                                  149 T.C. No. 2



                        UNITED STATES TAX COURT



           BOB GREGORY AND KAY GREGORY, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent

     JAMES W. GREGORY, JR. AND JANET E. GREGORY, Petitioners v.
        COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket Nos. 17198-13, 17210-13.1             Filed July 11, 2017.



            Ps own C, an S corporation that operates a landfill and uses the
      cash method of accounting for tax purposes. C is legally required to
      pay reclamation and closing costs if and when it closes the landfill. C
      currently deducted its estimated clean-up costs under I.R.C. section
      468. R contends that I.R.C. section 468 applies only to accrual-
      method taxpayers.

             Held: The term “taxpayer” in I.R.C. section 468 includes cash-
      method taxpayers and is not limited to accrual-method taxpayers.
      I.R.C. sec. 468(a).



      1
        We consolidated docket numbers 17198-13 and 17210-13 for trial,
briefing, and opinion.
                                        -2-

            Held, further, cash-method taxpayers must make an I.R.C.
      section 468 election to currently deduct estimated reclamation,
      closure, and post-closure costs before the costs are paid. C did make
      such an election, and it may therefore currently deduct its estimated
      reclamation and closing costs.



      Gregg R. Kosterlitzky and William M. Gerhardt III, for petitioners.

      Roberta L. Shumway and Sheila R. Pattison, for respondent.



                                     OPINION


      HOLMES, Judge: In 1988 Bob and Kay Gregory incorporated their landfill

business, Texas Disposal Systems Landfill, Inc. (TDSL). The Gregorys chose to

make TDSL a cash-method taxpayer when they incorporated it. TDSL was

successful, and the Gregorys began sifting through the Code to find more

deductions. With the help of their accountant they discovered section 468.2

Section 468 lets taxpayers who own landfills deduct now a portion of what it will

cost to clean them up in the future--even if that future is many years away. Sec.

468(a)(1). A current deduction for a future expense is a good deal for most


      2
       Unless we say otherwise, all section references are to the Internal Revenue
Code in effect for the years in issue, and all Rule references are to the Tax Court
Rules of Practice and Procedure.
                                        -3-

taxpayers, and the disagreement between the parties here is simple--who counts as

a “taxpayer” under section 468? The Gregorys think a “taxpayer” means any

taxpayer, including cash-method taxpayers like TDSL. But the Commissioner

thinks it means only taxpayers who use the accrual method.

      We must answer this novel question.

                                   Background

I.    TDSL and Its Accounting

      TDSL is an S corporation for income-tax purposes.3 TDSL is also a closely

held family business. Bob Gregory incorporated the business in 1988, and

ownership during the years in issue was split among Bob and three other family

members. Bob and his wife Kay owned 80% of the company, and Bob’s brother,


      3
        S corporations are corporations whose taxation is governed by subchapter
S of the Code. S corporations generally don’t pay federal income tax but are, like
partnerships, passthrough entities that channel income and deductions to their
owners. See Gitlitz v. Commissioner, 531 U.S. 206, 209 (2001) (“Subchapter S
allows shareholders of qualified corporations to elect a ‘pass-through’ taxation
system under which income is subjected to only one level of taxation”). So when
we say the Gregorys claimed a deduction, technically, we are saying that TDSL
reported a deduction on its return and the deduction flowed through to the
Gregorys to claim on their returns. See sec. 1.1366-1(a), Income Tax Regs.; see
also Hill v. Commissioner, T.C. Memo. 2010-268, slip op. at 11 (“[A]n S
corporation’s items of income, gain, loss, deduction, and credit--whether or not
distributed--flow through to the shareholders, who must report their pro rata shares
of such items on their individual income tax returns for the shareholder taxable
year within which the S corporation’s taxable year ends”).
                                          -4-

Jim Gregory, Jr., and his wife Janet owned the remaining 20%. Bob and Jim serve

as TDSL’s directors and are responsible for choosing TDSL’s method of

accounting.

      A few years after it was incorporated, TDSL started operating a solid-waste

disposal facility--a fancy way of saying the company puts trash in a landfill. But

this landfill is not a dump--it is big, and it is up-to-date. When it opened in 1991

on 730 acres outside of Creedmoor, Texas, just south of Austin, TDSL’s was the

state’s first fully integrated-service landfill. It also recovers resources from its

solid-waste disposal, compost production, and recycling. It currently processes

anywhere between 2,000 and 3,000 tons of solid waste each day. No matter how

modern TDSL’s facility is, though, there will come a day when it will close and

closing a landfill means having to comply with a great many environmental

regulations--federal, state, and local. The Texas Commission on Environmental

Quality knows how expensive it can be to clean up and restore a site after a

landfill closes, and that agency therefore requires waste-disposal companies such

as TDSL to keep a standby letter of credit. These letters of credit are designed to

ensure companies don’t pile up trash in landfills and then go out of business
                                         -5-

without cleaning up after themselves.4 By the end of 2009 TDSL’s letter of credit

had grown to a little more than $2 million.

      TDSL did not at first claim any deductions for its estimated clean-up costs.

But in 1996 TDSL’s then CEO asked an outside accountant to look into whether

TDSL was eligible to currently deduct these costs under section 468. The

accountant advised TDSL that it was eligible, and TDSL made the election and

claimed the section 468 deduction for the first time on its 1996 tax return. On its

2008 return, TDSL took a slightly more than $100,000 deduction for estimated

clean-up costs; and on its 2009 return, a slightly smaller one. TDSL hadn’t

actually paid those clean-up costs yet--it simply estimated the costs; and it also

hadn’t charged the estimated costs against its letter of credit yet either. TDSL also

did not just make the numbers up--it hired a professional engineering service to

estimate the correct amount. The Gregorys probably thought this meant any

controversy about the deduction was safely buried. For years the Commissioner

didn’t say anything.

