                                     PRECEDENTIAL

    UNITED STATES COURT OF APPEALS
         FOR THE THIRD CIRCUIT
             ______________

                  No. 18-1862
                ______________

 SIH PARTNERS LLLP, EXPLORER PARTNER
            CORPORATION,
           Tax Matters Partner,

                                         Appellant

                       v.

  COMMISSIONER OF INTERNAL REVENUE
            ______________

   On Appeal from the United States Tax Court,
            Internal Revenue Service
        (Tax Court No. IRS-1: 15-03427)
       Tax Court Judge: Mary Ann Cohen
                ______________

             Argued March 8, 2019

BEFORE: AMBRO, RESTREPO, and GREENBERG,
             Circuit Judges

              (Filed: May 7, 2019)
                        ______________

Sean M. Akins
Robert A. Long, Jr.
Ivano M. Ventresca
Covington & Burling
850 10th Street, N.W.
One City Center
Washington, DC 2001

Thomas H. Dupree (argued)
Jacob Spencer
Gibson Dunn & Crutcher
1050 Connecticut Avenue, N.W.
Washington, DC 20036

Kristen M. Garry
Mark D. Lanpher
Robert A. Rudnick
Shearman & Sterling
401 9th Street, N.W.
Suite 800
Washington, DC 20004

   Attorneys for Appellant

Gary R. Allen
Judith A. Hagley (argued)
Gilbert S. Rothenberg
Francesca Ugolini
United States Department of Justice
Tax Division




                              2
950 Pennsylvania Avenue, N.W.
P.O. Box 502
Washington, DC 20044

Julie A. Porter Gasper
Richard A. Rappazzo
Internal Revenue Service
4050 Alpha Road
14th Floor MS 2300 NDAL
Dallas, TX 75244

Jeffrey H. Fenberg
Suite 300
1000 South Pine Island Road
Royal Palm One
Plantation, FL 33324

   Attorneys for Appellee
                     ______________

                         OPINION
                      ______________

GREENBERG, Circuit Judge.

                     I.   INTRODUCTION

       This matter comes on before this Court on the appeal of
SIH Partners LLLP Explorer Partner Corp., Tax Matters Partner,
challenging a United States Tax Court decision on summary
judgment holding it liable for back income taxes. For the
reasons stated below, exercising plenary review, see Duquesne
Light Holdings, Inc. & Subsidiaries v. Comm’r of Internal




                              3
Revenue, 861 F.3d 396, 403 (3d Cir. 2017), we will affirm the
decision and order of the Tax Court.


                       I.   BACKGROUND

        In its comprehensive opinion, the Tax Court made
detailed factual findings which we accept. See SIH Partners
LLLP v. Comm’r of Internal Revenue, No. 3427-15, 2018 WL
487089, at *1-4 (T.C. Jan. 18, 2018). We point out, however,
that the Court found many facts that are immaterial to our
analysis.1 Though the financial history of this case is very
complex the issues before us boil down to whether a United
States entity incurs taxes on income made by its Controlled
Foreign Corporations (“CFC”)2 in circumstances defined by
applicable statutes and their implementing regulations, and, if
so, the tax rate on the income.

      Normally, a CFC’s income is not taxable to its domestic
shareholder or shareholders unless and until the income is

1
 This is not surprising because the Tax Court recited that “[w]e
state the stipulated facts in greater detail than may be necessary
so that the record is complete.” SIH Partners v. Comm’r, 2018
WL 487089, at *1.

2
  CFC is defined as “any foreign corporation if more than 50
percent of—(1) the total combined voting power of all classes of
stock of such corporation entitled to vote, or (2) the total value
of the stock of such corporation[—]is owned . . . or is
considered as owned . . . by United States shareholders on any
day during the taxable year of such foreign corporation.” 26
U.S.C. § 957(a).




