*1 1051 default; requirements upon provi- of due it is not a credit satisfy the enough clear Lending Truth in Regula- sion. Under the 254i(c)(l). section tions, charges for default are not finance damages contends Citrin also 226.4(c)(2)(1992). charges. 12 C.F.R. § right process. to due his provision violates Therefore, damages here are fi- not argues that response, the Government in charges Lending and the Truth nance enforceable provision is an damages Act is not applicable. statu- liquidated damages clause. Because judgment is AFFIRMED. ap- principles, contract tory principles, not Hatcher, program, 922 to the NHSC ply Rendleman, 1406-07; F.2d at 860

F.2d at

1541-42, damages will not examine we examine con- the standard used to

under In- damages

tractual clauses.2 liquidated

stead, damages amount of because in 42 by applying the formula

established 254o(b)(l)(A), we will examine U.S.C. § CARLTON, Jerry W. Executor penal- statutorily prescribed damages aas Day, Will of Willametta K. ty. Plaintiff-Appellant, [6,7] penalty statutorily prescribed A v. rights “only where the process violates due America, UNITED STATES oppres- is so severe and penalty prescribed Defendant-Appellee. wholly disproportioned sive as to be obviously unreasonable.” St. No. 91-55590. offense and Williams, Louis, Ry. Mt. & S. Co. Iron Appeals, United States Court of 66-67, L.Ed. 64 Ninth Circuit. omitted); (1919)(citations see 139 also Wa- ' Texas, May 212 1992. Argued v. State and Submitted Oil Co. ters-Pierce 111-12, L.Ed. 53 Aug. Decided necessary the resources 417 Given practice an under- to find a doctor case, area, damages in this

served

$113,479.11 payment time the at the they

due, vio- are so unreasonable not process.

late due con argument, final Citrin

In his the Government violated

tends that Act, et 1601 Lending

Truth U.S.C. § clearly did

seq., his contract not because damages he

inform him The Truth Lend upon default.

liable apply damages at

ing Act not does purpose of the Truth here. The

issue meaningful

Lending “to assure a Act is terms.” 15 U.S.C.

disclosure of credit added). 1601(a) (1988) (emphasis damages

damages provision establishes court, general prin- found those courts like this examined the dam courts have 2. Some district see, e.g., liquidated applicable, law ages damages ciples NHSC contracts as contractual clauses See, 1185-86; Swanson, e.g., United States v. F.Supp. Hayes, clauses. (M.D.N.C. F.Supp. Hayes, 1185-87 helpful F.Supp. cases are those Swanson, 1986); F.Supp. States United this court. Because, (E.D.Mich.1985). un- 1242-44 *2 Allen, O’Melveny Russell G. Myers, & Beach, Cal., Newport plaintiff-appel- lant. McLaughlin,

Teresa E. Dept, of Jus- tice, Div., Washington, D.C., Tax for defen- dant-appellee. ALARCON, NORRIS, Congress adjourned

Before: The 99th on October O’SCANNLAIN, Judges. 18,1986. passage Circuit by Congress Between September the TRA on 1986 and ad-

O’SCANNLAIN, Judge: Circuit journment, Congress considered hundreds *3 applica- We consider whether retroactive potential of technical and clerical amend- to the federal tion of an amendment estate TRA, ments to the proposed but one portion of the Internal Revenue Code amendment related to section 2057: dele- process. violates due Furthermore, tion of an extraneous “is.” parties the stipulated have bill or “[n]o

