more which necessitate years for the first expressed circumstances declining the permitted under off than year write the can take taxable for which H.R.Rep. No. 1387. See method. balance for the a deduction the useful to estimate it is difficult Because movies, 168(f)(1) to it is difficult property like that requirement

life The of of depreciation of such depreciated whether properly determine the be pro- forecast method by income only the a year sense as first taxable makes the declin- rapid write than more off duces a requirement of of modification the method, an is based on ing balance that alternative circum- facts and life. The of useful estimate declining the not than methods be faster prop- and similar peculiar to movies stances first two-thirds of the method for the balance subject not of a method erty use necessitate provision makes property’s useful life. (b)(4).7 and Those facts of limitations to the interpretation that under the IRS no sense case of do not exist circumstances types prop of certain is limited to a determin- inventory, which has characteristics, like erty specific movies. with life. able useful by nature is property that type A of properly be inventory cannot the income fore properly depreciated under Although the method necessarily forecast by year the income must be depreciated cast method one (b)(4), depreciat- properly it can be depreciated under that method properly outside require- if it satisfies the change method the cannot following years; ed the (c). (b)(4) satisfy re- To the and ments year one to the next.8 Ac its nature from (c), an alternative quirements properly depre property to be cordingly, for (1) and consis- must be reasonable method expressed in a term by a method not ciated al- determining a reasonable tent method the method must (2) no faster depreciation; be lowance (2) consistent; (1) produce be reasonable of subsec- declining balance method the than year first than the greater no (b)(2) the two-thirds of the first tion over (3) method; and be declining balance the (3) apply to property; life of useful life of at a useful applied to of at least three a useful life property with years. least three second relaxes years. Section requirement, that the first We conclude 167(b)(4), interpret- as requirement. and consistent be a reasonable 1.167(b)-4, the method requires Reg. § by Treas. ed allowance computing a reasonable great- method of produce no an alternative method that however, films, (c), forecast method income excluding picture vid- Language motion 7. paragraphs recordings applied be to movies. eotapes, and sound can 167(c) (b)(2) through was added history 1986. Reform Act of Tax 4(l)(ii) attempts Proposed Reg. Treas. 1.168— depre- change to limit was intended indicates interpreting provi- problem avoid this straight line method movies to the ciation of taxpayer properly elect requiring sion provide the income forecast depreciate property year to the first taxable (b)(4) were not avail- methods alternative years. in term a method not H.R.Rep. No. 99th for movies. able require proper 2), Sess., 914-15, (Vol. C.B. Cong., 2d 1986-3 requires year; it for the first taxable election Cong. & Admin.News U.S.Code 914-15 properly depreci- the first suggest might appear p. 4075. This expressed in a not term under a method ated (b)(4). not within method income forecast 168(f)(1)(A) governs election. years. Section However, (b)(4) permits the income 168(f)(1)(B) depreciation meth- governs Section od, in a faster it does result when method property be requires balance off than write under a method applied (b)(2). to mov- That method cannot (b)(4) term of subject limitations When not ies. *10 depreciation, is Massey, satisfied. Morning see Newark Ledger Co. v. United States, 364 U.S. at at 546, 553, the court explained primary it is purpose “the of de- (discussing preciation accounting 167(a)), to integrity further the I doubt that the limitations of periodic 167(b) (c) (1988) income statements making §§ I.R.C. apply. These meaningful of the limitations, allocation cost in entailed interpreted Court, as by the the ... use of the asset to periods the to preclude would use of the income forecast it The income contributes.” depreciation method if the allowance exceed- meaningfully method allocates costs to the ed that under the double-declining balance periods to which the asset contributes. during method the first two-thirds of the Here, counsel for the Commissioner con- property’s useful life or the had a argument ceded at oral that the income useful life of years. less than three economically 168(f) forecast method is the most ac- provi- cross-reference these curate method for rent-to-own nothing sions and in any legislative history inventory. concession, Given this we can remotely suggests even they apply. To only conclude the income 168(f)(1) forecast method is contrary, § broadly worded to a reasonable and consistent method that “any property” that meaningfully allocates the costs of the inven- depreciated” under an alternative method. tory periods to the to which it Moreover, contributes. history suggests depreciated by did not intend it to be difficult method not in expressed years a term of tangible fall under 168(f)(1),- method also must not See H.R. Rep. Conf. produce greater depreciation in first tax- Cong., 99th 2d Sess. 11-40 reprinted able than the balance method (“As in 1986 U.S.C.C.A.N. 167(b)(2), §of and the useful life of law, present which the must at least three We properly depreciate elects to under the unit- are unable to resolve these issues from the of-production method or other method record before us.9 This ease must be re- in years terms of ... will be manded to the tax court for a determination depreciated.”). so of those issues. Problems abound with the court’s restric- The decision of the Tax Court is RE- First, tive approach. if the limitations con- VERSED, and case is REMANDED for (c) (1988) §§ tained I.R.C. were proceedings. further integral application 168(f), it very unlikely seems these limitations KELLY, Jr., PAUL Judge, Circuit would have been stricken from the Code concurring part part. dissenting provisions” “obsolete while agree I with the Court that use survived. Budget See Omnibus income forecast method is not limited films Reconciliation Act of Pub.L. No. 101- and similar property, may but rather include 508, 11,812, 104 Stat. 1388-534. While the “any property,” I.R.C. including Treasury Regulations provisions still contain inventory. tracking subsections, these Reg. Treas. disagree I 1.167(b)-4 with the Court phrase §§ 1.167(c) 1, these dated — “properly depreciated ... regulations firmly are tied to the now obso- lete subsections and long were enacted be- years,” 168(f)(1)(B), I.R.C. incorporates fore predecessor requirements 168(e)(2). §§ of I.R.C. Although it is true that we must (1988). Although deduction look at the Code as it existed the tax under the income forecast issue, method would be ignore at we cannot that Con- subject to general 167(a), rule of gress I.R.C. retained while deleting average Because two is the time unit but we cannot make that determination from the inventory, appears remains in useful life unlikely it appeal. record on years, is at least three *11 167(b)(4) (c) (1988). §§ ry (c), provi- under I.R.C. ostensibly critical §§ simply reverse. I would depreciated” un- “properly define sions this answer to The court’s der may problem “[i]t is that