      But that was soon to change.




      4
        Section 468 refers to these costs as reclamation and closing costs, but this
definition simply means clean-up costs.
                                        -6-

II.   The Notices of Deficiency

      In April 2013 the Commissioner sent the Gregorys notices of deficiency for

their 2008 and 2009 tax years that disallowed these deductions because TDSL is a

cash-method taxpayer. Excluding cash-method taxpayers from the benefits of

section 468 is not an obvious conclusion: Section 468 says that a “taxpayer” may

currently deduct clean-up costs for landfills. Sec. 468(a). The Commissioner

says, however, that in context a “taxpayer” really means “a taxpayer who uses the

accrual method.” TDSL does use the accrual method to prepare its financial

statements, but it has always used the cash method for tax-accounting purposes,

and no one doubts that this means it should not have claimed a section 468

deduction if that section’s benefits depend on whether a taxpayer uses the accrual

method. The notices of deficiency determined that without those section 468

deductions, the Gregorys’ taxable income was substantially higher.

      The Gregorys, residents of Texas when they filed timely petitions with us,

argue that when section 468 says “taxpayer” it means all taxpayers, regardless of

what method of tax accounting they use. The parties have stipulated the facts and

submitted these cases for decision under Rule 122 as a nearly pure issue of law.

There is no dispute that TDSL is entitled to keep its accounting books on the

accrual method and its tax books on the cash method. And there is no dispute
                                         -7-

about the amounts of TDSL’s deductions--the only dispute is whether it was

entitled to the deductions at all.

                                     Discussion

I.    Landfill Accounting

       Most taxpayers are free to choose the cash method, although large

C corporations, partnerships, and tax shelters cannot. Sec. 448(a). Cash-method

taxpayers report income for the tax year in which they actually or constructively

receive it. See sec. 1.446-1(c)(1)(i), Income Tax Regs. Cash-method taxpayers

also generally deduct an expense for the tax year in which they pay it. See sec.

1.461-1(a)(1), Income Tax Regs. A cash-method taxpayer may also deduct the

noncash expenses of depreciation, depletion, and losses. Id. The method is fairly

simple, which is why many taxpayers choose it.

      The accrual method is more complicated. Accrual-method taxpayers must

generally report their income for the year in which it is earned and deduct

expenses for the year in which they are incurred. See sec. 461(a); sec. 1.461-

1(a)(2)(i), Income Tax Regs.; see also sec. 451; sec. 1.446-1(c)(1)(ii), 1.451-1(a),

Income Tax Regs. Section 461 gives them the general rules too. An expense is

incurred under the “all events test.” Sec. 1.461-1(a)(2), Income Tax Regs.; see

also sec. 461(h)(1), (4). The all-events test has three requirements: (1) there must
                                          -8-

be a liability; (2) the amount of the liability can be determined with reasonable

accuracy; and (3) there has been economic performance. Sec. 461(h); sec. 1.461-

1(a)(2), Income Tax Regs. Accrual-method taxpayers cannot deduct an expense

until all three requirements are met. Sec. 1.461-1(a)(2), Income Tax Regs. This

ensures that income and expenses are matched to the correct year. The regulations

make clear that a taxpayer such as TDSL is free to use one method for tax

purposes and the other method for financial accounting purposes. Sec. 1.446-

1(a)(1), Income Tax Regs.

II.   Text

      This is all a backdrop for the key question in these cases: What does

“taxpayer” mean in section 468? We start with the words of the section, read in

the context of the statute as a whole. Wright v. Ford Motor Co., 508 F.3d 263,

269 (5th Cir. 2007).5 The Fifth Circuit follows the usual rules: If the statute is

plain and unambiguous, we stop. United States v. Shabazz, 633 F.3d 342, 345

(5th Cir. 2011). We assume the statute was written as Congress intended. Conn.

Nat’l Bank v. Germain, 503 U.S. 249, 253-54 (1992). It is the text, not the

legislative history, that is the most reliable indicator of Congress’s intent.

      5
        Because the Gregorys were residents of Texas when they filed their
petitions, these cases are appealable to the Court of Appeals for the Fifth Circuit
unless the parties agree otherwise. See sec. 7482(b)(1)(A).
                                           -9-

Marques v. Lynch, 834 F.3d 549, 553 (5th Cir. 2016); Martinez v. Mukasey, 519

F.3d 532, 543 (5th Cir. 2008). If there is ambiguity and it’s necessary to resort to

legislative history, we do so with caution. Burlington N. & Santa Fe Ry. Co. v.

Bhd. of Maint. of Way Emps., 286 F.3d 803, 805 (5th Cir. 2002); Boureslan v.

Aramco, 857 F.2d 1014, 1018 (5th Cir. 1988).

      Section 468(a)(1) provides: “[I]f a taxpayer elects the application of this

section with respect to any mining or solid-waste disposal property, the amount of

any deduction for qualified reclamation or closing costs for any taxable year to

which such election applies” shall equal the current reclamation or closing costs

allocable to that year. Sec. 468(a)(1) (emphasis added). Section 468 doesn’t limit

the election to accrual-method taxpayers--which even the Commissioner

acknowledges.6 The section just tells a “taxpayer” who makes a section 468

election how to calculate the deduction.