I resolution was introduced that would have 22,1986, any On the Tax Reform Act availability October added condition to the of (“TRA”) provi- [sjection of 1986 became law. One the new 2057 deduction other than sion of the TRA allowed an estate de- to during those contained in the statute itself proceeds duct half of the of a sale of secu- period passage the between of the TRA Ownership Employee rities to an Stock adjournment on October 1986.” (“ESOP”) gross Plan from a decedent’s es- Day September Willametta K. died on (“the deduction”). proceeds tate ESOP See filing 1985. Because of an extension of the 1989). (repealed 26 U.S.C. § here, deadline not at issue her estate tax proceeds result of the ESOP deduction was return was not due until December to remove half of the estate from the reach timeliness, 1986. As a of Day matter tax, of the federal estate to the extent the eligible estate potentially comprised money estate was of received proceeds ESOP deduction contained in sec- from the sale of stock to an ESOP. This tion 2057. deduction, codified at section 2057 of the Code, Day Internal Carlton was executor of the estate. Revenue was available any timely estate that could file its return He reviewed the TRA and determined that TRA, after irre- the enactment date of the it was in the interest of the estate to utilize spective proceeds of the dece- date death the new ESOP deduction. The 2057(c)(1). parties stipulated specific dent. 26 U.S.C. that in re- any employer 1. Sec. 2057. SALES OF EMPLOYER SECURI- securities if such securities by TIES TO EMPLOYEE STOCK OWNERSHIP were received the decedent— (A) plan exempt PLANS OR WORKER-OWNED COOPERA- in a distribution from a 501(a) TIVES. section which meets from tax under 401(a), requirements of section or (a) purposes General Rule.—For of the tax (B) pursuant option as a transfer to an or imposed by tax- section the value of the right acquire to which section other stock by deducting able estate shall be determined 83, 422, 422A, applies. or 424 gross from the value of the estate an amount (d) Required.— Written Statement equal percent qualified proceeds to 50 (1) general. deduction shall be al- In qualified employer sale —No securities. (a) unless execu- lowed under subsection (b) purposes sec- Sale.—For of this Qualified the decedent files with the tor of the estate of tion, any "qualified the term sale” means sale of para- Secretary the statement described in by employer securities the executor of an estate graph to— (2) is described in Statement.—A statement (1) employee ownership plan an stock ... paragraph if it is a verified written state- 4975(e)(7), described in section or ment of— (2) eligible cooperative an worker-owned (A) employees employer are cov- whose (within 1042(c)). meaning of section by plan in subsection ered described (c) purposes of this Proceeds.—For Qualified (b)(1), or section— (B) coopera- any officer (1) authorized general. "qualified pro- term —The (b)(2), tive in subsection described means the amount received the es- ceeds" consenting of section 4979A employer tate from the sale of securities at employer cooperative. respect or to such any with (e) time before the date on which the return purposes of this imposed by required Employer Securities.—For of the tax section 2001 is section, extensions). "employer has the (including any securities" to be filed term 409(1). meaning given term section not such Proceeds certain securities from (f) apply not section shall qualified. "qualified proceeds" Termination.—This term —The after December sale of sale shall not include the from the estate, paid’a net estate half of the Carlton newly enacted section liance $18,752,250. tax of 1,500,000shares of MCI purchased Carlton average 1986 at December stock on Internal Reve- January On share, price for a total per price of $7.47 (“IRS”) an advance ver- nue Service issued buy chose to MCI $11,206,000. Carlton stated, 87-13, which inter sion of Notice of the MCI the trustee alia, “[pjending shares because the enactment of clari- pur- recog- an interest expressed fying legislation,” the IRS would not had ESOP pursuant section 2057 At the time Carlton nize a deduction chasing shares. MCI “directly owned” shares, however, unless the decedent the MCI bought (“the decedent the securities before death any legally into entered ESOP had *4 Notice 87-13 ownership requirement”). him; buy them from binding agreement formally published January risk of loss if the hence, bore the estate the that the government concedes days declined. Two in MCI stock market ownership requirement an- decedent agreed buy the later, the MCI ESOP not contained nounced in Notice 87-13 was share, per estate at $7.05 shares from the originally enacted in in section 2057 as the mean 26 cents below which was about any in amend- was not contained the day, as well as below price that market passed the 99th ments to the TRA before purchased. shares were price at the which adjourned, it in of Congress nor was the part agreement, MCI ESOP As proposed technical and clerical amend- quali- that it was a provided documentation by the 99th ments to the TRA considered section 2057. required under fying as ESOP Congress. 2057(e). The sale total 26 U.S.C. See § February a bill was intro- On $631,000 $10,575,000, or below price was Congress 100th to enact duced the new government price. The purchase Carlton’s ownership require- the decedent into law would not have sold that Carlton concedes (“the as announced in Notice 87-13 ment consequently a discount—and the shares at amendment”). eventually The bill be- not have been able ESOP would MCI ap- and came on December law a not for the acquire shares at discount—if ownership requirement plied the decedent 2057 deduction. section originally if TRA as retroactively as duly Carlton requirement. December a On filed enacted had contained such 10411,2 return, in which he deducted 101 Stat. Pub.L. No. 100-203 the estate (1987). pursuant The 1987 amend- $5,287,500 gross estate 1330-432 from “Congressional a Clarifi- deduction. On be- ment was labeled proceeds to the ESOP (i) participants, allocated to or are CONGRESSIONALCLARIFICA- 2. SEC. 10411. (ii) FOR held for future allocation connec- TAX DEDUCTION are TION OF ESTATE SECURITIES. SALES OF EMPLOYER tion with (1) exempt under the rules of sec- loan (a) Enacting Congress in Section Intent of 4975, or tion Revenue Code 1986.— Internal (II) assets under the rules of a transfer of. employer (relating to sales of secu- Section 2057 4980(c)(3). section ownership plans employee or stock rities to (2) pur- permitted. substitution No —For by cooperatives) re- is amended worker-owned (1)(B), except poses paragraph in the case (d), (e), (f) and as sub- designating subsections (e.g., a a bona fide business transaction (f), by (e), (g), respectively, and and sections inserting employer connec- securities in pf substitution (c) following new subsection after merger employers), employer with a tion subsection: treated as allocated or securities shall not be (d) Sales.— Proceeds From Qualified Qualified to the extent that held for future allocation purposes general. of this sec- —For or held for future are allocated such securities tion, employer proceeds of a sale of secu- employer other in substitution of allocation employee by to an stock rities an executor or held for had been allocated securities that eligible ownership plan or an worker-owned future allocation. qualified cooperative treated as shall not be (b) amendments made Date.—The proceeds qualified sale unless— from a Effective (a) effect as included shall take subsection (A) directly owned the securi- decedent 1172 of the death, made section in the amendments immediately ties sale, (B) Act of 1986. employer Tax Reform securities— after the transaction, applied actively Deduction for Sales of to his the es- cation of Estate Tax legislative its his- Employer Securities” and tate would not be entitled to the ESOP Report tory deduction, a Committee state- included that there would be no refund, ment: claiming other basis drafted, that the tax deduction be entitled to As the estate orig- judgment. significantly broader than what was

inally contemplated by Congress en- granted govern- The district court provision. The acting the committee be- summary judgment. ment’s motion for necessary lieves it is to conform the stat- The district court determined that the ret- original ute to intent of roactive of the 1987 amendment significant prevent order to revenue to the MCI ESOP transaction did not vio- [TRA], loss under the process late due because the 1987 amend- 100-391(11), Cong., H.R.Rep. No. 100th 1st impose “wholly ment did not new tax.” (1987), reprinted Sess. rejected The district court also Carlton’s 2313-1, 2313-661 U.S.C.C.A.N. Takings argu- Contract Clause and Clause ments, press audited, and Carlton does not those Day estate’s tax return was appeal. points on deficiency and the IRS determined *5 $3,385,333. deficiency The net attributable disputed deduction ESOP II $2,501,161. dispute does not Carlton may applied Whether a statute remaining deficiency. retroactively consistent with the Due paid deficiency plus the total Carlton law, question Process Clause is a and $996,953.18 3,1989, July in interest. On he we court’s determi thus review district part refund claim for that filed a nation on this issue de novo. Licari v. pro- deficiency attributable to the ESOP Commissioner, (9th F.2d 692 Cir. 946 the re- ceeds deduction. The IRS denied 1991). 11, 1990, fund claim. On October Carlton refund in district court for

filed a action III $2,501,161 interest, costs, plus and attor- A neys’ fees. half-century summary judgment past the Su moved for Over

