Metro One Telecommunications, v. CIR

Filing

FILED OPINION (BARRY G. SILVERMAN, RICHARD R. CLIFTON and N. RANDY SMITH) AFFIRMED. Judge: BGS , Judge: RRC , Judge: NRS Authoring. FILED AND ENTERED JUDGMENT. [8445972]

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

METRO ONE TELECOMMUNICATIONS,
INC.,
Petitioner-Appellant,

No. 11-70819
Tax Ct. No.
12651-07

v.
COMMISSIONER OF INTERNAL
REVENUE ,
Respondent-Appellee.

OPINION

Appeal from a Decision of the
United States Tax Court
Argued and Submitted
October 12, 2012—Portland, Oregon
Filed December 19, 2012
Before: Barry G. Silverman, Richard R. Clifton,
and N. Randy Smith, Circuit Judges.
Opinion by Judge N.R. Smith

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SUMMARY*

Tax
The panel affirmed the Tax Court’s judgment that Metro
One Communications was not entitled to tax relief under § 56
of the Internal Revenue Code (“the Relief Rule”), which
permitted taxpayers subject to the Alternative Minimum Tax
to offset up to 100% of their taxable income with net
operating losses.
The panel held that the term “carryovers” as used in the
Relief Rule means net operating losses that are carried
forward from a tax year to a later tax year. Therefore, Metro
One Communications cannot use net operating losses that are
carried back to 2001 or 2002 from a later tax year to take
advantage of the Relief Rule.

COUNSEL
Neil D. Kimmelfield, Lane Powell PC, Portland, Oregon, for
Petitioner-Appellant.
Gilbert S. Rothenberg, Acting Deputy Assistant Attorney
General; Bethany B. Hauser (briefed and argued) and Richard
Farber (briefed), Tax Division, United States Department of
Justice, Washington, D.C., for Respondent-Appellee.

*

This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.

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OPINION
N.R. SMITH, Circuit Judge:
Between 2002 and 2009, § 56 of the Internal Revenue
Code1 provided tax relief by permitting taxpayers subject to
the Alternative Minimum Tax (AMT) to offset up to 100% of
their taxable income with net operating losses (NOLs).2 To
qualify for this relief, NOLs had to be (1) “carryovers to” the
2001 or 2002 tax years, or (2) “carried back from” the 2001
or 2002 years to a prior tax year. The plain meaning of the
term “carryovers” prevents taxpayers from using NOLs that
are carried back to 2001 or to 2002 from a later tax year to
take advantage of the Relief Rule. Therefore, we affirm the
Tax Court’s assessment of a deficiency, because Metro One
Telecommunications may not take advantage of the Relief
Rule with NOLs it carried back from the 2003 and 2004 tax
years to 2002.
I. Facts
Metro One Telecommunications was a company based in
Beaverton, Oregon that operated call centers throughout the
United States. In this case, Metro disputes the determination
of a deficiency by the Commissioner of the Internal Revenue

1

W e refer to the Internal Revenue Code as “I.R.C.” or “the Code.”
Further, all citations to “I.R.C.” or “§” are to the Code, codified at Title
26, United States Code.
2

T ypically, the amount of the deduction for NOLs that a taxpayer
subject to the AMT is able to claim is limited to 90% of the taxpayer’s
taxable income. See § 56(d)(1)(A)(i)(II).

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Service based on Metro’s use of NOLs accumulated in 2003
and 2004 to completely offset its 2002 taxable income.
For the 2002 tax year, Metro was subject to the AMT.3 In
2004, Metro claimed a refund for 2002 by offsetting 100% of
its 2002 taxable income with NOLs that it had accumulated
in 2003 and 2004. In response, the Commissioner sent Metro
a Notice of Deficiency in the amount of $630,159. Metro
then filed a petition with the United States Tax Court.
Agreeing with the Commissioner, the court imposed the
amount of the deficiency.4 Metro then appealed.
II. Standard of Review
We review “the Tax Court’s interpretation of the Internal
Revenue Code . . . de novo.” Adkison v. Comm’r, 592 F.3d
1050, 1052 (9th Cir. 2010).
III.