      Even though section 468 doesn’t define “taxpayer”, we are not left without

textual help. The Code has a small dictionary toward its end, and in it we find a

default definition of “taxpayer”. Sec. 7701(a)(14); see, e.g., Rothkamm v. United

States, 802 F.3d 699, 704 (5th Cir. 2015). It says:

      6
        Although it was enacted in 1984, the Secretary hasn’t yet issued any
regulations for section 468. He also hasn’t issued any other guidance to interpret
section 468 or analyze whether it applies to cash-method taxpayers.
                                       -10-

             SEC. 7701(a). When used in this title, where not otherwise
      distinctly expressed or manifestly incompatible with the intent
      thereof--

                  (1) Person.--The term “person” shall be construed to
            mean and include an individual, a trust, estate, partnership,
            association, company or corporation.

                         *      *     *       *    *      *     *

                  (14) Taxpayer.--The term “taxpayer” means any person
            subject to any internal revenue tax.

      The definition of taxpayer is simple, broad, and does not distinguish entities

that use the accrual method from those that use the cash method. The question is

whether the person--which includes corporations like TDSL--is “subject to any

internal revenue tax.” TDSL is a corporation and like other S corporations it is

required to pay Social Security and unemployment (albeit not income) taxes.7 Sec.

6037(a); Joseph M. Grey Pub. Accountant, P.C. v. Commissioner, 119 T.C. 121,

134 (2002) (finding that an S corporation owed employment taxes), aff’d, 93 F.

App’x 473 (3d Cir. 2004). So TDSL is a “taxpayer”.

      7
        See Fehlhaber v. Commissioner, 94 T.C. 863, 868 (1990) (“as a
passthrough entity, an S corporation is generally a taxpayer not subject to income
tax. Secs. 1363(a) and 7701(a)(14).”), aff’d, 954 F.2d 653 (11th Cir. 1992); but
see Rollercade, Inc. v. Commissioner, 97 T.C. 113, 118 (1991) (S corporation not
“taxpayer” in deciding on whom to impose sanctions under section 6673). Our
Opinion today reaches only the question of whether an S corporation is a taxpayer
for the purposes of section 468. We are not deciding whether an S corporation is a
taxpayer for every section of the Code.
                                         -11-

      Of course this is tax, so there’s a possible loophole. The default definition

doesn’t apply if section 468 “distinctly express[es]” a different definition of

taxpayer. Sec. 7701(a); see, e.g., Rothkamm, 802 F.3d at 708 (finding that nothing

in the section at issue “specifically express[ed]” a limited definition of “taxpayer”

or was “manifestly incompatible” with the definition of section 7701(a)). But we

see no loophole here: Section 468 has no definition of “taxpayer”. There’s

nothing in section 468 “manifestly incompatible” with the default definition either.

Section 468 simply says a “taxpayer”. There’s also nothing “manifestly

incompatible” with a taxpayer’s currently deducting clean-up costs--that’s what

section 468 is all about.

      “Taxpayer” is one of the most basic terms in the Code. It is also one that

Congress itself knows how to modify as context requires.8 Congress could have--

as it has on numerous occasions--said “accrual method taxpayer,” but it chose in

      8
         See, e.g., sec. 461(b) (“[i]n the case of the death of a taxpayer whose
taxable income is computed under an accrual method of accounting”); sec. 461(d)
(“[i]n the case of a taxpayer whose income is computed under an accrual method
of accounting”); sec. 458(a) (“[a] taxpayer who is on the accrual method of
accounting may elect”); sec. 271(c) (“[i]n the case of a taxpayer who uses an
accrual method of accounting”); sec. 263A(d)(1)(B) (“[s]ubparagraph (A) shall not
apply to any corporation * * * required to use an accrual method of accounting”);
sec. 108(e)(7)(B) (“[i]n the case of any creditor who computes his taxable income
under the cash receipts and disbursements method”); sec. 163(e)(2)(C) (“[i]n the
case of an obligor of a short-term obligation * * * who uses the cash receipts and
disbursement method of accounting”).
                                        -12-

section 468 to say “taxpayer” instead. It’s difficult to believe that Congress forgot

to modify such a basic term, and really meant “accrual method taxpayer,” when it

actually said “taxpayer”.

      We could stop there, with a holding that the language of section 468 is

unambiguous. But the Commissioner has piled up a number of contextual

counterarguments. He first points us to section 461, which lists several exceptions

to the general pay-before-deduct rule for cash-method taxpayers, and section 468

is not one of them. The section 461 regulations echo this. They say cash-method

taxpayers can deduct some expenses before the expenses are paid, “such as

* * * for depreciation, depletion, and losses under sections 167, 611, and 165,

respectively.” See sec. 1.461-1(a)(1), Income Tax Regs. (emphasis added).

Section 468 isn’t on this list either. The Commissioner says that implies section

468 was not meant as an exception to the general pay-before-deduct rule.

      The problem here is that the regulation’s list is prefaced with the phrase

“such as.” This phrase is important. It signals that what follows are examples, not

an exclusive list. The Code and regulations are full of similar lists. Section

1.170A-2(a)(3), Income Tax Regs., discusses holidays when schools are closed,

“such as Christmas and Easter.” Schools are obviously closed for holidays other

than Christmas and Easter. Other regulations follow a similar pattern. To deduct
                                       -13-

business expenses, taxpayers must have documents “such as receipts, paid bills, or

similar evidence” showing their expenses. Sec. 1.274-5A(c)(2)(iii), Income Tax

Regs. (emphasis added). The phrase “or similar evidence” indicates that “such as”

means for example, and the list isn’t comprehensive. The Commissioner hasn’t

provided any evidence that the list in section 1.461-1(a), Income Tax Regs., was

meant to be an exclusive list of exceptions, and we’ve found none. This isn’t a

winning argument.

