*1 v. KEY OF REVENUE COMMISSIONER INTERNAL INDUSTRIES, INC. STONE CONSOLIDATED May 24, Argued February 22, 1993 No. 91-1677. —Decided *2 Wright Christopher J. the cause petitioner. argued Acting Starr, Solicitor General were him on the briefs With Attorney Bryson, Acting Gen- Assistant General Solicitor Deputy Wallace, and Steven Bruton, General eral Solicitor Parks. W.
Raymond P. Wexler the cause respondent. argued Maynes Ralph P. on the brief were Todd him With End.* Court.† delivered opinion
Justice Blackmun case, are concerned with the em- legality In we contributions of unencumbered de- ployer’s fined benefit we must address pension plan. Specifically, Flowe, Beyer, *Carol Connor William G. and James J. filed Armbruster Guaranty Corporation a brief for the Pension Benefit as amicus curiae urging reversal. joins opinion. all but Part III-B this
†Justice Scalia applied question contribution, such a when prohibited funding obligation, is a “sale or ex- change” so U. S. C.
thereby imposed taxes excise incurs substantial statute.
I implies, pension plan,” its name A “defined benefit employee, upon retirement, is entitled one where the usually payment periodic payment. size of that fixed prior salary years depends upon The more of service. pension plan,” “defined contrast, common contribution *3 percentage typically one where the contributes employee Upon payroll profits to individual accounts. employee to the funds in his ac- retirement, the is entitled (35). 1002(34) §§ count. See 29 and U. S. C. plan qualifies type treatment,
If for favorable tax either may employer, purposes, cur- tax deduct its for income plan; retiree, however, is not rent contributions to the payment plan. taxed until he receives from the See 402(a)(1) 404(a)(1). §§ U. C. and S.
II pertinent resolving present that are for liti- facts gation During years dispute. are not its taxable ended through respondent 30, 1988, June 1983, 30, inclusive, June Keystone corpora- Industries, Inc., a Delaware Consolidated place principal tion with Dallas, Tex., of business in main- tax-qualified pension plans. tained several defined benefit subject funding requirements These were to the minimum prescribed by Employee Retirement Income Se- curity (ERISA), Act of 1974 93-406, §302, Pub. L. 88 Stat. as 869, amended, 29 S. C. 1082. also 26 U. See U. S. C. Respondent plans by 412. funded the to the contributions Keystone Consolidated Pension Master Trust. respondent
On March 8, 1983, contributed to the Pension having Trust truck five terminals a stated fair market value Respondent value credited at that time. of $9,655,454 funding obligation defined benefit to its against its minimum years On March and 1983. pension plans fiscal for its Trust certain respondent to the Pension contributed 13, 1984, having market Key fair stated Fla., real West, Respondent credited at that time. $5,336,751 value of funding obligation against fiscal its minimum value year at the were encumbered The truck terminals 1984. Key prop was the West transfers. Neither times their erty. respective values are not fair market Their stated challenged here. tax
Respondent on its income claimed deductions federal terminals the five truck fair market values of returns reported cap Key as taxable It also West gain income tax basis each between its ital difference property’s stated fair market value. respondent purposes, dis treated the tax Thus, for income capital posal “sale of each §1222. asset. See 26 U.S.C. 26 U. C. Code, of the Internal Revenue S.