Analysis
A. Background

We determine here whether a taxpayer, subject to the
AMT in 2002 may (under the applicable version of the Code)
reduce its income tax liability by claiming a deduction for
NOLs that arose in later years. Section 172 of the Code
permits taxpayers to deduct NOLs from taxable income as a

3
The AM T is imposed to the extent that the amount determined to be
the “tentative minimum tax” exceeds the amount of the “regular tax.”
§ 55(a).

4

The Tax Court reached its decision without a trial, based on stipulated
facts and exhibits. See Tax Ct. R. 122.

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net operating loss deduction (NOLD). I.R.C. § 172(a). A
“net operating loss” arises in a given tax year, if the sum of
the taxpayer’s deductions in that year exceeds the amount of
the taxpayer’s taxable income. § 172(c). Further, § 172
permits taxpayers to apply NOLs that arise in a given tax year
as deductions in other tax years. See § 172(b)(1)(A).
Relevant here, § 172(b)(1)(A) specifies that:
a net operating loss for any taxable year–
(i) shall be a net operating loss carryback to each
of the 2 taxable years preceding the taxable year of
such loss, and
(ii) shall be a net operating loss carryover to each
of the 20 taxable years following the taxable year of
the loss.
According to this paragraph, a “carryback” is any NOL that
is “carried” to one of the 2 years preceding the tax year in
which the loss arises. Conversely, a “carryover” (sometimes
called a “carryforward”) is any NOL that is “carried” to one
of the 20 years following the taxable year in which the loss
arises. For a given tax year, the amount of the NOLD is the
sum of the amount of NOL carrybacks plus the amount of
NOL carryovers that are carried to that year. § 172(a).
If a taxpayer is subject to the AMT, the taxpayer must
claim an alternative tax net operating loss deduction
(ATNOLD) instead of the NOLD permitted by § 172.

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§ 56(a)(4). Under the Tax Relief Act of 2004,5 § 56(d)(1)
defined ATNOLD as:
the net operating loss deduction allowable for
the taxable year under section 172, except
that–
(A)
the amount of such deduction shall
not exceed the sum of–
(i) the lesser of–
(I) the amount of such deduction
attributable to net operating losses (other than
the deduction described in clause (ii)(I)), or
(II)
90 percent of alternative
minimum taxable income determined without
regard to such deduction, plus
(ii) the lesser of–

5

The version of § 56(d) that applies to M etro in this case is the version
of § 56 as enacted by the Job Creation and W orker Assistance Act of
2002, Pub. L. 107-147, § 102(c) (2002) and amended by the W orking
Families Tax Relief Act of 2004, Pub. L. 108-311, § 403(b) (2004).
Unless otherwise indicated, all citations to I.R.C. § 56 refer to that version,
which we refer to (for the sake of convenience) as the “Relief Rule,”
because it provided tax relief by permitting AMT taxpayers to use NOLs
to reduce their tax liability. References to the “original” Relief Rule refer
to the version of the Rule enacted by the Job Creation and W orker
Assistance Act of 2002, unamended by the W orking Families Tax Relief
Act of 2004. Congress eliminated the Relief Rule in 2009. See infra
note 13.