Carlton facts, preme consistently stated a sin stipulated and the Court has if tax statute prejudice, gle standard to determine moved to dismiss with which applied retroactively consistent may construed as a motion for district court Courts summary judgment. parties agreed to with the Due Process Clause.3 nature of the tax and narrowing potential issues in “must ‘consider the an order it is laid before controversy. government conceded the circumstances which applica said that its retroactive the estate was entitled to the ESOP it can be oppressive as to trans section 2057 as tion is so harsh and proceeds deduction under ” limitation.’ gress constitutional and that if the 1987 amend- passed Hemme, 476 U.S. retroactively applied con- United States v. ment could not be 2071, 2078, 568-69, 90 L.Ed.2d 106 process, that S.Ct. sistent with due Carlton (1986) (quoting Henry, 305 538 Welch judgment. Carlton conceded entitled 134, 147, 121, 125,83 L.Ed. 87 59 S.Ct. 1987 amendment could be U.S. retro- 37, -, construction, Youngblood, 110 S.Ct. long-standing judicial 497 U.S. 3. Under (1990) apply (citing be- Facto Clause does not here Calder Ex Post 111 L.Ed.2d 30 prosecution. (1798)). Bull, (3 Dall.) "Al- cause this is not a criminal 1 L.Ed. 648 3 U.S. literally though phrase post Paul, 'ex the Latin Preserving, Valley Inc. v. Wood See also facto’ fact,’ passed encompasses ‘after the law Cir.1986) ("The (9th post ex 754 785 F.2d long recognized that the this Court has been proceedings limited to criminal facto clause is prohibition post laws on ex constitutional applied facto application a land use no [to and therefore has ordinance].”). penal which disadvan- statutes tage Collins v. affected them.” the offender analysis of the circumstances of each retro- (1938)); States v. Darus accord United 292, 299, 549, 553, making mont, application active its deter- 449 U.S. curiam) (court’s (per constitutionality. clearly This mination 66 L.Ed.2d 513 particular application tax is so indicates that retroactive inquiry is “whether “automatically” permitted oppressive as to be a denial of tax laws is not harsh context, long wholly is not Outside of the tax so as a new tax involved. process”).4 due standard is often stated the constitutional whether, Thus, consider under “the we application of a differently: a laid,” it is the retro- circumstances which “arbitrary and irrational” statute must be application active of the 1987 amendment process. Usery v. Turn to violate due of section 2057 to the MCI ESOP transac- 1, 15, Co., Mining 428 U.S. er Elkhom oppressive” tion is “so harsh and as to (1976). 2882, 2892, 49 L.Ed.2d 752 S.Ct. process. An violate due examination of clear, made how Supreme Court has previous challenges constitutionality ever, oppressive” the “harsh and stan application of stat- of the retroactive context “does not dard used in the tax helps utes to elucidate the factors we must against arbi prohibition differ from the consider in our determination. legislation that we trary and irrational Coolidge, In Nichols v. clearly in Turner Elkhom.” enunciated (1927), 71 L.Ed. 1184 the Su- Guaranty Corp. v. R.A. Pension Benefit preme held a retroactive Court 717, 733, Co., Gray & of the federal estate tax to be unconstitu- 81 L.Ed.2d Coolidge Mrs. tional. transferred are instructed to “consider We property to a trust 1907. Income on the tax and the circumstances nature of the Coolidge paid trust was to be to Mrs. *6 “perceive rigid no which it is laid.” We ... husband, they her had and after both died constitutionality in the decided standard of corpus of the trust was to be divided rather, guided, by the are cases.... We among Coolidge’s Mrs. children or their delineated the Su more flexible criteria 1919, representatives. Congress In amend- Henry_” preme in Welch v. Pur Court ed the federal estate tax to include within States, 311, (9th 501 F.2d 313 vis v. United prior its ambit transfers made to death that “ omitted), denied, Cir.1974)(quotations cert. posses- were ‘intended to take effect ” 947, 1329, 43 L.Ed.2d 425 95 S.Ct. enjoyment after death.’ sion or at or ... (1975). Accordingly, reject we the notion 539, (quoting Id. at 47 S.Ct. at 712 Act of that tax statutes can never per of a se rule 24, 1919, 402(c)). February Such trans- applied. Supreme retroactively their at the fers were to be taxed at value retrospec “made clear that some Court has Congress time of the transferor’s death. necessarily fatal to a tive effect provision expressly also stated that such 568, Hemme, 476 U.S. at revenue law.” applied “whether such transfer or trust is Thus, retroactivity alone 106 at 2077. S.Ct. pas- created or after the made or congressional enact will not condemn sage Coolidge died of this Act.” Id. Mrs. ment. in 1921 and the of Internal Commissioner token, gross reject sought the Revenue to include within the By we also the same present value of the rule that tax statutes can taxable estate the per notion of a se course, Coolidge, retroactively applied long corpus. as trust Mrs. of had so always be corpus that the trust would be they “wholly new” tax. The no notice do not enact a cre- part as of her estate when she Supreme two most recent decisions taxed Court's also retroactivity challenges to tax ated the trust 1907. Court regarding prescribed, statutes, Damsmont, emphasized excise is and did not Hemme “[a]n depend of it is made to Despite taxes. but the amount wholly involve new transactions, thorough upon past not testa- fact, engaged in a lawful the Court hardly era.” See dissent at 1062. be said that these 1981 and 1986 Lochner It can cases, rely, upon which we "reach back