                                4
distributed to them, a process commonly known as repatriation.
Thus, a domestic shareholder in a CFC does not incur a taxable
event by reason of its CFC earning income until the shareholder
actually receives a monetary return from its foreign investment
and holdings. In the face of this straight-forward principle,
easily stated though not always easily applied, taxpayers
attempting to avoid domestic taxes though nevertheless seeking
to benefit from foreign earnings of their CFC hit upon the idea
of taking loans either from the CFC or from third-party financial
institutions using the CFC’s assets as collateral or having the
CFC guarantee the loans. Even though those maneuvers
allowed domestic shareholders to benefit from a CFC’s
earnings, it appears that prior to 1962 the IRS did not consider
the taking of a collateralized or guaranteed loan from or with the
participation of a CFC as a taxable event, even though the
process allowed domestic shareholders effectively to obtain a
monetary return on their foreign investment.

       The foregoing tax avoidness method permitted a
domestic shareholder to delay indefinitely any taxes on foreign
income, while making use of the foreign income by
continuously taking out loans using its CFC’s assets as collateral
or by having the CFC guarantee the loans. Domestic
corporations exploited this loophole by forming CFCs in foreign
tax havens to which they transferred portable income, thereby
avoiding or at least delaying taxes on the income at United
States domestic tax rates, even though the taxpayers had the
benefit of having received the income.

      Not surprisingly Congress took steps to close the CFC
loophole by enacting the Revenue Act of 1962 (“Act”) “to
prevent the repatriation of income to the United States in a
manner which does not subject it to U.S. taxation.” Dougherty




                                5
v. Comm’r of Internal Revenue, 60 T.C. 917, 929 (1973)
(citation omitted). The Act essentially requires the inclusion in
the domestic shareholder’s annual income of any increase in
investment in United States properties made by a CFC it
controls. The rationale for the Act is clear—any investment by a
CFC in United States properties is tantamount to its repatriation.
 Id. United States property is defined as including, among other
things, “an obligation of a United States person[.]” 26 U.S.C. §
956(c)(1)(C); see also id. § 951. The Act goes further as it
provides that “a controlled foreign corporation shall, under
regulations prescribed by the Secretary [of the Treasury], be
considered as holding an obligation of a United States person if
such controlled foreign corporation is a pledgor or guarantor of
such obligations.” Id. § 956(d).

        Taking up the baton from Congress, in 1964 the IRS
promulgated the two regulations at issue in this case. First, the
agency determined when a CFC’s pledge or guarantee would
result in the CFC being deemed the holder of the loan:

       [A]ny obligation of a United States person with
       respect to which a controlled foreign corporation .
       . . is a pledgor or guarantor will be considered to
       be held by the controlled foreign corporation . . . .

26 C.F.R. § 1.956-2(c)(1). Second, the IRS determined how
much of the “obligation” a CFC pledgor or guarantor would be
deemed to hold:

       [T]he amount of an obligation treated as held . . .
       as a result of a pledge or guarantee described in §
       1.956-2(c) is the unpaid principal amount of the
       obligation . . . .




                                6
Id. § 1.956-1(e)(2). As the Tax Court summarized, “a CFC
whose assets serve (even though indirectly) as security for the
performance of an obligation of a United States person will be
considered a pledgor or guarantor of that obligation.” SIH
Partners, 2018 WL 487089, at *5.

        Apparently the regulations were unchallenged for an
extended period. But almost 50 years after their adoption, these
statutes and regulations have come to bite Appellant, one of a
cluster of companies affiliated with Susquehanna International
Holdings (“SIH”). Through the SIH family, Appellant owns
two CFCs. Another SIH affiliate, investment firm SIG,
borrowed $1.5 billion from Merrill Lynch in 2007 in a loan
guaranteed by over thirty SIH affiliates, including the two CFCs
that Appellant owns. Even though the loan dwarfed the CFCs’
assets that were roughly $240 million, Merrill Lynch insisted on
having the CFCs guarantee the loan in order to “ring fence” the
transaction—that is, for protection in case the deeper-pocketed
domestic guarantors tried to dump their assets overseas with the
CFCs.