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(I) the amount of such deduction
attributable to the sum of carrybacks of net
operating losses from taxable years ending
during 2001 or 2002 and carryovers of net
operating losses to taxable years ending
during 2001 and 2002 . . . .
Job Creation and Worker Assistance Act of 2002, Pub. L.
107-147, § 102(c) (2002) [hereinafter Jobs Act of 2002], as
amended by Working Families Tax Relief Act of 2004, Pub.
L. 108-311, § 403(b) (2004) [hereinafter Tax Relief Act of
2004] (emphasis added). This section limits the amount of
the ATNOLD that can be claimed by a taxpayer who is
subject to the AMT. In general, this limit is 90% of the
taxpayer’s alternative minimum taxable income (AMTI), or
the amount of NOLs, whichever is lesser.
Id.
§ 56(d)(1)(A)(i). On the other hand, under the Relief Rule,
there is no limit (up to the amount of taxable income) on the
amount of the ATNOLD that a taxpayer can claim in a given
taxable year, if those NOLs are carried from 2001 or 2002 to
an earlier tax year (“carrybacks”), or to 2001 or 2002 from an
earlier tax year (“carryovers”). Id. § 56(d)(1)(A)(ii).
Ultimately, we address here whether the term “carryovers
of net operating losses” in the Relief Rule includes (1) both
NOLs that are carried to a later tax year (“carryforwards”)
and NOLs that are carried to a preceding tax year
(“carrybacks”), or (2) only carryforwards. Metro argues that
“carryovers” means both carryforwards and carrybacks, and
therefore it was entitled to use NOLs from 2003 and 2004 as
“carrybacks” to offset 100% of its taxable income in 2002.
The Commissioner disagrees, arguing that, as used in the
Relief Rule, “carryovers” is a synonym for carryforwards, so
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Metro carried back from 2003 and 2004 was, like any other
NOL carried under § 172, limited to 90% of Metro’s 2002
AMTI.
Thus, under the Commissioner’s interpretation, Metro
would be able to carry back only $11,182,013.00 of its 2004
NOLs to 2002.
That amount would increase to
$14,332,806.00 under Metro’s interpretation of the Relief
Rule, because the ATNOLD would not be limited to 90% of
Metro’s 2002 AMTI. Therefore, if Metro is correct, it would
be able to claim an additional $3,150,793.00 ATNOLD
against its 2002 AMTI, reducing its taxable income for that
year to $0.00. However, the plain meaning of “carryovers”
indicates that the Relief Rule does not apply to NOLs that are
carried back under these circumstances. We therefore affirm
the Tax Court.
B. The plain meaning of carryovers refers only to
items that are carried from an earlier period to a
later one.
When interpreting a statute, we must start with the
language of the statute. Williams v. Taylor, 529 U.S. 420,
431 (2000). Moreover, “[i]n the absence of an indication to
the contrary, words in a statute are assumed to bear their
ordinary, contemporary, common meaning.” Walters v.
Metro. Educ. Enters., Inc., 519 U.S. 202, 207 (1997) (internal
quotation marks omitted).
The term “carryovers” ordinarily and commonly refers
only to something that is carried from an earlier period to a
later one—only to carryforwards. To ascertain the plain
meaning of terms, we may consult the definitions of those
terms in popular dictionaries. Af-Cap, Inc. v. Chevron

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Overseas (Congo) Ltd., 475 F.3d 1080, 1088 (“When
determining the plain meaning of language, we may consult
dictionary definitions.”). Black’s Law Dictionary defines a
“carryover” as “[a]n income-tax deduction (esp. for a net
operating loss) that . . . may be taken in a later period . . . .”
Black’s Law Dictionary 242 (9th ed. 2009); Electrolux
Holding, Inc. v. United States, 491 F.3d 1327, 1328 n.2 (Fed.
Cir. 2007) (defining “carryovers” in § 1212 by reference to
Black’s). Likewise, Webster’s Third New International
Dictionary contains multiple definitions of “carry over,” all
of which suggest movement from one period of time to a later
period of time.
Webster’s Third New International
Dictionary 344 (1993) (e.g., “to hold over . . . for another
season”). Courts also commonly employ “carryovers” for
this meaning. E.g., Kansas v. Colorado, 543 U.S. 86, 102
(2004); In re Grand Jury Subpoenas Duces Tecum, 78 F.3d
1307, 1312 n.11 (8th Cir. 1996); United States v. Gregory,
871 F.2d 1239, 1243 (4th Cir. 1989) (“Of these, 19 were new
hires and the remaining 11 were carryovers from the previous
administration.”); Hoots v. Pennsylvania, 672 F.2d 1124,
1129 (3d Cir. 1982). None of these definitions or usages
suggest that the ordinary meaning of “carryover”
encompasses movement from a point in time backward to an
earlier point in time. Therefore, according to the plain
meaning of “carryovers,” the Relief Rule does not apply to
carrybacks of NOLs.
It becomes even more clear that Congress used
“carryovers” in the Relief Rule as a synonym for
“carryforwards” after considering the relationship between
§ 56 and § 172. See Samantar v. Yousuf, 130 S. Ct. 2278,
2289 (2010) (“[W]e do not . . . construe statutory phrases in
isolation; we read statutes as a whole.”) (quoting United
States v. Morton, 467 U.S. 822, 828 (1984)). Section 56 is