      The Commissioner next argues that the term “incurred” in section 468--

which he says is usually used in the context of the accrual method--shows that

section 468 was meant to apply only to accrual-method taxpayers. Section 468

uses the term “incurred” twice. Mining reclamation and closing costs are defined

as “[a]ny expenses incurred for any land reclamation or closing activity which is

conducted in accordance with a reclamation plan.” Sec. 468(d)(2)(A). Similarly,

solid-waste disposal and closing costs are defined as “[a]ny expense incurred for

any land reclamation or closing activity in connection with any solid-waste

disposal site.” Sec. 468(d)(2)(B).

      We agree with the Commissioner that “incurred” often refers to an expense

that is deductible under the accrual method while the word “paid” often refers to

an expense that is deductible under the cash method. Section 162--one of the most
                                         -14-

commonly cited Code sections--combines the two by allowing deductions for

ordinary and necessary expenses “paid or incurred” in a trade or business. Sec.

162(a). The Supreme Court itself has said “incurred” in this context refers to the

accrual method. United States v. Hughes Props., Inc., 476 U.S. 593, 599 (1986)

(“An accrual-method taxpayer is entitled to deduct an expense in the year in which

it is ‘incurred,’ [sec.] 162(a), regardless of when it is actually paid”). The Court

cited sections 1.446-1(c)(1)(ii), 1.451-1(a), and 1.461-1(a)(2), Income Tax Regs.,

all of which are regulations that determine when an expense is incurred, and all of

which govern taxpayers who use the accrual method.9 The Court also noted that

the term “paid” in section 162 refers to the cash method. Id. at 599-600 (“Under

the ‘cash receipts and disbursements method,’ * * * a taxpayer is entitled to deduct

business expenses only in the year in which they are paid”).10




      9
        The Supreme Court in United States v. Hughes Props., Inc., 476 U.S. 593,
600 (1986) (“1.451-1(a) (accrual of income)”), specifically noted that it was
referring to the portion of sec. 1.451-1(a), Income Tax Regs., that applied to the
accrual method, not the cash method.
      10
        Other regulations reinforce the point. For example, the regulations for the
annualized income-installment method say cash-method taxpayers can’t take
deductions until expenses are “paid” and accrual-method taxpayers can’t take
deductions until expenses are “incurred”. Sec. 1.6655-2(f)(1)(ii), Income Tax
Regs.
                                         -15-

        There’s a problem, though, with the Commissioner’s argument that

“incurred” is a subtle signal that “taxpayer” in section 468 must mean “accrual

method taxpayer”--section 468 also uses the term “paid” four times. The section

says:

                     (C) Reserve to be charged for amounts paid.--Any
              amount paid by the taxpayer during any taxable year for
              qualified reclamation or closing costs allocable to portions of
              the reserve property for which the election under paragraph (1)
              was in effect shall be charged to the appropriate reserve as of
              the close of the taxable year.

                           *     *      *       *    *     *      *

               (3) Allowance of deduction for excess amounts paid.--There
        shall be allowed as a deduction for any taxable year the excess of--

                    (A) the amounts described in paragraph (2)(C) paid
              during such taxable year, over

                     (B) the closing balance of the reserve for such taxable
              year (determined without regard to paragraph (2)(C)).

Sec. 468(a)(2)(C), (3)(A) and (B) (emphasis added). Section 468 uses terms that

signal its application to both accrual- and cash-accounting. Reading “taxpayer” in

section 468 to mean “all taxpayers”--even if this creates a current deduction for a

future expense--just means that this section creates another exception to a general
                                          -16-

rule for cash-method taxpayers.11 The Code and regulations are filled with general

rules and exceptions to them. So this argument doesn’t help the Commissioner

either.

          The Commissioner next fires off another canon of interpretation--noscitur a

sociis. Noscitur a sociis is a Latin phrase that means “it is known by its

associates.”12 Black’s Law Dictionary 1087 (8th ed. 2004). The Commissioner’s

invocation of this doctrine essentially repeats his argument that “incurred” signals

that section 468 applies only to accrual-method taxpayers. We already addressed

this--section 468 also uses the term “paid”, which the Commissioner concedes

typically applies to cash-method taxpayers. As they say at the IRS: Ab his sociis

publicanus non adjuvatur.

          The Commissioner has also found some cases that at least mention section

468. In South Side Landfill, Inc. v. United States, 52 F. Supp. 2d 783, 784 (W.D.



          11
         Nothing too strange here--some accrual-method taxpayers, for example,
are required to use the cash method to determine how much of their state-tax bill
they can deduct. Sec. 1.164-1(a)(5), Income Tax Regs.
          12
        In The Tempest Gonzalo says he would not have “[t]reason, felony,
sword, pike, knife, gun, or need of any engine.” William Shakespeare, The
Tempest, act 2, sc. 1. The list “provides a helpful context for the meaning of
engine, which today is considered a broad term with an entirely neutral meaning.”
Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal
Text 195 (2012).
                                        -17-

Mich. 1999), the court described section 468 as allowing “landfill operators who

use the accrual-method of accounting” to deduct clean-up costs before the costs

are actually incurred. But the court there was not deciding whether section 468

could also apply to cash-method taxpayers, and it didn’t analyze the issue. It was

deciding only the much narrower issue of whether section 468(a)(2)(B) applies to

landfill owners who take deductions and actually set aside funds for future closing

obligations. Id. at 784. The taxpayers in South Side Landfill were accrual-method

taxpayers, so it’s not surprising the court described section 468 in that context, and

does not narrow the Code’s broad definition of taxpayer.

      The Commissioner also cites the principle of ejusdem generis--a fancy way

of saying that “[w]here general words follow an enumeration of two or more

things, they apply only to persons or things of the same general kind or class

specifically mentioned.” Antonin Scalia & Bryan A. Garner, Reading Law: The

Interpretation of Legal Text 199 (2012). But section 468 doesn’t have a list--it

just says “taxpayer”. Without a generis, there is no ejusdem and this canon

likewise cannot help us.