Section 4975 2003(a) §by was added ERISA. 88 Stat. §4975, “prohibited specified imposes on two-tier excise tax1 “disqualified per- and a between a transactions” *4 persons” Among “disqualified the statute listed in son.” employees plan. is the of covered 4975(e)(2)(C). § Among prohibited is the transactions See any “any exchange sale ... direct or indirect . . or . 26 U. S. C. percent The first-tier tax “5 the amount involved.” 4975(a). § percent tax ‘TOO the amount involved.” The second-tier money 4975(b). greater § is the of the amount of The “amount involved” property given fair of the other the amount and the market value properly money market other received. and the fair value 4975(f)(4). usually may by timely correc The second-tier tax avoided litigation prohibited upon completion of the con tion of the transaction 4963(b) liability 4961(a), §§ taxpayer’s for the tax. See cerning the 7481(a). (e), 6213(a), plan disqualified person.” between a and a 4975(c)(1)(A). peti- Revenue,
The Commissioner Internal who is the respondent’s here, tioner ruled that transfers to the Pension Key Trust of the five terminals and the West truck 4975(c)(1)(A). exchanges prohibited were sales or under ruling respond- This resulted determined deficiencies in year liability tax $749,610 ent’s first-tier excise for its fiscal years $482,773 1984 and of for each of its fiscal 1983 and inclusive. The 1985-1988, Commissioner also determined respondent liability incurred second-tier excise tax year the amount of $9,655,454for its fiscal timely Respondent petition filed for redetermination court, with the United States Tax That with an un- Court. opinion summary judgment, on reviewed cross-motions for (1990), respondent’s ¶ ruled in favor. 60 90,628 TCM 1423 P-H Memo TC. acknowledged potential Tax Court that “there is a by allowing plans
abuse unencumbered transfers to funding requirements.” in satisfaction Id., of minimum ¶ p. 1424, 90,628 TC, P-H Nonetheless, Memo 90-3071. agree did not that the transfers in this case constituted sales §4975. exchanges rejected the Commissioner’s attempt analogize recogni- transfers to the purposes, tion of income for income tax for it considered the prohibited issue whether a transfer is a transaction under “separate recogni- to be and distinct from tax income ¶ Id., 1425, 90,628 tion.” P-H Memo TC, 90-3071. drawing In distinction, the Tax cited 26 Court U. S. C. 4975(f)(3). specifically That section states that a “by disqualified person to shall be exchange subject treated as sale or if the to a mortgage or similar lien.” court sec- observed: “Since 4975(f)(3)specifically tion describes certain transfers of real personal property plan by disqualified person as a *5 exchange purposes sale or of section 4975, definitional
157 the general from or are removed exchange’ of ‘sale concerns TCM, the tax law.” 60 in other areas found definitions Tax Court The TC, P-H 90-3071. 90,628 p. Memo 1425, ¶ 4975(f)(3) reach of limits the § to say that thus seemed property- § so that transfers encumbered 4975(c)(1)(A), only are prohibited. argument Tax Court Commissioner’s rejected also em noncash contributing plan,
that by over a unwarranted influence was in exert position ployer answer The court’s policy. Trust’s investment the Pension Id., at of” the trustee “can dispose that was The court noted TC, P-H Memo 90-3072. 1425, 90,628 p. ¶ distinction earlier had the Commissioner’s that it rejected a funding obliga transfers satisfy between or not of encumbered property, tion and transfers v. a Wood funding latter transfers fulfill obligation, (1990) (unreviewed), rev’d, 955 Commissioner, 95 364 T. C. 505 972, dism’d, 504 U. U. S. (CA4), cert. S. F. 2d 908 granted, TC, (1992). 90,628 P-H Memo 1425, TCM, ¶ 90-3072. Fifth for the Circuit United Appeals States. Court (1992). 4975(f)(3) “im- 2d It read as affirmed. lien, a or that unless is encumbered mortgage plying treated if it were sale as transfer Id., rejected at 78. Commissioner’s or exchange.” 4975(f)(3) was intended to defi- expand argument to include transfers of encum- of “sale exchange” nition in the do not fulfill funding obligations; bered property view, “there is no basis for distinction between court’s transfers in the Code.” involuntary voluntary anywhere “If all The court reasoned: Ibid. transfers were to be as a sale treated exchange” 4975(f)(3) then 4975(c)(1)(A), “would be superfluous.” Ibid. That of an ob- satisfaction is treated “sale ligation *6 “[s]eetion 4975 purposes “irrelevant,” because tax
income Id., income.” to measure economic was not enacted Appeals ruled the Commissioner’s views The Court despite both the fact that to deference, not entitled were Department Labor and the ad- Service Internal Revenue provisions. prohibited-transaetion This minister ERISA’s had not been set out views was because the Commissioner’s Department regulation, of La- and because the formal in a advisory opinion that was in were set out bor’s views precedential binding only parties has no thereto, “on Ibid. effect.” acknowledged the Fourth conflict between
In view of the 2d, 913,and the Fifth Wood, see 955F. Circuit’s decision litigation, present cases decided in the Circuit’s decision granted we certiorari. 506 other, two of each within weeks (1992). U. S.
Ill complicated concerned is a we are The statute with which applicable language, much not to the one. But when present side, one the issue before us comes case, is set to acknowledges Respondent into better focus. respect
“disqualified person” Pension Trust. with It acknowledges qualifies also trust §4975. only task, then, is to determine whether the Our Key the terminals and of the West transfers of 4975(c)(1)(A) exchanges within the were sales or reach prohibited and therefore were transactions.