1057 mentary beyond in character and recall.” to know when and how he becomes liable Thus, 542, 47 at 714-15. Id. S.Ct. for taxes—he cannot ought foresee and appli- Court concluded that the retroactive required guess not to be the outcome cation of the 1919 amendment was “so pending of measures. The future of ev- arbitrary capricious and as to amount to ery Congress bill while before is neces- and offend the Fifth Amend- confiscation sarily uncertain. ment.” Id. 445-46, Id. at 48 S.Ct. at 354. Term, again Supreme The next Court This court too has held that a federal tax challenge applica faced a to the retroactive applied unconstitutionally as retroac- Blodgett tion of a federal tax statute. In Commissioner, tive. See Wheeler 143 Holden, (9th Cir.1944), F.2d rev’d on other (1927), four members of the L.Ed. 206 grounds, 324 U.S. Court viewed (1945). L.Ed. 1166 reliance on the Reve- gift of due the federal tax as violative nue Act of the shareholders of the Blodgett gifts January process.5 made provision question Company John H. gift 1924. The tax Wheeler dissolved the presented for considera corporation pro- its distributed assets February approved tion on portionately among themselves. Under the plurality pointed 1924. The out June Revenue Act capital gains gifts that the had been made before the corporation the dissolved were measured pending new statute was even before Con purposes for corporation as gress. wholly It concluded that seems “[i]t bought all its assets at market value. That who, good that one in entire unreasonable is, the of certain basis assets was taken as slightest premonition faith and without the market value at the time the assets consequence, dispo such made absolute were transferred from shareholders to the gifts property by sition of his should there corporation. The Second Revenue Act of required pay charge after for so 1940, however, purported change doing.” (opinion at 106 retroactively corporations liqui- rule J.). McReynolds, dated under the Revenue Act 1938. Un- Term, Later in the same the Court revis- Act, corporation der the 1940 assumed question applica- ited the of the retroactive *7 basis, the transferor-shareholder’s rather gift legislation. tion of the 1924 federal taking than as its basis the market value at Anderson, 440, In Untermyer v. 276 U.S. that the time of transfer. This court held 353, (1928), gift 48 S.Ct. 72 L.Ed. 645 the the Act of 1940 had not Second Revenue 23, Hence, May unlike was made on legis- “come the next session of the within gift the after Blodgett, was made Con- [following passage of the 1938 lature Act] gress begun legis- had consideration length a reasonable of time” and or within lation, although legislation still before such retroactively applied to hence could not be Nonetheless, was enacted. the Court still corporate the Wheelers’ 1938 dissolution application found the retroactive to offend process. at 168. consistent with due Id. process. due recently that We have stated “[f]ederal gift The mere fact that a was made while long legislation courts have been hostile provi- containing questioned the the bill expectations.” settled that interferes with stage progress in the sions was last Licari, Still, 946 F.2d at 693. it cannot enough through Congress think we gainsaid modern trend has been that the to differentiate this cause from [Blod- against challenges successful to retroactive legislation of the gett and to relieve the ] In three applications of the tax statutes. arbitrary character there ascribed cases, re- Supreme the Court has taxpayer may justly modern it.... demand avoiding apply retroactively, the constitu- opinion by McReynolds thus Justice was 5. This joined by Van Justice question. Chief Justice Taft and Justices recorded for tional Sutherland, No vote is Holmes, joined Butler. Justice evenly Devanter and di- thus the Court Brandéis, Stone, Sanford and was of Justices vided on this issue. could be read to not the view that the statute challenges percentage the process to retroactive rate of tax.” jected due increased] 300, at 553. applications of revenue acts. Id. S.Ct. 134, Hemme, In Henry, 305 U.S. 59 S.Ct. United v. In States Welch (1986), (1938), challenged the rev- 90 L.Ed.2d 538 83 L.Ed. 87 retroactively imposed a tax on the retroactive of a transitional enue act formerly gifts rule6 to made its certain dividend income that had before enactment challenged process grounds. from taxation. There was was on due been excluded taxpayer concluding process in- In indication that that due was not no violated, expenses any put great weight extra or in other the Court curred way changed taxpayers his conduct reliance on the fact that the were “no worse off they tax law as it stood before retroactive than would havé been without the holding enactment of the Act.” Id. at amendment. In the retroactive tax observed, constitutional, at 2079. The noted that even Court Court “[w]e operation under the retroactive of the tran that stockholders would can not assume rule, taxpayers paid sitional “still have corporate dividends even refuse to receive they estate taxes of than less they receipt $655.16 would later knew their paid would have had the 1976 Act never the increase subjected to a new tax or to passed” accordingly been and that “the an old Id. at 59 S.Ct. at 126. one.” aspect retroactive of the law could not be stated, however, that a different The Court oppressive inequitable.” said to be or presented a transac- case would be where 106 S.Ct. at 2079. The also Court “completely vested tion was taxed significant long found it 2035 had taxing “§ before the enactment of the stat- in effect time been at the ute,” [the decedent] amount of the tax and “the nature or gift, made his and it is 2035 that contains anticipated reasonably could not have been principal retroactive feature involved particu- time of the taxpayer at the case, requiring the estate to reach voluntary which the statute later lar act gift back and embrace a made over two made the taxable event.” Id. at years previously.” Id. 5.Ct. at 125. recently challenge This court decided a Darusmont, United States penalty an increase rate from 10% 66 L.Ed.2d 513 underpayment liability, of tax 25% curiam), (per taxpayer unsuc- retroactively applied to tax returns filed challenged applica-

cessfully penal- the date of enactment where change tion of a the minimum tax that yet ties had not as of been assessed already completed tax on an increased the Licari, enactment date. 946 F.2d at 692. property. relying Far from sale of real aspect We concluded that the retroactive law, pre-amendment “con- the statute was rational because served considering he was ceded ... that when *8 trying to make those who were to cheat dispose in ways various which he could government for property, “reimburs[e] [the] he was aware of Texas not heavy investigative prosecu- burden of and the existence of the minimum tax.” Id. at ferreting torial costs incident to out tax added). (emphasis 101 S.Ct. at 551 underpayment.” at 695. We were that the tax- The Court further observed out, however, point careful to that: payer “hardly position in a to claim was surprise [h]ere, presented amendments to the with at the 1976 we are not a case proposed in minimum tax. The increase in which an individual acted in accord- public rate under consideration with the law as it stood at the time had been ance only subjected penalty; its enactment.” later to to a year for almost a before be instead, signifi- subjected Also to the increased Id. at 553. those Licaris, merely penalties, amendments like the knew at the cant that the 1976 was exemption they that filed their returns that the allowable and time “decreas[ed] Hemme, bridge gifts and estates.” 476 U.S. at 6. The transitional rule was “enacted to regimes S.Ct. at 2073. old and new for the federal taxation Congress to include a acting in accordance with intended they not were ownership in subjected requirement to a section and could be decedent the law circumstances, imposing we these and that an amendment fine.... Under increased imposition surely find in requirement not such a the off- do was oppressive.” unduly “harsh and penalty however, ing. government, The can point passing congres- to two references added). (emphasis Id. at 695 support sional documents in of its view. B merely of these state that Both references cases, proceeds would circum the ESOP deduction From these two impor his com- emerge to a decedent who sold paramount stances as available determining employee govern- the retroac pany group. whether to an tance unduly harsh place legislative of a tax is in the point can to no tive ment First, taxpayer did the oppressive. history that states the ESOP and that the notice actual or constructive have to such a situa- deduction would be limited retroactively amend tax statute would tion. Second, rely his to did the ed? Further, passing one of references these pre-amendment tax stat detriment pamphlet in a the staff written was