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closely related to § 172, because § 56 “define[s] ATNOL by
expressly incorporating the definition of regular NOL in
§ 172 and then enumerating specific exceptions . . . .”
Kadillak v. Comm’r, 534 F.3d 1197, 1203 (9th Cir. 2008).
Accordingly, § 172 defines NOL as the sum of two parts: (1)
the carrybacks to that year of NOLs and (2) the carryovers to
that year of NOLs. § 172(a). Paralleling § 172, the Relief
Rule addresses each component of the NOLD: The amount of
the NOLD “attributable to the sum of carrybacks of net
operating losses from taxable years ending during 2001 or
2002” is not subject to the 90% limit typically imposed on
NOL carrybacks. § 56(d)(1)(A)(ii)(I) (emphasis added).
Likewise, the amount of the NOLD attributable to
“carryovers of net operating losses to taxable years ending
during 2001 and 2002” is also not subject to that limit. Id.
(emphasis added). Because Congress used “carryovers” in
the Relief Rule to refer to the part of the NOLD computed
under § 172 with the same label, it intended the words to have
the same meaning.
Additionally, we note that Congress could have easily and
clearly extended the benefit of the Relief Rule to taxpayers
like Metro who carried back NOLs from tax years after 2002,
without using “carryovers” contrary to its plain meaning.
Inserting the words “to or” into the phrase “carrybacks of net
operating losses from taxable years ending during 2001 or
2002” would have this effect. The resulting phrase would
read: “carrybacks of net operating losses to or from taxable
years ending during 2001 or 2002.” However, Congress
elected not to insert those words into the text of the statute.
If Congress did intend to extend the Relief Rule to NOLs that
a taxpayer carried back from tax years later than 2002, it
would be odd to do it by using the word “carryovers”

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contrary to its plain meaning, when simply adding two words
would have produced the same effect with more clarity.
We understand that Congress has used the term
“carryovers” in other parts of the tax code to refer to both
“carryforwards” and “carrybacks.”6 However, that fact does
not suggest that “carryovers” must have a non-ordinary
meaning in the Relief Rule. Such uses only indicate that
Congress sometimes uses “carryovers” in an out-of-theordinary way.7 The varied uses of the term “carryovers” in
the Code also explain why we cannot, here, assume “that
identical words used in different parts of the same act are
intended to have the same meaning.” Sorenson v. Sec’y of
Treasury of United States, 475 U.S. 851, 860 (1986) (internal
quotation marks omitted). Clearly, Congress intended to use
“carryovers” in some provisions of the Code to mean both
“carryforwards” and “carrybacks,” and in other provisions, to
mean only “carryforwards.” Therefore, we cannot adopt a
uniform definition of the term “carryovers” applicable to
every usage of the term in the Code. Rather, we only confirm
that, in the Relief Rule, “carryovers” means “carryforwards.”
Metro argues that we should reject the plain meaning of
“carryovers” and instead follow the canon that “where
Congress includes particular language in one section of a
statute but omits it in another section of the same Act, it is
generally presumed that Congress acts intentionally and

6
As examples of these statutes, Metro cites I.R.C. §§ 1362(e)(6)(A),
1371(b), 535(b)(7).

7

In fact, Congress also uses the term “carryovers” in sections other than
56 and 172 according to its plain meaning. E.g., §§ 45A(d)(2), 50(a)(3),
50(c)(2).

