                                                                 November 6, 1978



78-97       MEMORANDUM OPINION FOR THE ASSISTANT
            TO THE PRESIDENT FOR DOMESTIC AFFAIRS
            AND POLICY

           Enrolled Bills— Effect of Order of Approval by the
           President—Revenue and Energy Tax Acts of 1978
           (26 U.S.C. § 46)

    This responds to the inquiry o f your office concerning the effect of the
 President’s contemplated order o f signing on provisions of the Revenue Act of
 1978 (Revenue Act) and o f the Energy Tax Act o f 1978 (Energy Act) relating to
the 10 percent investment tax credit on certain depreciated property. Because
 the Revenue Act extends the 10 percent rate indefinitely by rewording § 46(a)
 (2) (B) of the Internal Revenue Code o f 1954, 26 U .S.C . § 46(a) (2) (B) (1976),
 which Congress had already amended in the Energy Act, the President’s
 approval o f the two bills in either order will necessarily result in the revision of
 § 46(a) (2) (B), as provided in the Revenue Act, and will extend the 10 percent
credit indefinitely. (A chart is appended to this opinion to facilitate understand­
ing o f the successive revisions of the Internal Revenue Code.)
   Section 38 of the Internal Revenue Code of 1954, 26 U .S.C . § 38 (1976),
provides for an investment tax credit with respect to certain depreciable
property. The amount o f the credit allowed is determined by § 45 of the Code.
As originally enacted in 1954, the general rate permitted for qualified property
was 7 percent. 28 U .S.C . § 46(a) (1) (current version at 26 U .S.C. § 46(a) (2)
(1976)).
   In 1975, Congress amended § 46 to raise temporarily the general investment
tax credit from 7 percent to 10 percent. Tax Reduction Act of 1975, § 301(a),
Pub. L. 94-12, 89 Stat. 26, 36 (1975). Under “ transitional rules’’ added to § 46
by § 301(a) of the 1975 Act, 26 U .S.C . § 46(a) (1) (D) (current version at 26
U.S.C . § 46(a) (2) (D) (1976)), the 10 percent credit applied, in general, to
qualified investments made prior to January 1, 1977.
   In 1976, Congress enacted a major revision o f § 46. Subsection 46(a) (1) (D)
became § 46(a) (2) (D), and was amended to extend the general 10 percent
credit to qualified investments made prior to January 1, 1981. Tax Reform Act
of 1976, § 802(a), Pub. L. 94-455, 94 Stat. 1520, 1580 (1976).

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    On October 14, 1978, both Houses o f Congress passed a conference-
 approved version of the Energy Tax Act of 1978, H.R. 5263, 95th C ong., 2d
 sess. Section 301(a) of the bill again effects a major amendment o f § 46, but its
 version of subsection 46(a) (2) (D), which would become § 46(a) (2) (B), would
 still result in a drop of the regular business investment credit rate from 10
 percent to 7 percent on December 31, 1980.
    Congress several hours later again amended § 46 in passing the Revenue Act
 of 1978, H.R. 13511, 95th C ong., 2d sess.1 Under § 311 of the Revenue bill,
 § 46 of the Code would be further amended to create a general tax credit rate of
  10 percent with no time limitation. Section 311 accomplishes this purpose by
 rewording § 46(a) (2) (B), as already amended by the Energy Act, to eliminate
 any time limit on the extension of the 10 percent rate.
    That Congress, in enacting the Revenue Act, both recognized and intended
 to amend further the amendment of § 46(a) (2) (B) as enacted in the Energy bill
 is clear from the way in which § 311 of the Revenue Act describes § 46(a) (2)
 (B). Section 311 reads:
       (A) 10-PERCENT INVESTM ENT CREDIT.— Subparagraph (B) of
       section 46(a) (2) (defining regular percentage) is amended to read as
       follows:
          (B) REGULAR PERCENTAGE.— For purposes of this para­
       graph, the regular percentage is 10 percent.