obvious means depreciated’ ‘properly § 167 as amend- the 1990 it existed before than as

ed rather n. 5. It Op. at 399-400 Ct. amendment.” (c) do not §§ likely that

far more not tinker Congress would apply, and NICKEL, Plaintiff-Appellant, W. Willie depreciated” meaning v. manner. and inadvertent an odd such statutes Second, may at related while we look Warden, HANNIGAN, Hutchin Robert D. longer help, a statute no interpretive here Attorney Facility, and son Correctional regula- accompanying and its in existence Kansas, Defendants-Appel General of quantita- provide being consulted tions are lees. phrase “properly benchmarks tive 94-3417. any legislative Nothing depreciated.” history suggests administrative Appeals, United States Court as used in the “properly depreciated,” phrase Tenth Circuit. § 168 and allowing exit provision Sept. MACES, in accordance be restricted should meaning of “reasonable narrowest with the (e) (1988). §§

allowance” under

Third, subsec- incorporating these obsolete on use of the a further condition

tions as beyond judi- forecast method seems

income interpretation and within

cial we are spheres. While

and administrative reject posi-

obligated to the Commissioner’s law, support are without

tions that delegated to

Congress has the Commis- courts,

sioner, pre- the task of not to the regulations

scribing, “all needful rules Reve- of the Internal

for the enforcement” 7805(a). In

nue Code. 26 U.S.C. variations, “it is factual

area of limitless the Commis- province of courts, appro-

sioner, make the not the adjustments.”

priate Correll, 389 U.S. United States 19 L.Ed.2d 537 Stidger, 386

(quoting Commissioner

(1967)). §§ Reg. 301.7805- See also Treas. 601.601(a).

1(a); party Finally, neither cited subsections, suggest- let alone

these obsolete they applied are without

ed —we views, which we must consid- Commissioner’s

er, taxpayers. For these and those of the

reasons, respectfully por- from that I dissent inqui- judgment remanding for an

tion of the