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purposely in the disparate inclusion or exclusion.” United
States v. Wahid, 614 F.3d 1009, 1014 (9th Cir. 2010).
However, where the plain meaning rule has provided a clear
answer, we do not need to look to other canons of statutory
construction. See United States v. Harrell, 637 F.3d 1008,
1010 (9th Cir. 2011) (quoting Hughes Aircraft Co. v.
Jacobsen, 525 U.S. 432, 438 (1999)). Nevertheless, Metro
also argues that our exclusive reliance on the plain meaning
of the statute’s text, rather than other canons of construction,
“may unnecessarily establish precedent regarding the relative
weight given to competing canons.” This concern is moot.
It is already well-settled that, in the realm of the canons of
statutory construction, the plain meaning rule is
“preeminent.” See McDonald v. Sun Oil Co., 548 F.3d 774,
780 (9th Cir. 2008). Therefore, regardless of what other
canons of statutory construction might suggest, under the
plain meaning of the text, “carryovers” in the Relief Rule
means “carryforwards.”
Relying on Benton v. Commissioner, 122 T.C. 353, 370
(2004), Metro also argues that we should abandon the plain
meaning of “carryovers,” and instead define the term
according to its purpose. However, the Benton court’s
implicit construction of the term “carryovers” in § 1398 to
include carrybacks does not change our conclusion. Section
1398 imposes conditions on the use of NOLs in and after a
chapter 7 or chapter 11 bankruptcy case. I.R.C. § 1398(a);
Benton, 122 T.C. at 370. Under § 1398(g)(1), the bankruptcy
estate succeeds to the debtor’s “net operating loss carryovers
determined under section 172” upon the commencement of a
bankruptcy case. After the case terminates, the debtor then
succeeds to the tax aspects of the estate (including NOLs
specified in § 1398(g)(1)), “but taking into account that the

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transfer is from the estate to the debtor instead of from the
debtor to the estate.” § 1398(i).
Based on these provisions, the Tax Court in Benton
concluded that “the losses succeeded to [by the debtor] from
the estate may be used, to the extent permitted in section 172
. . . .” Benton, 122 T.C. at 376. Because § 172 provides for
NOLs to be carried back, the court’s conclusion implies that
the debtor could carry back NOLs that he inherited under
§ 1398(i). Necessarily, this means that the Tax Court read the
term “carryovers” in § 1398(g)(1)—which defines the tax
attributes that the debtor succeeds to—as including NOL
carrybacks.
The Tax Court’s implicit interpretation of § 1398(g)(1) in
Benton does not undermine our conclusion that Congress
used “carryovers” according to its ordinary meaning in the
Relief Rule. Assuming that the Tax Court’s analysis is
correct, we can accept that § 1398 is another instance in the
Code where Congress used “carryovers” to refer to both
carryforwards and carrybacks.8 At the same time, we
recognize that the plain meaning of “carryovers” could not be
applied to § 1398(g)(1) for reasons that do not prevent its
application in the Relief Rule.
If “carryovers” in
§ 1398(g)(1) meant only “carryforwards,” then
§ 1398(j)(2)(B), which prohibits a debtor from offsetting prepetition income by carrying back NOLs it inherits from the
bankruptcy estate, would serve no purpose. Section
1398(g)(1) would already effectively bar any NOLs from
being carried back, because the debtor would not inherit them
from the bankruptcy estate. Thus, the plain meaning of the
term “carryovers” could not apply in § 1398(g)(1) without
8

See supra notes 6–7 and accompanying text.

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rendering § 1398(j)(2)(B) “meaningless or superfluous.”
United States v. Cabaccang, 332 F.3d 622, 627 (9th Cir.
2003). The Relief Rule does not present the same structural
problem. Therefore, at most, Benton confirms that the term
“carryovers” is not always used according to its ordinary
meaning.9 The case does not suggest, however, that Congress
used “carryovers” in the Relief Rule to mean something other
than its plain meaning.
C. Legislative history confirms that Congress
intended “carryovers” in § 56 to have its plain
meaning.
The plain meaning also does not “produce a result
demonstrably at odds with the intentions of [the Rule’s]
drafters.” United States v. Ron Pair Enters., Inc., 489 U.S.
235, 242 (1989); see also Albertson’s, Inc. v. Comm’r,
42 F.3d 537, 545 (9th Cir. 1994). Although legislative
history can be read as an expression of the intention of the
legislature, it is certainly not the best expression. See Lyons