      The Commissioner’s final textual argument is that sections 468 and 468A

have similar language, and since section 468A applies only to accrual-method

taxpayers, section 468 must as well. Sections 468 and 468A are indeed very
                                         -18-

similar--both allow taxpayers to deduct clean-up costs, both impose reserve

requirements, and both have the same general structure. Section 468A allows an

electing “taxpayer” to deduct portions of nuclear decommissioning costs. Sec.

468A(a) and (b). Section 468A says:

            SEC. 468A(a). In General.--If the taxpayer elects the
      application of this section, there shall be allowed as a deduction for
      any taxable year the amount of payments made by the taxpayer to a
      Nuclear Decommissioning Reserve Fund * * * during such taxable
      year. [Emphasis added.]

The Commissioner thinks section 468A applies only to accrual-method taxpayers

because of section 1.461-1(a)(2)(iii)(B) of the regulations. But that regulation--

which also applies to section 468--doesn’t say that. It says only that accrual-

method taxpayers who make an election under sections 468 or 468A must account

for liabilities under those Code sections, and not the general rules for accrual-

method taxpayers under section 461 and its regulations. Sec. 1.461-1(a)(2)(iii)(B),

Income Tax Regs. The regulation does not say sections 468 and 468A apply only

to accrual-method taxpayers.

      Section 1.468A-1(a), Income Tax Regs., also says that any “eligible

taxpayer” may elect to claim a deduction under section 468A. Sec. 1.468A-1(a),

Income Tax Regs. Paragraph (b)(1) defines eligible taxpayer as “any taxpayer that

possesses a qualifying interest in a nuclear power plant.” (Emphasis added.) This
                                         -19-

is an example of a section that provides a more specific definition of “taxpayer”,

but the definition does not limit the application of the section to particular entities

based on their accounting method; it limits the section’s application to entities

with a qualifying interest in a nuclear power plant.

III.   Legislative History and Policy

       We think all this should be enough, but the parties discuss what legislative

history there is and make some policy arguments too. The Commissioner urges us

to use legislative history to define “taxpayer” because, he argues, the term must be

ambiguous if we need to jump from section 468 to section 7701 to define it.

That’s flat out wrong. There are many cases where courts have used section

7701(a)(14) to define the term “taxpayer” without concluding this made the Code

ambiguous enough to resort to legislative history. See, e.g., United States v.

Williams, 514 U.S. 527, 535 (1995); Rothkamm, 802 F.3d at 708 (“Because the

statute is clear, we must conclude that the section 7701(a)(14) definition of

‘taxpayer’ applies”). The definitions in section 7701 bring clarity to the Code, not

ambiguity.

       We will nevertheless--out of a supersized abundance of caution--look at the

legislative history anyway. That history begins with the Commissioner’s original

position on clean-up costs--that they couldn’t be deducted even by an accrual-
                                        -20-

method taxpayer until they were actually paid. Ohio River Collieries Co. v.

Commissioner, 77 T.C. 1369, 1375 (1981) (citing Rev. Rul. 72-34, 1972-1 C.B.

132), changed all that. We held there that clean-up costs accrue when these costs

can be estimated with reasonable accuracy. Id. at 1372. Congress partially

codified this holding in section 461(h) as part of the Deficit Reduction Act of 1984

(DEFRA), Pub. L. No. 98-369, sec. 91, 98 Stat. at 598. But that Act also added a

third requirement to the all-events test for accrual-method taxpayers generally--

economic performance would have to take place before a liability would be

considered “incurred”. See United States v. General Dynamics Corp., 481 U.S.

239, 243 n.3 (1987). That Act also added section 468 to the Code. The

Commissioner thinks the legislative history for the Act shows that “taxpayer” in

section 468 must mean a taxpayer who uses the accrual method.

      His argument relies heavily on the Blue Book. See Staff of J. Comm. on

Taxation, General Explanation of the Revenue Provisions of the Deficit Reduction

Act of 1984, at 260 (J. Comm. Print 1985). Blue Books are compiled by the Joint

Committee on Taxation and provide commentary on tax laws after Congress

enacts them. They “therefore d[o] not inform the decisions of the members of

Congress who vot[e] in favor of the [law].” United States v. Woods, 571 U.S.        ,

   , 134 S. Ct. 557, 568 (2013) (quoting Flood v. United States, 33 F.3d 1174,
                                          -21-

1178 (9th Cir. 1994)). The Supreme Court has told us such “[p]ost-enactment

legislative history [a contradiction in terms] is not a legitimate tool of statutory

interpretation.” Bruesewitz v. Wyeth LLC, 562 U.S. 223, 242 (2011). Instead,

like law review articles, persuasive Blue Books may be helpful. Woods, 571 U.S.

at   , 134 S. Ct. at 568.

      The Blue Book does tell us that Congress passed section 461(h) to ensure

that accrual-method taxpayers take deductions only when they economically incur

expenses. Staff of J. Comm. on Taxation, supra, at 260.13 As a general rule

Congress didn’t want taxpayers to be able to deduct expenses that hadn’t been

incurred yet, because any other rule would overstate the economic impact of those

expenses on the current income of an accrual-method taxpayer when one considers

the time value of money. Id. Section 468 was to be an exception to this general

rule for reclamation and closing costs. Id. at 273.