       In 2011, when the CFCs distributed earnings to
Appellant, their domestic shareholder, the IRS stepped in.
Applying the above regulations, the agency determined that
Appellant should have reported its income from the CFCs at the
time the CFCs guaranteed the loan to SIG. Per the regulations,
the IRS treated each CFC as if it had made the entire loan
directly, though the amount included in Appellant’s income was
reduced from the $1.5 billion principal of the loan to the CFCs’
combined “applicable earnings.” See 26 U.S.C. § 956(a)(2)
(capping the taxable income to domestic shareholders at “the




                               7
applicable earnings of such controlled foreign corporation”).
This addition to income even in the reduced amount was no
small thing, as it resulted in an additional tax of $378,312,576 to
Appellant.

       Having applied its regulations to increase Appellant’s
taxable income and accelerate the tax date from 2011 to 2007,
the IRS took the final step of raising Appellant’s tax rate.
Although the 2011 distribution of CFC earnings to Appellant
would have been taxed at the 15% rate for “qualified dividend
income” under 26 U.S.C. § 1(h)(11)(B)(i), the IRS found that its
accelerated income inclusion through §§ 956(c)(1)(C) and
956(d) was not a dividend and therefore was taxable at the then
applicable 35% rate for ordinary income. In the Tax Court,
Appellant challenged both the validity of the § 956(d)
regulations and the use of the ordinary income tax rate. These
proceedings followed and resulted in the Tax Court granting
summary judgment to the IRS, so Appellant lost on both issues.



                         II. DISCUSSION

       A.     Validity of the Regulations

        Before we begin our analysis, we note that Appellant
does not challenge the Commissioner’s calculations with regard
to the amount of its taxable income. Instead, it argues that the
implementing regulations are invalid because they are arbitrary
and capricious and violate the Administrative Procedure Act
(“APA”), 5 U.S.C. § 706(2)(A), and thus the addition to its
income was unauthorized. Inasmuch as Appellant does not
challenge the Commissioner’s calculation of the amount




                                8
included in its income, we need not explain how the
Commissioner made his calculations.

       While we appreciate and agree with the Tax Court’s
masterful analysis rejecting Appellant’s argument challenging
the validity of the regulations, we need not explicitly rely on that
analysis because Appellant’s argument fails for a reason on
which the Tax Court did not rely, inasmuch as Appellant asks us
to review the regulations taking into account hindsight derived
from matters occurring after their adoption. The Tax Court did
not address the hindsight issue, but Appellant almost invited us
to do so, for in its brief it argues that the IRS practice shows that
the regulations are unreasonable. Appellant’s br. 32. The IRS’s
practice, of course, followed the adoption of the regulations.
Though the Commissioner has not raised this hindsight point on
this appeal as a ground to affirm, we nevertheless consider it
because a “court of appeals may affirm Tax Court decisions on
any grounds found in the record regardless of Tax Court’s
rationale[.]” ACM P’ship v. Comm’r of Internal Revenue, 157
F.3d 231, 249 n.33 (3d Cir. 1998) (citation omitted). Thus,
“[w]e may affirm a [decision of a lower] court for any reason
supported by the record,” Disability Rights N.J., Inc. v. Comm’r,
N.J. Dep’t of Human Servs., 796 F.3d 293, 300-01 (3d Cir.
2015), even though no party has advanced the reason to affirm.
See Kline v. Zimmer Holdings, Inc., 662 F. App’x 121, 124 n.2
(3d Cir. 2016).

       The rule supporting our approach with respect to
hindsight evidence is clear, for we have stated that when
reviewing an agency action under the APA, 5 U.S.C. §
706(2)(A), we must confine our review to “the full
administrative record that was before the [agency] at the time” it
took the action under review. C.K. v. N.J. Dep’t of Health and




                                 9
Human Servs., 92 F.3d 171, 182 (3d Cir. 1996) (quoting
Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402,
420, 91 S.Ct. 814, 825 (1971)); see Tinicum Twp. v. U.S. Dep’t
of Transp., 685 F.3d 288, 294 (3d Cir. 2012). Specifically,
Appellant argues that the regulations are arbitrary and
capricious, because they do not take into consideration the
possibility that if the IRS considers individually multiple CFCs
that guaranteed the entire loan, the CFC shareholder may incur
income larger than the loan, indeed potentially an amount
multiple times the loan. Appellant further argues that even
though certain loans triggering the taxable event could not have
been made without the security provided by a CFC’s guarantee,
such is not always the case, so only those guarantees that are
necessary for a shareholder to obtain a loan should be regarded
as a repatriation and accordingly be treated as income to the
domestic shareholder.