9

The parties make a distinction between “functional” and “nonfunctional” uses of the term “carryover” in the Code. “Carryovers” in
§ 1398(g)(1) would be a functional use of the term, according to Metro,
because its meaning cannot be determined by looking to the surrounding
text. Thus, M etro argues that, “Benton shows that it is appropriate for a
court to determine the meaning of the word” that is used “functionally” by
what the “operative text” of the section it appears in is “intended to
accomplish.” However, unlike in this case, the Tax Court in Benton
derived the “purpose” of § 1398 by analyzing general principles of tax and
bankruptcy law, and the operation of § 1398 in light of those principles.
122 T.C. at 373–74. Here, Metro asks us to derive a “purpose” from the
Relief Rule’s thin legislative history. As described below, infra Part III.C,
we are not persuaded that the legislative history supports M etro’s
interpretation, certainly not enough to overcome the plain meaning of the
language used in the statute.

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v. Mendez, 303 F.3d 285, 293 (3d Cir. 2002) (“[T]he text of
the statute is the best expression of the intent of Congress.”).
Rather, it is “often murky, ambiguous, and contradictory.”
Gonzalez v. Arizona, 677 F.3d 383, 450 n.1 (9th Cir. 2012)
(Rawlinson, J., concurring in part and dissenting in part)
(quoting Exxon Mobil Corp. v. Allapattah Servs., Inc.,
545 U.S. 546, 568 (2005)), cert. granted sub nom. Arizona v.
Inter Tribal Council of Arizona, Inc., 133 S. Ct. 476 (2012).
Here, Congress has given us very little legislative history
to go on:10
the September 11, 2001 attacks have caused
adverse effects to the U.S. economy.
Thousands of Americans have lost jobs.
Consumer confidence and investor confidence
are low. The Committee believes that it is
necessary to spur economic growth and job
creation and help struggling businesses and
unemployed workers.
The provisions
approved by the Committee will stimulate and
strengthen the economy.
H.R. Rep. No. 107-251, at 18 (2001). Parsing the general
language in this passage, Congress apparently enacted the
Relief Rule (among other legislation) to “stimulate and
strengthen the economy” in response to the economic
10

This fact distinguishes this case from Albertson’s. Had the court in
that case followed the plain meaning, it would have created a loophole,
permitting businesses to avoid a disincentive that Congress implemented
to “encourage employers to create qualified [deferred compensation] plans
for their employees.” Albertson’s, 42 F.3d at 543–44. Unlike that case,
adopting the plain meaning of “carryovers” here will not compromise a
statutory mechanism that Congress implemented to further its purpose.

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downturn that followed the terrorist attacks of September 11,
2001. Specifically, Congress sought to strengthen the
economy by “spur[ring] economic growth and job creation
and help[ing] struggling businesses and unemployed
workers.” Temporally, Congress was apparently targeting an
immediate problem, because it employed the past tense to
describe the source of economic downturn: “The terrorist
attacks . . . have affected the United States in numerous ways.
In addition to the [lives lost], the September 11, 2001 attacks
have caused adverse effects to the U.S. economy.” H.R. Rep.
No. 107-251, at 18 (emphasis added). Thus, Congress
enacted the Relief Rule to address an economic slowdown
that existed at the time of its enactment.
Consistent with this understanding of Congress’s intent,
the original Relief Rule would have had its primary economic
effect in 2002 and 2003 by providing businesses with extra
cash as a result of refunds and deductions generated during
the 2001 and 2002 tax years. Originally, the Relief Rule only
applied to “carrybacks of net operating losses for taxable
years ending during 2001 or 2002 and carryforwards of net
operating losses to taxable years ending during 2001 and
2002.” Jobs Act of 2002 § 102(c) (emphasis added).
Obviously, the term carryforwards11 does not include
carrybacks. Thus, after 2002, taxpayers would have been
unable to take advantage of the Relief Rule by carrying back
NOLs generated in those years to offset 2001 or 2002
income. Therefore, the original Relief Rule permitted an
AMT taxpayer to free up cash that would otherwise be
subject to taxation in only two ways. First, if the taxpayer
sustained losses in 2001 or 2002 sufficient to give rise to
11

“Carryforwards” was replaced by the term “carryovers” when the
Relief Rule was amended by Tax Relief Act of 2004 § 403(b).