ute, reliance reasonable? and was such Septem- on Taxation in the Joint Committee question turn. address each We pamphlet purport ber 1985. The does not had no undisputed It is that Carlton congres- speak or even a impos notice of the 1987amendment actual committee, prepared over a sional requirement ownership ing the decedent passage of the TRA. Its value year before transac completed the MCI ESOP when he history doubtful. The oth- legislative is as upon any basis Nor is there tion 1986. a floor statement passing er reference is had constructive Carlton could have which Long, Russell which was Senator made imposition of the dece the future notice of have no ambiguous.7 trouble best We Day es ownership requirement. dent fleeting referenc- concluding that these two completed its before tate transaction merely that sec- stated es—each which pro first December 1986. IRS end encourage decedents to tion 2057 would in 2057 be amended to posed that section an companies to ESOP—did sell their own ownership requirement on clude a decedent give constructive notice Carlton that included January 1987. The bill imposing decedent owner- amendment introduced Con amendment was forthcoming. ship requirement would be Moreover, 26,1987. February gress on the decedent government concedes that impor Next, second turn we requirement not “identified ownership reasonably factor, Carlton whether tant and clerical proposed technical in the 2057 as detrimentally relied on section Congress ad discussed before amendments specifically in 1986. That Carlton enacted not “added to the stat journed,” and was con proceeds deduction on the ESOP relied TRA changes to the (although other ute deciding 2057 in new section in the tained made) Congress adjourned” on were undoubt is pursue the MCI transaction Hence, no act of the October stipu has so Indeed, ed. legislative or branch executive uncontested, it this fact While *9 lated. forewarning of the 1987 amend given very fact The overlooked. not be should transac the time the MCI ESOP ment at costly engaged in a transac Carlton that tion occurred. induce than the no other reason for tion section by new however, provided the that ment argues, government different significantly case this TRA should makes history of the legislative the chal- process due rejecting those a notice from on put Carlton constructive have its brief it filed argues of it at the time government unaware Interestingly, while 7. of the eve brought on to our it attention gave to constructive notice statement this that Carlton, argument. apparently oral government was itself Comm, retroactively applied Taxation, revenue Staff of Joint on 99th lenge to a Sess., Cong., Proposals: 1st Tax Reform law. Employee Tax Treatment of Stock Owner- Indeed, say merely that the estate (ESOPs) (Comm. ship Plans 21 n. 29 Print section 2057 understates the “relied” on 1985). expenditure The total annual tax of this case. The federal circumstances of section 2057 it had not been amended in long sought promote has 1987 was estimated the Joint Committee employee ownership of shares in their em- Cong. on Taxation at billion. $1.4 2057 was enacted to in- ployers. Section (Feb. 26, 1987) (statement Rec. H845 of taxpayers shares at a discount- duce to sell Comm, Rep. citing Rostenkowski the Joint ESOP, furthering the price ed to an thus Taxation); (statement on id. at of S2532 policy employee ownership. As public Comm, citing Sen. Bentsen on Joint intended, Day estate succumbed to the Taxation). Although just are one ESOPs a lure and sold shares to the MCI ESOP at type “qualified plan,” a term which also substantial discount. Section 2057 worked. pension profit-sharing plans, includes buy An was more shares at a ESOP able expenditure this tax billion does not $1.4 Then, price lower than before. when appear incredible in the context of a total completed socially private actor had expenditure promote employee tax in- selling shares desirable action of dis- Thus, vestment of billion. even if it $56.8 ESOP, government reneged count to an expect were reasonable to that on its end of the deal.. It was too late for taxpayer plainly would take a deduction to undo his sale to the MCI ESOP. Carlton code, him available to under the tax he $631,000 forever, gone was irretriev- expendi- would research the estimated tax deduction, able. ture associated with such expenditure pro- tax created the ESOP however, government urges, originally ceeds deduction as enacted was pro- reliance on the while Carlton's ESOP entirely plausible. undoubted, ceeds deduction is it was not Carlton had little reason to think Con- argument core of reasonable. At the all, gress drafting had made a error. After originally notion that section 2057 as the ESOP deduction was not add- windfall, any enacted was such reason- ed to the TRA in a frenzied last minute taxpayer able known was pro- effort. Section 2057 had first been reject good flatly “too to be true.” We posed years over two and a half before the government’s premise that a can- finally passed. approved by TRA As rely unequivocal on the clear and text the Senate Finance in March Committee code, speculate of the tax but instead must 1984, section 2057 did not have a decedent unspoken and inchoate intentions of Comm, ownership requirement. Sen. on Congress. Finance, Sess., 2 Cong., 98th 2d Deficit Moreover, viewed the context of the 1984, Statutory Language Reduction Act of Congress incentives huge other tax Approved by Provisions Committee encourage development has created to (Comm. on March at 338 Print ESOPs, section' should not have 1984). Thus, seriously argued it cannot be any eyebrows, even as enacted raised first ownership requirement the decedent According to the Joint Committee inadvertently omitted a last minute Taxation, drafting error. expenditure qualified plans for given [t]he has several substantial largest single expendi- is the item of tax years. tax incentives to ESOPs over the year tures. For the fiscal the tax money to an When a bank loans ESOP to shares, expenditure employer maintained purchase half of the finance the qualified plans (including Keogh plans) is income from such loans is excluded interest *10 estimated to billion and this income. 26 U.S.C. 133. from taxable See $56.8 § expenditure may to an ESOP projected Taxpayers is to increase to who sell shares purposes recognition year billion 1990. defer for tax the $88.9 for fiscal is, selling capital gain on such sale. See 26 sive. That the shares to the any context, price ESOP at discount from the market In this section U.S.C. § statutorily is not one of the allowing pro- half of the defined re- provision 2057’s quirements qualify the pro- for ESOP of shares to an ESOP to be ceeds of a sale ceeds deduction. not from the taxable estate would excluded appeared out of line. have economist, however, need not One perceive practice only in way the government ar The nevertheless have obtained the deduction was for the any reliance the estate on the gues that estate it to offer to “share” with the other truly 2057 was not detrimental new section party necessary transaction, to the the any argument in event. This has two as ESOP. Under section the estate First, government argues pects. the the must file with IRS certification from any under the availability the deduction the ESOP that the ESOP meets certain legislative grace, tax code is an act of 2057(e). requirements. 26 U.S.C. imposing amendment the de that the 1987 provide must such Because the ESOP certi- simply ownership requirement re cedent fication, necessarily it knows the circum- position it stored the estate to the would being stances under which the sale is made made the have been had tax the es- and the substantial deduction passing section 2057 “mistake” of Moreover, receiving. tate will be there is require ownership the decedent without ESOP; going way no around the its simply ment. This is not correct. The situation, cooperation is essential. In this $631,000 (plus essentially “paid” estate any can it is manifest that rational ESOP brokerage and transactions costs such as part demand some of the tax and will break fees) attorney to receive the million $2.5 price. discounted share the form Welch, liability. reduction in tax Unlike The ESOP had to have incentive MCI some preference for Wisconsin where the tax Carlton, given paper- to deal the extra with having taxpay ended the corporations been just purchase required, rather than work merely position to the he er was restored open Selling market. the its shares on the preference have been in had such price market shares at a discount from the here, enacted, the is never been error or miscalculation on Carl- was not an ante, quo to the status but not restored necessary conces- part, ton’s but instead a payment suffers a loss. It is true that complete deal. sion to in taxes makes the es of the million $2.5 reliance on that the estate’s We believe no than it would liability tate’s tax worse 2057 was plain language of section proceeds deduction been ESOP light the lack of indi- reasonable in place. enacted in the first had never been offing amendment was cation that an question. It fails to begs the But this large incen- tax and in the context by the for the actual loss suffered account given Fur- Congress has to ESOPs. tives truly estate. To return the estate ther, is detriment to the estate obvious. ante, government would quo status merely re- did not The 1987 amendment $631,000. persuaded it We are pay have to TRA. The quo before the store the status from a critical distinction this is $631,000. out estate was where, even with the Hemme statute, the tax the new argues that The off than he would payer still better sham, that it MCI ESOP transaction regime. the old have been under disagree. sub no We substance. wealth from in the transfer of Second, that a stance was government contends Day to the MCI ESOP. prerequisite Day estate not a loss the estate was $631,000 trans poorer after the estate was qualify 2057 to ESOP under section ESOP The MCI than it was before. deduction, not be action and so should would have than it more shares determining whether retroac- now owns considered shares on purchase been able ownership had application of the decedent tive permanently open market. oppres- unduly harsh and requirement *11 positions parties of the changed judgment show that tions to enter in favor of the had reality. plaintiff. the transaction substance and power We do not doubt the of Con REVERSED and REMANDED with IN- gress legislation apply retroactively to STRUCTIONS. introduced, legislation