        In support of the two above contentions, Appellant cites
to the IRS’s internal guidance, stating that the inclusion of
income under § 956(c)(1)(C) of the Act should be determined on
the facts and circumstances of each case to ascertain if there has
been a repatriation of earnings. Appellant’s br. 33-34. But
Appellant’s argument runs into the insurmountable obstacle that
every guidance and ruling it cites in its brief occurred decades
after the promulgation of the regulations under the Act in 1964.

       In the circumstances, though the authorities might
demonstrate the IRS’s post-adoption recognition that the
regulations do not always address economic reality, they are not
evidence that the regulations were arbitrary or capricious at the
time they were promulgated. We cannot and will not find half-
century old regulations arbitrary and capricious, based on
insights gained in the decades after their promulgation, when the




                               10
challenger, here Appellant, has not made a showing that those
insights were known or, perhaps, at least should have been
known to the agency at the time of the regulations’
promulgation. See San Luis & Delta-Mendota Water Auth. v.
Locke, 776 F.3d 971, 993 (9th Cir. 2014) (“Reviewing courts
may admit evidence . . . only to help the court understand
whether the agency complied with the APA’s requirement that
the agency’s decision be neither arbitrary nor capricious. . . .
But reviewing courts may not look to this evidence as a basis for
questioning the agency’s . . . analyses or conclusions.”); Fearin
v. Fox Creek Valley Conservancy Dist., 793 F.2d 1291 (6th Cir.
1986) (“While such subsequent factors may have some
relevance, we may not simply substitute our judgment, improved
by the luxury of hindsight, for that of the [agency], and hence
cannot consider them as controlling.”).3

3
  Appellant’s APA claim may be generously construed as
asserting a claim under 5 U.S.C. § 706(1), to “compel agency
action unlawfully withheld or unreasonably delayed[.]” After
all, we regard Appellant’s argument as not so much that the
initial regulations were arbitrary and capricious, but that the IRS
failed to amend or promulgate new regulations to conform to
later observed economic realities. Appellant, however, has not
shown that it requested the IRS to amend its regulations. See
Armstrong v. Exceptional Child Center, Inc., 135 S.Ct. 1378,
1389-90 (2015) (Breyer, J., concurring in part and concurring in
the judgment) (“[W]hy could respondents not ask the federal
agency to interpret its rules to respondents’ satisfaction, to
modify those rules, to promulgate new rules or to enforce old
ones?”); Pub. Citizen Health Research Grp. v. Comm’r, FDA,
740 F.2d 21, 29 (D.C. Cir. 1984) (finding that plaintiff must
exhaust administrative remedies before asserting a claim that an




                                11
       When we raised the hindsight problem with Appellant at
oral argument, Appellant argued that even at the time they were
promulgated the regulations were arbitrary and capricious
because the IRS failed to exercise its expertise to recognize the
issues Appellant raises here. But the Supreme Court never has
held that agency regulations must be the best or the most perfect
solution possible to the problem at hand given the record before
it. Rather, as that Court has explained:

       The scope of review under the ‘arbitrary and
       capricious’ standard is narrow. A court is not to
       ask whether a regulatory decision is the best one
       possible or even whether it is better than the
       alternatives. Rather, the court must uphold a rule
       if the agency has examined the relevant
       considerations and articulated a satisfactory
       explanation for its action, including a rational
       connection between the facts found and the
       choice made.

FERC v. Elec. Power Supply Ass’n, 136 S.Ct. 760, 782 (2016)
(citations and internal quotations omitted).