      Before section 468 was enacted, companies used different accounting

methods to track clean-up costs. DEFRA authorized taxpayers to use a uniform

      13
         In this it echoed the conference committee’s description of the original
House bill. H.R. Conf. Rept. No. 98-861, at 879 (1984), 1984-3 C.B. (Vol. 2) 1,
133. The conference committee report shows that the Senate’s amendment--with
its use of the more general term “taxpayer”--is what ended up in the final text of
the statute. There is nothing in that committee report that suggests a limit on the
meaning of “taxpayer” depends on the accounting system used. Id. at 879-82,
1984-3 C.B. (Vol. 2) at 133-36.
                                         -22-

method of accounting for reclamation and closing costs even before economic

performance. Id. at 273. This history does show that Congress wanted a more

liberal rule for the deductibility of reclamation and closing costs. Id.

      The Gregorys join this detour through section 468’s legislative history, but

look at it in a broader context. They argue that to see a true picture of Congress’s

intent we need to zoom out and look at history from 1982 as well. In that year

Congress considered several bills that would have allowed both cash- and accrual-

method taxpayers to deduct estimated clean-up costs for surface mining before the

work was actually performed. Mining Reclamation Reserve Bills: Hearing Before

the Subcommittee on Energy and Agricultural Taxation of the Committee on

Finance of U.S. Senate 97th Cong. 1 (1982). They argue from this that Congress

wanted cash-method taxpayers to benefit from the bills. Congressman Bailey

explained to the subcommittee that the bills would allow cash-method taxpayers to

elect the accrual method for reclamation costs and to deduct reclamation reserves.

Id. at 27. They say that Congress was looking to give both types of taxpayers

flexibility. Id. at 28. The explanation of the bills makes this even more clear.

Under S. 1911 and S. 2642, cash-method taxpayers “would be allowed to use the

accrual method [and that would be the pre-1984 accrual method] for reclamation

costs.” Id. at 7. This bit of legislative history--admittedly legislative history of
                                         -23-

bills the relevant provisions of which weren’t enacted until the next Congress--

uses the term “accrued reclamation expenses,” but they would have applied to

cash-method taxpayers. Id. Then, when the 1982 statute was marked up and

enacted in 1984, the phrase “accrued reclamation expenses” had morphed into

“qualified reclamation expenses” and “qualified closing costs.” One can see from

this that the unfinished 1982 legislation, with its perhaps awkward phrasing about

allowing cash-method taxpayers “to use the accrual method,” aimed to help both

cash- and accrual-method taxpayers. A reasonable inference is that the enacted

1984 statute was a cleaner way of achieving the same end. But one can definitely

see how this would be an instance--were we in the era before textualism again

became the predominant mode of statutory interpretation--where we’d have to

conclude that ambiguities in the legislative history make it “clear that we must

look primarily to the statutes themselves to find the legislative intent.” Citizens to

Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 412 n.29 (1971).

      The parties move on in their arguments from legislative history to tax

policy, and we hesitate to follow, but we will address the Commissioner’s final

argument--that the Gregorys’ position would lead to absurd results. The

Commissioner thinks that letting cash-method taxpayers claim deductions under

section 468 would lead to double deductions for the same expenses--once now and
                                         -24-

then again when clean-up actually begins later on. His concern isn’t realistic. If a

taxpayer elects to claim deductions under section 468, its liability is computed

under that section, and it gets no deduction for current clean-up expenses until it

exhausts its accumulated reserve for those costs. Sec. 468(a)(3).

      Taxpayers like TDSL must comply with numerous environmental-protection

laws at the federal, state, and local levels. These costs can be large, and they

continue after a landfill, mine, or nuclear-power plant stops earning income.

Section 468 lessens the burden of compliance by helping to match income and

expenses better in an era where businesses that are messy to run must clean up

after themselves and maintain proof that they have the means to do so.

                                     Conclusion

      The term “taxpayer” in section 468 includes cash-method taxpayers like

TDSL. Since section 468 itself doesn’t define the term, we hold that the general

definition under section 7701(a)(14) applies. TDSL is eligible to currently deduct
                                      -25-

its estimated clean-up costs under section 468, and the Gregorys may claim those

deductions on their returns.


                                             Decisions will be entered for

                                     petitioners.

      Reviewed by the Court

       FOLEY, VASQUEZ, THORNTON, GOEKE, GUSTAFSON, PARIS,
MORRISON, KERRIGAN, BUCH, and PUGH, JJ., agree with this opinion of the
Court.
                                         -26-

      LAUBER, J., concurring: I agree with the result the Court reaches today,

but I do so with some reluctance. The legislative history convinces me that Con-

gress likely intended that the election to set up reserves for mining and waste site

reclamation costs (collectively, reclamation costs) would be available only to ac-

crual basis taxpayers. However, quite possibly because of a last-minute drafting

glitch, Congress did not reify this intent in the text of section 468 as actually en-

acted. If the Secretary, in reliance on the legislative history, had issued regula-

tions that defined “taxpayer” for purposes of section 468 to mean “accrual basis

taxpayer,” the outcome might have been different. Cf. Lindsay Manor Nursing

Home, Inc. v. Commissioner, 148 T.C. __ (Mar. 23, 2017) (sustaining the Secre-

tary’s regulations excluding taxpayers other than individuals from the definition of

“taxpayers” eligible for levy relief on account of “economic hardship” under sec-

tion 6343(a)(1)(D)). But the Secretary has issued no such regulations, and I can-

not conclude that the Court’s plain language construction of the statute produces

an absurd result.

      As the Court notes, sections 468 and 468A entered the Code, hand in glove

with section 461(h), as part of the Deficit Reduction Act of 1984 (DEFRA), Pub.