the time such was or legislation pro even to the time such was NORRIS, Judge, dissenting: Circuit posed by the executive branch. See Pur majority recognizes that “the mod- vis, (retroactive applica 501 F.2d at 313-14 ern against trend has been successful chal- equalization tion of “interest tax” on Amer lenges applications to retroactive of the tax purchases foreign ican securities to the Indeed, statutes.” Majority at 1057. proposed by time when first the President Supreme order to find precedent Court process).. During does not violate due this striking taxation, down retroactive ma- period, taxpayer time is on notice that a jority opinion, brief, petitioner’s like the change forthcoming. govern in law is was forced to reach back to the Lochner strong capturing ment has a interest My reading era. of contemporary case law taxing powers within its transactions delib leads me to a different conclusion: Con- erately through anticipation rushed of a gress did not offend the constitutional re- pending change of law. Our conclusion quirement process of due when it retroac- likely entirely be different if Carlton tively applied the ownership “decedent re- engaged in his transaction after Janu quirement” to an provision estate tax en- 5,1987. ary States, See Ferman v. United couraging Employee Ownership Stock (E.D.La.1992) F.Supp. (rejecting (ESOPs). Plans I accordingly dissent. ownership requirement claim that decedent regulating unconstitutionally applied activity, economic Con- transac 1987). gress enjoys wide February legislate tion in latitude to retroactively. Supreme explains Court Having considered the nature of the 1987 amendment and the circumstances in which strong legislation deference accorded laid, that, conclude applied we as in the field of policy national economic is here, such amendment is “so harsh and applicable no less legislation when that oppressive transgress as to the constitu- applied retroactively. Provided that the notice, tional limitation.” Carlton had no application sup- a statute is actual or constructive. The estate entered ported by legitimate legislative purpose $600,- into a transaction that cost it over rational, means, furthered judgments solely based on the inducement of a legislation about the wisdom of re- such tax deduction the now wants province main within the exclusive away. to take legislative and executive branches.... IV Pension Guaranty Corp. R.A. Benefit Co., U.S. 717, We hold that the 1987 amendment Gray to the & imposing 2709, 2717-18, federal estate tax a decedent 81 L.Ed.2d 601 This ownership requirement pro- principle on the ESOP applies with full force to the tax formerly laws, ceeds deduction contained at 26 may step where courts when “ applied U.S.C. as transaction ‘retroactive is so harsh here, violated the oppressive Due Process transgress as to issue the constitu ” par- Clause of the Fifth Amendment. The tional limitation.’ United States v. stipulated Hemme, 558, 568-69, ties if such amend- 476 U.S. 106 retroactively applied 2071, 2077, ment could (quoting 90 L.Ed.2d 538 134, 147, transaction here consistent Henry, with the Welch Constitution, (1938)). “then the is entitled 83 L.Ed. 87 Measured judgment sought complaint.” against standard, as in the high the 1987 amend Accordingly, judgment we reverse the of ment to the Tax Reform Act of should upheld. district court and remand with instruc-

1063 Henry provide v. Welch exploit The facts of been structured special to treat- appropriate starting point interpreting for ment accorded dividends from Wisconsin oppressive” the “harsh and standard that corporations. case, In Carlton’s as in opinion taxpayer’s in- articulates. Welch’s, taxing authority that had cre- mostly in come that case derived from divi- special grew ated the tax benefits con- paid by corporations doing majori- dends cerned their public about drain on the fisc Welch, ty in of their business Wisconsin. retroactively and eliminated them. 141, at 59 at 122. 305 U.S. S.Ct. Wiscon- case, Welch’s the retroactive law was a sin’s income tax statutes treated such divi- sharp departure long from a history of until, extremely favorably dend income in favorable treatment for investments in 1935, taxes, imposed the state additional corporations. Welch, Wisconsin 305 U.S. applied retroactively paid in dividends 142-43, at 59 S.Ct. at 123. Carlton’s case is 143, 1933 and 1934. Id. 59 S.Ct. at 124. arguably sympathetic less because the ret- Although previously the Court had struck law, closing roactive in loophole in the see Nich gifts, down retroactive taxes on provision, new ESOP deduction merely re- 531, 710, Coolidge, ols v. 274 U.S. 47 S.Ct. quo stored the status that Carlton faced a Holden, Blodgett v. (1927), 71 L.Ed. 1184 year earlier. 142, 105, 275 48 72 206 U.S. S.Ct. L.Ed. Cases decided since Welch upheld Anderson, (1927), Untermyer v. 276 U.S. variety retroactive taxes on a 440, economic (1928), 48 72 L.Ed. 645 S.Ct. transactions, sharply limiting scope upheld this statute the basis that “a tax See, e.g., United the Lochner-era cases. receipt comparable of income is not Hemme, v. tax,” States gift 476 properly to a but more resembles U.S. (1986) (retroactive