      We see nothing arbitrary and capricious in the regulations
which make an obvious and straight-forward determination that

agency failed to act); see also In re Long-Distance Tel. Serv.
Fed. Excise Tax Refund Litig., 751 F.3d 629, 634 (D.C. Cir.
2014) (“Absent a statutory duty to promulgate a new rule, a
court cannot order it.”). We hasten to add, however, that we do
not suggest that if Appellant formally had made such a request
and it was rejected, our result would have been different. We do
not address this point because there was no such request.




                               12
the amount to be included in the domestic shareholder’s income
should equal the amount of the loan the CFC guaranteed up to
the amount of the CFC’s earnings. After all, no reasonable
argument could be made otherwise with respect to the income to
be included in the shareholder’s income if the CFC makes a
direct loan to its domestic shareholders. Consequently, it makes
logical sense to hold that loan guarantees should be treated the
same as a direct loan, a position supported by a straight-forward
reading of the Act. See 26 U.S.C. § 956(d).

        Appellant argues that, by enacting § 956(d) separately,
Congress intended the Commissioner to promulgate more
substantive regulations in its treatment of § 956(c)(1)(C)
income, but Appellant does not explain what substantive
mandates § 956(d) specifically imposed, and it certainly does
not explain how the enactment of § 956(d) relates to the two
issues it raises here that we describe above. There is no showing
that Congress even recognized these issues. Absent evidence
that the agency failed to follow a clear statutory mandate, we
cannot find that the regulations were arbitrary and capricious.
“If a statute is ambiguous, and if the implementing agency’s
construction is reasonable, [Chevron, U.S.A., Inc. v. Natural
Res. Def. Council, Inc., 467 U.S. 837, 104 S.Ct. 2778 (1984)]
requires a federal court to accept the agency’s construction of
the statute, even if the agency’s reading differs from what the
court believes is the best statutory interpretation.” Nat’l Cable
& Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967,
980, 125 S.Ct. 2688, 2699 (2005) (citing Chevron, 467 U.S. at
843-44 & n.11, 104 S.Ct. at 2782 & n.11). “Where Congress
has not merely failed to address a precise question, but has given
an ‘express delegation of authority to the agency to elucidate a
specific provision of the statute by regulation,’ then the agency’s




                                13
‘legislative regulations are given controlling weight unless they
are arbitrary, capricious, or manifestly contrary to the statute.’”
Zheng v. Gonzales, 422 F.3d 98, 112 (3d Cir. 2005) (quoting
Chevron, 467 U.S. at 843-44, 104 S.Ct. at 2782). Nothing in the
record here shows that the agency’s interpretation of the scope
of the statutes was unreasonable, or that the regulations in
question failed to implement an articulable statutory mandate.
Though there were other things the agency could have addressed
in the regulations, we only review what it did.4

        Moreover, as the Tax Court noted in its opinion, when
the agency solicited public comments about the regulations
when it was considering their adoption, it did not receive any
comment about the possibility of multiple-counting of loan
guarantors being an issue with the regulations. SIH Partners,
2018 WL 487089, at *7. Furthermore, the Commissioner noted
at oral argument that he was unaware of a single instance where
the inclusion of income under § 956(c)(1)(C) has resulted in the
domestic shareholder receiving income greater than the loan
amount. Appellant does not claim that it did in this case. It very
4
  Appellant also argues that the regulations were arbitrary and
capricious because the agency failed to promulgate regulations
to ensure that only those obligations that amount to a
repatriation in substance should be included as income, because
Congress only intended to capture as income those transactions
that are “substantially the equivalent of a dividend.”
Appellant’s br. 27. However, the plain language of the statutes
in question does not impose this requirement on the agency. We
do not read absent words into a statute “so that what was
omitted, presumably by inadvertence, may be included within its
scope.” Lamie v. U.S. Trustee, 540 U.S. 526, 538, 124 S.Ct.
1023, 1032 (2004).




                                14
well could be that the practice of loan guarantees by multiple
CFCs was exceedingly rare or simply did not occur back in 1964
and thus escaped agency consideration when it adopted the
regulations, or that the hypothetical multiple-counting problem
was not serious enough to require further examination.
Appellant does not provide evidence suggesting another
explanation.