A purposes It is well established for income tax that the monetary obligation of a in satisfaction usually g., a “sale or e. See, (1941). Helvering Hammel, v. 311 U. S. also 2 Bittker Taxation Lokken, Income, B. & L. Federal Estates (2d 1990). ¶ 40.4, Gifts 40-11 ed. seems clear, respondent’s therefore, that contribution of the truck termi- constituted, nals and the West under the in- Key laws, come tax sales of those Pension Trust. properties supra, Circuit, Wood, The Fourth observed: are “[W]e aware of no instance when the term ‘sale or has exchange’ been used or include transfers of interpreted *7 in satisfaction of 955 2d, indebtedness.”
This in income tax is cases logic applied applicable equally 4975(c)(1)(A). “sale or had phrase a settled and administrative acquired judicial interpretation the half over course of a before century enacted in Congress §4975 the even broader statutory of direct or language “any indirect... sale or was exchange.” Congress presumptively §4975 aware when it enacted that the or “sale ex phrase had been construed to include the change” consistently trans of fer in satisfaction of a monetary obligation. States, Albernaz v. United (1981). 450 U. 333, 340-343 S. It Sorenson v. Sec ais “normal rule of statutory construction,” retary Treasury, 851, 475 U. 860 (1986), S. that “identical of words in used different of the same act are intended parts Dyers, Atlantic Inc. Cleaners & to have the same meaning,” States, United (1932). v. 286 427, U. S. 433 “the Further, Code must be ‘as given an internal great and con symmetry ” Lester, Commissioner v. sistency as its words permit.’ (1961). 299, U. S. when we construe Accordingly, 4975(c)(1)(A), to the proper accept settled already “sale meaning phrase or exchange.” Even if this had phrase not a settled possessed meaning, it still 4975(c)(1)(A) would clear that the trans- prohibits of fer in satisfaction of a debt. Congress barred or merely “sale exchange.” prohibited something more, direct or namely, “any indirect... sale exchange.” The contribution of satisfaction of a obli- funding is at least both gation an indirect of type sale and a form of exchange, since the for diminution exchanged the employer’s funding obligation.
B broad the statute’s construction of too, that this note, We accomplish goal. necessary Congress’ language Before governed a 1974, measure ERISA’s enactment sponsor plan pension was and its between transaction arm’s-length provided customary This standard conduct. prop- sponsor’s open sale for abuses such as an erty door sponsor’s price satisfac- inflated obligation by funding contribution tion Congress’ response nonliquid. to these was overvalued 406(a)(1)(A), the enactment ERISA’s abuses included §1106(a)(1)(A), In- and the addition S. C. U. ternal Revenue Code.
Congress’ categorically goal a transaction was to bar Rep. injure plan. likely 93-383, S. No. was (1973). may pp. encumbered 95-96 *8 ability jeopardize plan pay promised to benefits. the of the supra. imposes a transfer Commissioner, Such See Woodv. obligation primary pay upon the encum the the to trust by restricting the brance, frees for and thus cash by of Overvaluation, the the burden the use of cash trust. property, disposing the of the and substitution of policy, judgment other as investment are obvious own to Although the of an is considerations. burden encumbrance unique property, the contribution of encumbered concerns to disposal property, overvaluation, to about need independent any policy animate con maintain an investment property funding obligation, a re tribution of gardless that satisfies property not the encumbered. is up long giving This is as as a fund is because exchange property, account in for runs receivable the fund giving up getting risk more than it is in if the return less a is either valuable or more burdensome than cash been. contribution would have by potential
These are harmful effects illustrated facts present though properties of the case, even at issue of their not at the times overvalued were unencumbered sales-listing respective transfers. There were exclusive respect respondent agreements two of the had with made agreements called for sales commis- these terminals; truck requirement presence that of this demonstrates sions. The to-dispose properties. easy of such neither nor costless is Chicago example, sold was not terminal, truck by years Trust. it was for sale the Pension after listed SVz Appeals problems as solved, are not Court These §4971. by imposition by suggested, the mere of excise taxes prevents abuses. It
C agree Appeals’ conclusionthat with the Court of We do not 4975(f)(3) meaning exchange,” of “sale as limits the 4975(f)(3) 4975(e)(1)(A). phrase appears Section states “by disqualified person a transfer exchange treated a sale if the sub shall be as Appeals ject mortgage or similar lien.” Court implying language “is en as that unless read this by mortgage or lien, cumbered exchange.” 2d, treated if it were sale or 951 F. not to be Congress language feel that intended 78. We 4975(f)(3) expand, scope prohibited- limit, provision. reach of “sale or ex transaction extends the 4975(e)(1)(A) change” include contributions encum funding obligations. satisfy bered that do not (1974). Congress Rep. 93-1280, H. R. in Conf. No. *9 4975(f)(3) §by provide protection, not to tended additional 4975(c)(1)(A).2 already protection by provided the limit 2 by coverage following example. An expanded Such is illustrated funding obligations outstanding with no wishes contribute pension employees especially pro to a fund an to reward its year analysis, ductive Under our is service. contribution unencumbered, permissible if the is because it will not be “exr changed” funding a obligations therefore diminution does not
We feel that Commissioner’s construction of is a sensible one. A transfer of encumbered like the property, transfer of unencumbered satisfy obligation, has the to burden a potential while transfer of plan, prop- erty that is neither encumbered nor satisfies debt presents far less potential for loss to the causing plan.3
IV The judgment of the Court Appeals reversed.