The reference in § 311 to “ Subparagraph (B) o f section 46(a) (2) (defining
regular percentage)” makes sense only if the Energy Act has already amended
46(a) (2) (B) because, without the amendment effected by the Energy Act,
§ 46(a) (2) (B) would not define regular percentage, as indicated in § 311.
Currently, without the Energy Act in force, § 46(a) (2) (B) as revised in 1976
discusses credit allowances in excess of the 10 percent rate, a wholly different
subject. Section 311 is sensible only if Congress considered and intended to
amend the amendment to § 46 it had already passed in the Energy Tax Act. This
conclusion is buttressed by other sections of the Revenue Act that refer
expressly to the Energy Tax Act o f 1978.2
   Regardless of the order in which the President signs the two Acts passed by
Congress on October 14, 1978, a court subsequently construing them will be
bound by two elementary principles: statutes are to be interpreted, so far as
possible, to give effect to the intent of the legislature; statutes in p a ri m ateria.




   'A s indicated by the Congressional R ecord, 124 Cong. R ec.'D 1564, D 1567. D1573, D1575
(daily ed ., Oct. 14, 1978), each House passed the Revenue Act subsequent to its own approval of
the Energy Tax Act. Were the relevant provisions o f the acts in conflict, application o f the general
rule that where statutes in pari materia are absolutely repugnant, the one passed later will prevail,
Sutherland, Statutes and Statutory Construction SS 23.17. 51.03 (4th cd. 1972). would still lead to
the conclusion that the Revenue Act would control.
  2See. e.g.. the technical am endm ent effected by the Revenue Act o f 1978. § 3 1 1(c) (2).

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especially when enacted closely in tim e, are to be interpreted, so far as
possible, to avoid a contradiction between them. We conclude that the intent of
Congress as manifested in the language o f the Revenue bill and as evidenced in
identical paragraphs o f the committee reports on the Revenue Act of 1978, S.
Rept. 95-1263, 95th C ong., 2d sess. 112 (1978); H . R ept. 95-1445, 95th C ong.,
2d sess. 62 (1978), to extend permanently the 10 percent investment tax credit
rate, requires an interpretation o f both bills that would extend the 10 percent
rate indefinitely. The President, by signing the Revenue Act first, is incapable
of altering C ongress’ clearly expressed m eaning.3

                                                              L eon U lm a n
                                                 D epu ty A ssistant Attorney GeneraI
                                                                  Office o f L egal Counsel




   ’A contrary result would be inconsistent with the legislative role delegated by the Constitution
entirely to Congress.
                                  APPENDIX

Legislation     Regular Rate Time           Section In    How Amendment to
                o f Investment Limit        Which Time    Time Limit Is
                Tax Credit                  Limit Appears Accomplished
                Provided

Internal        7 percent        None
Revenue Code    (26 U .S.C .
of 1954         § 4 6 (a )(l))

Tax Reduction   10 percent       Invest­    26 U .S.C.     Transitional time
Act of 1975                      ments      §46(a) (1) (D) rules inserted in
                                 made                      new §46(a) (1) (D).
                                 prior to
                                 1-1-77

Tax Reform      10 percent       Invest­   26 U .S.C.     §46(a) (I) (D)
Act of 1976                      ments     §46(a) (2) (D) moved to §46(a) (2)
                                 made                     (D); dates changed
                                 prior to                 to conform to extend­
                                 to 1-1-81                ed time limit.

Energy Tax      10 percent       Invest­  26 U .S.C.     Transitional rules
Act of 1978                      ments    §46(a) (2) (B) eliminated; time
                                 made in                 limits embodied in
                                 period                  entirely rewritten
                                 ending                  version of §46(a)
                                 12-31-80                (2) (B).

Revenue         10 percent       None                     §46(a) (2) (B) re­
Act of                                                    written to abolish
1978                                                      time limit on 10 per­
                                                          cent rate and rever­
                                                          sion to 7 percent
                                                          rate.

          EXTENSIONS OF THE 10 PERCENT REGULAR RATE
                   INVESTM ENT TAX CREDIT




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