        Additionally, in 2015, the IRS did consider amending the
regulations to include a cap on the inclusion of all income under
§ 956(c)(1)(C) to that of the loan amount guaranteed, see 80
Fed. Reg. 53,058, 53,062 (2015) (noting that “there could be
multiple section 951 inclusions with respect to the same
obligation that exceed, in the aggregate, the unpaid principal
amount of the obligation” and requesting comments “on whether
the Treasury Department and the IRS should adopt” a rule
limiting this result), but decided against it. See Crestek, Inc. v.
Comm’r of Internal Revenue, 149 T.C. 112, 129 n.8 (2017)
(explaining the IRS’s decision not to issue final rules). Even 50
years after the adoption of the regulations at a time that the IRS
had the benefit of hindsight with respect to the regulations’
application in practice, it chose to maintain the status quo.
Evidently, the Commissioner did not consider the multiple
counting issue a serious enough problem to warrant amendment
of the regulations to deal with it.

        In any event, we are satisfied that the regulations are not
arbitrary or capricious merely because they may not adhere to
the policies embodied in the statutes in every case. As the
Supreme Court has recognized, “there are numerous federal
statutes that could be said to embody countless policies. If
agency action may be disturbed whenever a reviewing court is
able to point to an arguably relevant statutory policy that was not




                                15
explicitly considered, then a very large number of agency
decisions might be open to judicial invalidation.” Pension
Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 646, 110 S.Ct.
2668, 2676 (1990). To sum up this portion of our opinion, we
see no compelling or even plausible reason to intervene under
the APA to invalidate the regulations.5

       Appellant further argues that even if we uphold the
regulations, we should remand the matter to the IRS and require
it to employ a facts-and-circumstances determination with
respect to their application in this case, as Appellant asserts that
IRS internal guidances, in particular Revenue Ruling 89-73,
required it to make such an analysis. See Appellant’s br. 33.
Appellant contends that because the CFC guarantees were not
5
  To the extent Appellant argues that the agency did not provide
an adequate explanation for its implementation of the
regulations, we note that the regulations track the text of
§ 956(d) nearly verbatim. The almost word-for-word match
keeps the IRS’s terse explanation in line with the general
principle that the more a regulation departs from a statute, the
more an agency must explain itself. Cf. Good Fortune Shipping
SA v. Comm’r of IRS, 897 F.3d 256, 262 (D.C. Cir. 2018)
(faulting the IRS for providing “only a single, undeveloped
statement” of explanation for a rule that “appear[ed] to rewrite”
statutory rules surrounding stock ownership); Dominion Res.,
Inc. v. United States, 681 F.3d 1313, 1317–19 (Fed. Cir. 2012)
(faulting the IRS for offering only “the general statement that
the regulations are intended to implement” the statute, even as
one regulation “directly contradict[ed]” the statute). Because
the challenged regulations barely rocked the statutory boat, and
because of the lack of public commentary and the straight-
forward nature of the regulations, little explanation was needed.




                                16
essential to its domestic parent entity’s ability to obtain the
loans, the guarantees should not have been deemed as
investments in United States properties under § 956(c)(1)(C),
and thus should not have been included in its income. It further
argues that Merrill Lynch insisted on the CFC guarantees to
ensure that the domestic entity could not simply transfer assets
to the CFCs in the event of its insolvency or default. The Tax
Court in considering this point held that:

       Neither section 956(d) nor the regulations inquire
       into the relative importance that a creditor
       attaches to a guaranty. A guarantor’s precise
       financial condition or the likelihood that it would
       be able to make good on its guaranty are
       irrelevant in determining under the regulations
       whether the guaranty gives rise to an investment
       in United States property. The regulations
       applicable in this case provide categorically that
       any obligation of a United States person with
       respect to which the CFC is a guarantor shall be
       considered United States property held by the
       CFC in the amount equal to the unpaid principal.
       They make no provision for reducing the section
       956 inclusion by reference to the guarantor’s
       financial strength or its relative creditworthiness.