L. No. 98-369, sec. 91, 98 Stat. at 598-606. But there is more by way of legis-

lative background to these provisions than the post-enactment Blue Book that the
                                        -27-

Court discusses. See op. Ct. p. 20 (citing Staff of J. Comm. on Taxation, General

Explanation of the Revenue Provisions of the Deficit Reduction Act of 1984, at

258-276 (J. Comm. Print 1985)). By enacting section 461(h) as part of DEFRA,

Congress added a new prong--“economic performance”--to the judicially created

“all events test” for determining the year for which accrual basis taxpayers may

deduct business expenses under section 162. See United States v. General Dyna-

mics Corp., 481 U.S. 239, 242 (1987); United States v. Anderson, 269 U.S. 422

(1926); sec. 1.461-1(a)(2), Income Tax Regs.

      In a report accompanying an amendment to the original House bill, H.R.

4170, 98th Cong. (1984), the Ways and Means Committee described proposed

section 461(h) as a provision aimed at preventing “premature accruals.” As it ex-

plained: “[T]he rules relating to the time for accrual of a deduction by a taxpayer

using the accrual method of accounting should be changed to take into account the

time value of money.” H.R. Rept. No. 98-432 (Part 2), at 1046, 1254 (1984), 1984

U.S.C.C.A.N. 697, 917. But despite its reference to “the time value of money,”

the committee did not propose a discounting regime, recognizing that “determin-

ing the discounted values for all kinds of future expenses would be extraordinarily

complex and would be extremely difficult to administer.” Ibid. Instead, by requir-

ing that expenses be accrued only when economic performance has occurred, the
                                        -28-

committee aimed to “prevent deductions for future expenses in excess of their true

cost while avoiding the complexity of a system of discounted valuation.” Id. at

1255, 1984 U.S.C.C.A.N. at 917.

      It seems clear that section 461(h) as proposed was envisioned as applying

only to accrual basis taxpayers, with no relevance or implications for cash basis

taxpayers. And section 461(h) as enacted applies only to accrual basis taxpayers.

It imposes an “economic performance” requirement for “determining whether an

amount has been incurred with respect to any item during any taxable year.” Sec.

461(h)(1) (emphasis added). And it explicitly adds this economic performance re-

quirement as a statutory modification to “the all events test,” which applies exclu-

sively to accrual basis taxpayers.

      Notably, the House bill did not carve out an exception from the “economic

performance” requirement for estimated future reclamation costs or nuclear de-

commissioning costs.1 To the contrary, as an example of how the economic per-

formance test would apply to the former, the House report stated as follows: “[I]f

a strip mining company engages a contractor to reclaim stripped land, economic


      1
        The House bill did contain an exemption from the “economic performance”
requirement for “[a]ny other provisions of this title which specifically provide[]
for a deduction for a reserve for estimated expenses.” See H.R. Rept. No. 98-432
(Part 2), at 1256 (1984), 1984 U.S.C.C.A.N. 697, 918.
                                        -29-

performance occurs when the contractor performs the reclamation rather than

when the strip mining company enters into a binding contract with the contractor.”

H.R. Rept. No. 98-432 (Part 2), supra at 1255, 1984 U.S.C.C.A.N. at 918. Similar-

ly, “when the strip mining company itself reclaims the land, economic perform-

ance occurs when the land is reclaimed.” Ibid. The House bill would thus have

denied accrual basis taxpayers any deduction for reclamation or nuclear decom-

missioning costs before the year in which “economic performance” had occurred.

      The Senate was apparently more solicitous of accrual basis taxpayers sub-

ject to clean-up cost obligations mandated by Federal or State law. The Senate bill

that eventually became that chamber’s amendment to H.R. 4170 proposed to in-

clude in section 461, immediately after new subsection (h), two additional new

subsections (i) and (j), each constituting an exception from the former’s “econom-

ic performance” requirement. Each of the latter provisions was denominated a

“Special Rule.” See S. Prt. 98-169 (Vol. II), at 207, 212 (1984).

      Proposed section 461(i) provided an elective method whereby taxpayers

could deduct contributions to a reserve created to pay future nuclear decommis-

sioning costs. A report accompanying the Senate Finance Committee’s mark-up

of that bill characterized that provision as “the exclusive method for obtaining a

deduction for nuclear decommissioning expenses prior to economic performance.”
                                         -30-

S. Prt. 98-169 (Vol. I), at 277. In parallel fashion, proposed section 461(j) pro-

vided an elective method whereby taxpayers could deduct contributions to a re-

serve created to pay future reclamation costs. The Senate Finance Committee re-

port explained that this method “departs from the general principle, adopted in the

bill, of allowing a deduction for future liabilities only when economic performance

occurs.” Id. at 274.

      Envisaged as exceptions to the general “economic performance” rule of sec-

tion 461(h), subsections (i) and (j) in the Senate bill were clearly aimed at accrual

basis taxpayers. Their placement immediately after subsection (h), as “special

rules” limiting its application in specified circumstances, underscores this legisla-

tive design. It follows that, under the Senate bill, cash basis taxpayers would have

been ineligible for either elective regime.

      Following a conference between the House and the Senate, the conferees

produced a report, H.R. Conf. Rept. No. 98-861 (1984), 1984 U.S.C.C.A.N. 1445.

Incorporating the amendments in that conference report, H.R. 4170 was enacted

into law as DEFRA. As the conference report explained, “the conference

agreement generally follows the House bill” in attacking premature accruals by

adding the “economic performance” test of section 461(h). Id. at 873, 1984

U.S.C.C.A.N. at 1561. But the conferees adopted several “modifications” to the
                                         -31-

original House bill, including “the Senate amendment’s provisions relating to

nuclear power plant decommissioning costs and to costs associated with the

reclamation and closing of mine and solid waste disposal sites.” Ibid. In other

words, the conference agreement adhered to the approach of the Senate amend-

ment by adopting elective exceptions that allowed accrual basis taxpayers to ac-

crue deductions for future reclamation and nuclear decommissioning costs in

advance of “economic performance.”