It is so ordered. Stevens, Justice dissenting.
For the reasons stated in the of the Tax opinions Court, (1990), TCM 1423 90,628 TC, P-H Memo and the Court ¶ (CA5 Appeals, 2d 76 I am 1992), persuaded that the transfer of unencumbered trust a “sale or 4975(c)(1)(A) exchange” prohibited 26 U. by S. C. of the Internal Revenue I Code. would merely add these two observations. 4975(c)(1)(A). prohibition fall within the hand, On prop- the other erty is impermissible contribution if encumbered, because 4975(f)(3) specifically prohibits all contributions of encumbered note, and the amicus have We passing, parties that the argued stren uously the issue whether we should afford interpretation deference to the of the statute agencies two charged administering with it. See 29-32; Brief for Petitioner Respondent 39-42; Brief for Reply Brief for 18-20;
Petitioner Brief for Pension as Ami Guaranty Corporation Benefit cus Curiae 10-13. appear Department does that the of Labor and the Internal Revenue Service consistently have taken position sponsoring transfer of properly unencumbered to pension plan satisfy funding obligation is prohibited sale or exchange. Department of Labor Advisory Opinion 81-69A, July 28, 1981; issued Department of Labor Advi sory Opinion 90-05A, 29, 1990; issued 81-40, 1981-1 March Rev. Rule Cum. 508; 77-379, 1977-2 Bull. Rev. Rule Cum. Bull. 387. We reach our result in this case any without reliance on rule of defer- ence. Because of the nature and limitations of rulings, express these we no view as to they are or are not entitled to deference. The resolution of that issue is deferred to day. another *10 holding of unencumbered an that
In
funding obliga
pension
of
a
in satisfaction
a
to
fund
4975(c)(1)(A),
§by
exchange”
a
barred
“sale or
tion
upon
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rule
income
the well-established
Court draws
satisfy
purposes
to
an indebted
the transfer
tax
equally
exchange.” Ante,
158. It is
a
or
at
ness is
“sale
was so at the time
established, however, or at least
Con
well
4975(e)(1)(A),
any
prop
gress
contribution of
enacted
pension
erty by
employee
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an
to
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voluntarily
pursuant
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is,
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done
exchange”
prop
purposes,
or
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a “sale
for income
erty.
Tasty Baking
States, 393
2d 992
Co. United
v.
(Ct.
1968);
Manufacturing
P.
v.Co. United
Cl.
A.
Smith
(Ct.
1966);
v.
States,
2d 831
United States General
364 F.
Cl.
(CA6 1960);
Corp.,
75-498,
also
Rul.
I dissent. respectfully exchange” a “sale or between the and the within the 4975(c)(1)(A) meaning §of because it made was not in satisfaction of a mandatory funding obligation. argument, my Commissioner’s in view, weight places more on the 4975(c)(1)(A) plan” words “between a in they can than reasonably bear. The Commissioner accept hypothesis asks that we that Congress drew upon body regarding a settled of law the terms “sale or exchange” in the context, then, by income tax but words, use of three departed these from that usage settled and drew a distinction between voluntary and involuntary rejected roundly contributions had been in the case law by the and Internal Revenue Again, Service itself as did the Court of Appeals Court, I the Tax likely Congress find it more intended 4975(c)(1)(A) that we construe context, independent of the meaning attributed to the term parts “sale or other Internal Revenue Code.