SIH Partners, 2018 WL 487089, at *15 (citations omitted).

       Surely the Tax Court was correct. Neither the Act nor the
regulations nor any other statute states that the purpose of a CFC
loan guarantee should be a factor in the determination of what
constitutes § 956(c)(1)(C) income. Although Appellant argues
that the IRS should have employed its own facts-and-




                               17
circumstances guidance and determined that the guarantees were
not in substance repatriations, internal guidance directions are
not binding on an agency and do not have the force of law. See
Schweiker v. Hansen, 450 U.S. 785, 789, 101 S.Ct. 1468, 1471
(1981). “A revenue ruling is simply the opinion of the Service’s
legal counsel which has not received the approval of the
Secretary nor of Congress. A ruling is not a regulation and does
not bind the IRS.” Temple Univ. v. United States, 769 F.2d
126, 137 (3d Cir. 1985). “[A]lthough revenue rulings may be
helpful, they do not have the force of law.” Geib v. N.Y. State
Teamsters Conference Pension & Ret. Fund, 758 F.2d 973, 976
(3d Cir. 1985). Moreover, Appellant’s contention that the
guarantees were not “necessary” is a matter of opinion rather
than a recitation of historical fact.

        We point out that, although the observation is not
controlling, we cannot dismiss at least the possibility, if not the
likelihood, that Merrill Lynch would not have made the loans
without the CFC guarantees. There is no way to know for sure
if it would have taken that position because Appellant was in
control of the CFCs and the circumstances at the time of the
loans cannot be recreated. Though we realize that Merrill Lynch
could have made the loans on the basis of the parent entity’s
creditworthiness, we see no reason to doubt that it made its
decision based on its assessment of the parent entity’s ability to
repay the loans and the guarantees on which it insisted. After
all, Merrill Lynch surely recognized that it could have sought to
recover the loans from the CFCs, if necessary to do so if the
parent entity did not repay them. In sum, we are satisfied that
the guarantees were properly included in Appellant’s income.

       B.      The Tax Rate




                                18
       Appellant’s final argument is that even if income was
validly attributed to it by the regulations, the tax rate on the
income should be the favorable rate applicable to dividends in
the years in question, rather than the higher rate applicable to
ordinary income, because the statutes deem the repatriation “as
if it were a dividend.” Dougherty, 60 T.C. at 926; see SIH
Partners, 2018 WL 487089, at *18. The Tax Court rejected this
argument, as it held “[t]he fact that [the Act] in operation treat[s]
a CFC’s investment in United States property ‘as if it were a
dividend’ in no way establishes that the income inclusions
required for shareholders thereunder actually are dividends for
general purposes of the Code.” Id. The Court, of course, was
correct—analogizing one concept to another does not make
them completely interchangeable.

        We start our analysis of the tax rate issue by pointing out
that the obligation of a United States person is just one type of
property the Act defines as an investment in United States
properties for income inclusion purposes. Other types of
property include tangible property, stock in a domestic
corporation, intellectual property rights, inventions, designs, and
trade secrets. 26 U.S.C. § 956(c)(1). Accordingly, a CFC’s
domestic shareholders incur taxable income when the CFC
makes an investment in United States properties—that is, if it
simply purchased domestic land, stock, or intellectual property
rights for whatever purpose regardless of whether it distributed
any such purchases to any shareholder. Under Appellant’s
proposed construction, all such income would become
“dividends,” which we understood it conceded at oral argument
to be the consequence of its proposed construction.6 To
6
 Even if we misunderstood the scope of the concession, the
construction under Appellant’s construction would have had that