property ap taxes and benefit assessments of 90 L.Ed.2d 538 estate, retroactivity plication real where had been of the transitional rule for federal Id. 305 147-48, appropriate. found gift U.S. United upheld); and estate taxes Darusmont, 59 S.Ct. at 125-26. The Court reasoned v. States 449 U.S. 101 bestowing gift “voluntary act (1981) (per S.Ct. 66 L.Ed.2d 513 cu- taxpayer,” which it contrasted with riam) (retroactive increase the minimum receiving corporate dividends: “We can not Commissioner, Wiggins v. upheld); tax assume that stockholders would refuse to (5th Cir.1990) (upheld 904 F.2d 311 retroac corporate they receive dividends even if tive exclusion of investment tax credit re receipt their knew that would later be sub- capture calculating when alternative mini jected to a new tax or to the increase of an tax); Estate Ekins v. Commis mum old one.” Because the decision in- sioner, (7th Cir.1986) (retroac F.2d 481 797 in stocks whose dividends receive fa- vest repeal tive of an estate tax exclusion for is, course, vorable tax treatment volun- Fein v. policies upheld); life insurance tary, the distinction between the States, 730 F.2d 1211 (8th Cir.), United Nichols, Blodgett, Welch and those in denied, 858, 105 cert. 469 U.S. S.Ct. Untermyer lies in the difference be- Ceppi (1984) (same); Estate of L.Ed.2d economic and the others’ tween Welch’s Commissioner, (1st 698 F.2d 17 Cir. eleemosynary motives for the acts that denied, 1983), 1120, 103 cert. gave liability. divi- rise Welch’s (1983) (retroactive 77 L.Ed.2d 1350 a form of in ex- dends were consideration upheld); repeal of estate tax exclusion change his cor- investment Wisconsin Commissioner, 636 F.2d 291 Westwick v. was, porations, receipt of consideration (10th Cir.1980) (retroactive changes in the word, the Court’s sense involun- upheld spite minimum tax of detrimental tary. States, Purvis v. United reliance); denied, (9th Cir.), cert. F.2d 311 closely

Carlton’s case resembles Welch’s. (1975) 1329, 43 L.Ed.2d 425 the financial affairs of Carlton structured (interest foreign tax on stock advantage equalization Day’s Mrs. to take estate retroactively applied); acquisitions may be favorable tax treatment for sales of stock Bank in Dallas United Likewise, First National portfolio had to ESOPs. Welch’s sis, States, imply 190 Ct.Cl. 400 we should constructive notice of 420 F.2d Commissioner, amendment, Sidney v. (same); 273 F.2d the tax code which retroac- *13 J.) (retroactive (2d Cir.1960) (Friendly, tively fifty percent 928 abolished the deduction collapsible realized from gains taxation an from ESOP stock sale but upheld). corporations wholly majority, no new taxes. The levied conclusion, reaching in a different creates a Nichols, have limited of these cases Most circuits, split among the as well as a con- facts, Untermyer to their or Blodgett, and own, precedent. flict with our older imposition of a whol least to retroactive at tax, change in opposed to a ly new as wholly addition to taxes that are new In. Hemme, existing tax. or rate of an base unforeseeable, completely and therefore 2077; Darus 568, 106 S.Ct. at 476 U.S. at Supreme suggested has ret Court that mont, 299, 553; 101 at 449 U.S. at S.Ct. “attempt roactive taxes that to reach 314; of Ekins, Estate Wiggins, 904 F.2d at past” events far are harsh and [too] 484; Fein, 1213; 730 F.2d at 797 F.2d at Henry, v. oppressive. 134, Welch 305 U.S. 21; Westwick, Cep pi, 698 F.2d at Estate of 148, 126, 121, (1938). 59 S.Ct. 83 L.Ed. 87 292; First Nat'l Bank Dal 636 F.2d at Congress long has enacted revenue laws 8; las, Sidney, 730 n. 273 F.2d 420 F.2d at retroactively tax income and assets Ninth Circuit decided Purvis at 932. The year from the entire which the new ground v. States on the narrower United passed, statute is and some instances presidential speech proposing the that a year preceding year from the calendar put taxpayer tax had retroactive enactment. United legislation’s of the new subsequent change, so that notice of the Darusmont, 292, 296, States v. 449 U.S. application was not “harsh and retroactive 549, 551, (1981) 101 66 513 S.Ct. L.Ed.2d F.2d at 314-15. oppressive.” 501 curiam). (per upheld The courts have Supreme and our sister cir The Court “customary congressional practice” as “re clear, however, that con cuits have made quired by practicalities producing taxpayer usually to the structive notice Id. 297, legislation.” national 101 S.Ct. change in implied the rate or basis of for á split circuits on whether In the existing tax. words Sev may retroactive taxes reach back Circuit, change in the tax rate is enth “a year precedes year the calendar very nature reason by its to be considered legislation, their enactment. Curative Estate Ekins v. ably foreseeable.” passed original to effectuate the intent of Commissioner, 797 F.2d 481, (7th 484 Cir. Congress, granted greater has lee been 1986). “Legislative changes are to be ex See, Baptist e.g. England New Hos way. taxpayer pected, assumes the risk and States, pital v. 280, United 807 F.2d 285 particular that the tax burden on transac (1st Cir.1986) (four years of retroactive ef pursuant, Congress’ may tion increase ac upheld legislation); fect for curative carry responsibility to out continual States, College cord Canisius v. United of taxation.” at 483 necessary policies denied, 18, (2d Cir.), cert. 799 F.2d 26-27 States, v. United Milliken (citing 283 U.S. 1014, 1887, 481 U.S. 107 S.Ct. 95 L.Ed.2d 15, 324, 327, 23, 75 L.Ed. 809 51 S.Ct. Temple University accord v. (1987); 495 States, Fein v. United (1931)). 730 Accord States, 126, Cir.), (3d United 769 F.2d 135 denied, Cir.), cert. 1211, (8th 469 F.2d 1213 denied, 1182, 2914, cert. 476 U.S: 106 S.Ct. 188, 83 L.Ed.2d 121 105 S.Ct. (1986); Wheeler Com 91 L.Ed.2d 544 court once considered the Our cf. missioner, (9th Cir.), F.2d disposed that it of a chal point so obvious grounds, 324 U.S. rev’d on other lenge repeal of an income tax to retroactive (1945) (tax 89 L.Ed. 1166 statute single provision in a carry-forward loss years’ with two retroactive provision that tax “a paragraph. We called down). not reach struck We need grace legislative ... within matter of here, however, period dispute where the power to revoke” retroac Commissioner, mea application for the revenue 115 F.2d retroactive Miller tively. year in which (9th Cir.1940). analy- sure includes the calendar Under this passed Darusmont, few months of the United States v. 449 U.S. preceding year.1 66 L.Ed.2d 513 (1981) curiam) (per (quoting Welch v. Hen- majority’s opinion substitutes a test 134, 146-47, ry, much sympathetic taxpayer more (1938)). 83 L.Ed. 87 than those that courts have used Darusmont’s second test was whether (1) past. taxpayer It asks whether the lacked “actual or constructive specific actual or constructive notice of the legislation. notice” of the retroactive provision, whether the per Court’s opinion curiam directly did not taxpayer reasonably relied to his detriment *14 appropriateness address the of inquiry, this on the tax code as written at the time of his as the facts of Darusmont’s case indicated transaction. While maximum fairness to e did, notic aplenty. however, The Court taxpayers might argue Congress approvingly cite couple a of its earlier legislate according generous should to this upholding cases retroactive taxation where standard, Supreme Court has declined notice had not been demonstrated. 449 adopt requirement to it as a of Due 299, U.S. at (citing 101 S.Ct. at 553 Welch Process. 134, Henry, 121, 305 U.S. 59 S.Ct. 83 taxpayer suggested in Darusmont (1938)), L.Ed. 87 Id. 449 U.S. 101 two tests that majority resemble those the (citing S.Ct. at 553 Cooper v. United asked, uses here. First he could the tax- States, 74 L.Ed. payer “have altered his to behavior avoid (1930)). 516 And other two circuits have if it anticipated by tax could have been interpreted Supreme an earlier Court case him at the time the transaction effect- inferring as constructive notice whenever a ed?” 449 U.S. 10Í S.Ct. at 553. tax code revision alters the rate or basis majority’s inquiry into detrimental re- for existing tax. Estate Ekins v. elegantly Commissioner, liance is the same test more (7th stat- 797 F.2d 483 Cir. ed, 1986) Supreme (citing but the rejected States, Court it as Milliken v. United 283 15, 23, 324, 327, gift cases, U.S. 51 based on the old tax 75 L.Ed. 809 which had (1931)); States, accord Fein v. precedential no value United for retroactive taxes (8th Cir.), denied, F.2d cert. on income. Id. Detrimental reliance is 83 L.Ed.2d 121 law, essentially a creature of contract (1984). theory promissory estoppel where the rights in party reasonably vests a re- event, any apply majori- I to were promise. lies on another’s Restatement case, ty’s I willing test to this would less be (Second) of Contracts Contrac- § that, arranged to find at the time he analogies, us, Supreme