      The conference report’s discussion of these elective clean-up cost provi-

sions tracks that of the Senate report. This suggests that the conferees, like the

Senate Finance Committee, regarded these provisions as exceptions from the eco-

nomic performance requirement that would otherwise bind accrual basis taxpay-

ers. Indeed, the conference report says this in so many words, noting that the con-

ference agreement followed the Senate amendment by “except[ing] nuclear de-

commissioning costs from the general rule * * * of allowing accrual basis taxpay-

ers to deduct future liabilities only when economic performance occurs.” Id. at

877, 1984 U.S.C.C.A.N. at 1561.

      Similarly, in discussing the exception for future reclamation costs, the con-

ference report noted the IRS’ longstanding litigation position that “reclamation

expenses cannot be accrued until reclamation occurs.” Id. at 879, 1984
                                         -32-

U.S.C.C.A.N. at 1567. The conference report then cited with approval Ohio River

Collieries Co. v. Commissioner, 77 T.C. 1369 (1981), where this Court had held

that an accrual basis strip mining company could accrue deductions for expected

future reclamation costs if those costs were “susceptible of reasonable estimation”

under the all events test. Id. at 1377. Reading this case citation in context, it ap-

pears that the conferees intended, as the Senate Finance Committee had intended,

to give similarly situated accrual basis taxpayers the ability to “elect into” the out-

come of Ohio River Collieries, notwithstanding the economic performance re-

quirement being imposed by new section 461(h). Compare S. Prt. 98-169 (Vol. I),

supra at 274, with H.R. Conf. Rept. No. 98-861, supra at 879.

      In short, the explanatory remarks of the conference committee strongly sug-

gest that Congress intended to adopt the Senate approach, whereby the two elect-

ive clean-up cost provisions would constitute exceptions to the “economic per-

formance” requirement for accrual basis taxpayers and be exclusively applicable

to them. But the explanatory remarks of the conferees do not have the force of

law. See Roeder v. Islamic Republic of Iran, 333 F.3d 228, 236-237 (D.C. Cir.

2003). And the text that Congress actually enacted differs from that of the Senate

amendment in one important respect.
                                         -33-

      For reasons that are nowhere explained, the conferees moved the two elec-

tive clean-up cost provisions from their original location in the Senate amendment,

where they appeared as proposed subsections (i) and (j) of section 461. Instead,

the conferees placed these provisions into a pair of new stand-alone Code sections.

The reclamation cost provision became section 468, and the nuclear decommis-

sioning cost provision became section 468A.2 As a result of this shift, the term

“taxpayer” in section 468 became unmoored from its original section 461 context,

rendering respondent’s position that “taxpayer” means “accrual basis taxpayer”

correspondingly more difficult to sustain.

      The conferees did not explain why the two elective clean-up cost provisions

were relocated. Indeed, the conferees did not even mention that they had made

this change. It is difficult to tell what significance we should attach to this “dog

that didn’t bark.” Compare Koons Buick Pontiac GMC, Inc. v. Nigh, 543 U.S. 50,

63 (2004), with id. at 73-74 (Scalia, J., dissenting) (expressing doubt about the

“Canon of Canine Silence” as a tool of statutory construction).




      2
       The conferees retained the House bill’s exemption from the “economic per-
formance” requirement for other Code provisions that “specifically provide[] for a
deduction for a reserve for estimated expenses.” See supra note 1. That exemp-
tion, which now appears as section 461(h)(5), evidently serves as a cross-reference
to (among other provisions) sections 468 and 468A.
                                         -34-

      “[T]he meaning of statutory language, plain or not, depends on context.”

King v. St. Vincent’s Hosp., 502 U.S. 215, 221 (1991). That contextual analysis

may encompass the statutory provision’s styling and location. See Smith v. Doe,

538 U.S. 84, 85 (2003) (“formal attributes of a legislative enactment, such as the

manner of its codification * * *, are probative of the legislature’s intent”); see also

FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000) (empha-

sizing the importance of reading a statute’s words “with a view to their place in

the overall statutory scheme”). As enacted in sections 468 and 468A, the two

elective clean-up cost provisions are captioned “special rules,” as was true in the

Senate amendment. But because these two regimes are now located outside sec-

tion 461, that term no longer automatically connotes special rules for accrual basis

taxpayers.

      In sum, section 468 as enacted is untethered from the economic performance

requirement imposed on accrual basis taxpayers by section 461(h). As a result, the

contextual enterprise of determining whether cash basis taxpayers are excluded

from the ambit of section 468 ultimately reduces to a textual analysis. And in that

endeavor I cannot fault the Court. It reasonably concludes that nothing in the text

of section 468 necessitates giving the term “taxpayer” a meaning less comprehen-

sive than the ordinary meaning it has elsewhere in the Code.
                                         -35-

      This conclusion does seem misaligned with the evolution of the legislative

proposals that culminated in the enactment of sections 468 and 468A. Conceiv-

ably this misalignment may reflect a drafting oversight. When relocating the two

elective clean-up cost provisions, the conferees may not have realized that the

term “taxpayer,” as it appeared the Senate’s proposed sections 461(i) and (j),

required a corollary modification. If the Secretary believed that this created a

statutory gap, he might have issued regulations in an effort to fill it. But in the

absence of regulations “we must apply the statute as we find it.” McClain v.

Commissioner, 311 U.S. 527, 530 (1941).

      MARVEL, GALE, NEGA, and ASHFORD, JJ., agree with this concurring
opinion.