                                 19
Appellant, they are “constructive dividends.”

        But as we have held, “unless a distribution which is
sought to be taxed to a stockholder as a dividend is made to him
or for his benefit it may not be regarded as either a dividend or
the legal equivalent of a dividend.” Holsey v. Comm’r of
Internal Revenue, 258 F.2d 865, 868 (3d Cir. 1958) (emphasis
added). Indeed, the Internal Revenue Code defines dividends as
“any distribution of property made by a corporation to its
shareholders[.]” 26 U.S.C. § 316(a) (emphasis added).
Appellant asks us to construe the Act in such a way as to find
that all income inclusions under § 956 to be “constructive
dividends,” regardless of whether any distribution has been
made by the CFC, or whether any such investments are for the
benefit of the domestic shareholders. We can find no case law
holding that a taxpayer has received dividend income when
neither of those two criteria has been satisfied. See Rodriguez
v. Comm’r of Internal Revenue, 722 F.3d 306, 309 (5th Cir.
2013) (finding that § 956 “inclusions do not constitute actual
dividends because actual dividends require a distribution by a
corporation and receipt by the shareholder”). As such,
Appellant’s overbroad construction of § 956 would result in
income being classified as a “constructive dividend” even when
that income does not come within any plausible definition of a
“dividend.” We reject such implausible construction of § 956
income.7


consequence.

7
 Appellant argues the agency erred in ruling that § 956(c)(1)(C)
income is not a dividend because the agency has enacted
regulations in the past treating certain other § 956 income as




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        We recognize the crux of Appellant’s real argument to be
that loan guarantees under § 956(c)(1)(C) are special cases, as
guarantees ordinarily are given for the benefit of shareholders,
and thus loan proceeds are akin to distributions and should be
taxed as dividends if they are taxed at all. However, §
956(c)(1)(C) mandates the inclusion of a loan guarantee as
income when the CFC holds “an obligation of a United States
person[.]” That person does not have to be a shareholder. In
fact, a CFC may guarantee a loan to a charitable organization for
charitable purposes, and if it does so the CFC’s domestic
shareholders will receive taxable income. To hold in that
scenario that the domestic shareholders’ income should be
regarded as a dividend would defy common sense.

       Furthermore, Congress knows how to deem § 951(a)
income as dividend income for specific purposes. See, e.g., 26
U.S.C. §§ 904(d)(3)(G) & 960(a)(1) (2017). Thus “Congress
specifically designates when § 951 inclusions are to be treated
as dividends,” but “Congress has not so stated” for purposes of
the tax rate for qualified dividend income under 26 U.S.C.
§ 1(h)(11)(B)(i). Rodriguez, 722 F.3d at 311. As the Tax Court
noted, if Congress desired to tax § 956(c)(1)(C) income as
dividends, it could have done so in the fifty-plus years since the
Act’s original passage, and it did not. SIH Partners, 2018 WL
487089, at *18. “[I]t is clear that Congress did not intend to
deem as dividends the [] inclusions at issue here. The statute is
completely silent [on the point,] a fact which carries added
weight when compared to the myriad provisions specifically

dividends. We are unsure why treating certain § 956 income as
dividends requires the agency to treat other § 956 income as
dividends. Regardless, as we stated above, absent statutory
mandate, we are powerless to compel agency action.




                               21
stating that certain income is to be treated as if it were a
dividend.” Rodriguez, 722 F.3d at 312.

        Significantly, Appellant’s own actions undermined its
argument: in 2010 and 2011, the CFCs made distributions of
dividends to their shareholders, and by doing so triggered the
IRS audit leading to the income inclusion and thus to this
litigation. Appellant’s br. 16. If Appellant wanted the CFCs’
income to be treated as dividends, it was well aware of the best
way to do so—paying out actual dividends to shareholders. The
circumstance that its tax planning did not lead to a result
favorable to it does not provide us with a reason to adopt a
questionable construction of a well-established statute and the
regulations under it. As another court has stated:

       Appellants could have caused a dividend to issue.
        They could have also paid themselves a salary or
       invested . . . earnings elsewhere. Each of these
       decisions would have carried different tax
       implications, thereby altering our analysis.
       Appellants cannot now avoid their tax obligation
       simply because they regret the specific decision
       they made.

Rodriguez, 722 F.3d at 310.



                       III. CONCLUSION

      For the foregoing reasons, we will affirm the Tax Court’s
January 18, 2018 decision and order in its entirety.




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