tual Court tells stock, purchase and sale of MCI Carlton inapposite are in tax cases: lacked constructive notice that a future ret- might Day amendment ‘[tjaxation roactive render the penalty imposed is neither a ineligible estate for the ESOP deduction. liability nor a which he Nor would I find reliance on the his statute assumes It way contract. is but a originally passed as to have been reason- apportioning the cost of True, plain language able. of the 1986 among those inwho some measure are provision allowed to Carlton benefit from privileged enjoy its benefits and must arranged. the transaction he But several enjoys bear its burdens. Since no citizen Congress factors indicated that would not immunity burden, from that its retroac- original satisfied with its work imposition necessarily tive does not in- might act to curtail benefit within a fringe process, due challenge and to short time after its enactment. present enough point tax it is not out First, that the taxable event ... antedated the legislative history the available in- statute.’ original Congress dicates that the intent of 22, 1987, retroactively applying applied 1. The amendment the de- became law on December ownership requirement day cedent was introduced as of October when the Tax February originally in the 100th on 1987. It Reform it modified was enacted. Act parties to third through subsidies to sell ESOPs “stockholders allow had been taxation to exclude from employees who a bank to their allows companies their company.” income for fifty percent Staff of interest build helped them Taxation, 99th made to an ESOP. 26 U.S.C. Committee loan the Joint Sess., Proposals: Treasury from Tax the loss to the Cong., 2d Note that Reform Employee Owner- Stock funds: leverages tremendous provision Tax Treatment (Comm. Print (ESOPs) at 37 rate, ship every Plans nickel percent ten interest At a out correctly points 1985). majority Treasury loses lands tax base the a class of highlights that this statement In con- pocket in the of an ESOP. dollar owners, not limit does but decedent trast, provision that Carlton estate tax however, Congress If, to them. deduction fifty cents of estate base employs saps willing to any estate meant to allow for the guaranteeing any benefit without securities relatively low-risk undertake True, bargaining lever- ESOP. the ESOP’s pro- from the ESOP to benefit transaction it to shave off itself age should enable deduction, examples of decedent then ceeds But the estate’s tax benefit. piece selling employees their owners case, where the ESOP outcome of this *15 prototypi- not a proportion, an infinitesimal $631,000 employer purchasing saved of the beneficiaries example, of the cal $2,501,161in stock, Treasury lost while the have dif- executor would Any estate rule. taxes, that the deduc- demonstrates estate temptation purchase resisting the ficulty subsidy of a whol- tion as drafted offered promptly open market and securities existing provi- ly magnitude from different ESOP in market to an them at resell below providently more Congress could sions. Had Con- estate taxes. reduce order to purchases underwritten ESOP stock have scope provision gress understood Treasury without directly the U.S. from drafted, opponents measure’s it had as middlemen! bringing in estate executors important surely raised more that, case raised a recognize I this tracing problems for life- concerns than interpretation, nei statutory question of legislative history men- time sales legislative history nor provision’s ther argument against as the chief tions de effects could its unfortunate economic The estimated revenue loss deduction. meaning of the text. plain from the tract provision as drafted— estate tax from the Germain, Bank v. Connecticut Nat’l 20 times more than some billion—was $7 — -, at-, contem- loss million $300 (1992). 1149, 117 But this case L.Ed.2d 391 Appellee’s Brief at 26. plated. interpret the 1986 require us to does not Second, on its face offered the statute statute, Congress, inquire whether only to good appeared “too to be benefit it, arbitrary in an amending acted pro- Admittedly, a number of laws true.” manner, harsh[ly] and or “so capricious encourage the tax incentives vide transgress the constitu oppressively] as ESOPs, in some cases subsidiz- growth of Guar limitation.” Pension tional Benefit facilitating the trans- ing parties third Co., 467 U.S. Gray & anty Corp. v. R.A. employer securities to an ESOP. fer of 2709, 2719, 81 L.Ed.2d gives tax- provision example, a 1984 For Congress’s Because closely stock in a sells an ESOP payer who loophole scope of a limited the legislation right to roll over his or corporation held year, just over one had been effect reinvesting in other gains by capital her boundary. transgress that it did not Although securities. 26 U.S.C. § taxpayer an incen- gives provision than on the an ESOP rather to sell to tive market, who sell to it offers those

open advantages those who over

ESOPs no investment, original to hold their

continue Treasury should cost the U.S.

and thus that benefits provision Another

little.