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NOLs, it could carry back those NOLs to prior tax years. The
Relief Rule would permit such a business to offset an
additional 10% of the income in those prior tax years with its
2001–02 NOLs that it could not have offset under the preRelief Rule version of § 56(d)(1)(A). This would give rise to
a refund, providing the business with additional cash in 2002
or 2003—the years in which refunds from 2001 and 2002
would have been received.
Second, a business could also free up cash by carrying
forward unused NOLs from previous tax years to 2001 or
2002, potentially offsetting all of its taxable income in those
years. Obviously, the direct economic effect of this part of
the Rule would not persist past 2003, because 2002 would be
the last tax year that the Rule would have permitted an AMT
taxpayer to completely offset its taxable income with NOLs.
Therefore, judging by the economic effects of the original
Relief Rule, Congress enacted the Rule to stimulate the
economy by providing businesses with additional cash,
primarily in 2002 and 2003.12 Because applying the plain
meaning of “carryovers” to the Relief Rule would have the

12

Contrary to Metro’s argument, Congress did not intend to change the
economic effect of the original Relief Rule when it changed
“carryforwards” to “carryovers” in 2004. Both the Joint Committee on
Taxation and the 2004 Conference Committee described the change as
merely “clerical.” See H.R. Rep. No. 108-696, at 90 (Sept. 30, 2004);
Joint Committee on Taxation, Description of the “Tax Technical
Corrections Act of 2003,” JCX-104-03, at 4 (Dec. 3, 2003). Such a
change was necessary, because the Rule used “carryovers” to mean both
“carryforwards” and “carrybacks,” but § 172, which the Rule discussed,
used “carryovers” to mean only “carryforwards.” Thus, the clerical
change of wording sensibly eliminated an inconsistent usage of the same
word in closely related sections of the Code.

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same economic effect, it is not demonstrably at odds with
Congress’s intent for us to adhere to that meaning.
Metro argues that the plain meaning is demonstrably at
odds with Congress’s intent, because the Relief Rule “would
not provide any benefit to taxpayers that generated positive
AMTI through 2002 but struggled (and generated ATNOLs)
thereafter” if “carryovers” means only “carryforwards.”
Metro argues this result opposes Congress’s intent to “help
struggling businesses,” particularly those that struggled after
September 11, 2001. By focusing on this short phrase from
the Rule’s limited legislative history, Metro has “look[ed]
over a crowd and pick[ed] out [a] friend[].” Exxon Mobil,
545 U.S. at 568. However, there is no evidence that Congress
intended to suspend the 90% limit in perpetuity following
September 11.13 Moreover, taking the legislative history and
the original Relief Rule together, we are confident that
Congress was focused on providing the greatest economic
stimulus during 2002 and 2003; determining what effect
Congress intended the Rule to have beyond that would
require speculation that we will not indulge.
Citing Albertson’s, Inc v. Comm’r, 42 F.3d 537, 545 (9th
Cir. 1994), Metro also argues that we should not adopt the
plain meaning of “carryovers,” because doing so will produce
absurd results. The absurd result Metro foresees is that the
plain meaning “capriciously allows the Relief Rule to benefit
ATNOLs carried back to 2001 and 2002 depending on
whether and to what extent other ATNOLs are carried
forward to the Carryover Year in question.” We disagree.

13

Indeed, Congress eliminated the Relief Rule in 2009. See W orker,
Homeownership, and Business Assistance Act of 2009, Pub. L. 111-92,
§ 13(b), 123 Stat. 2984, 2993–94 (2009).

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19

Based on the little legislative history available, it is
unclear that Congress was concerned about the ability of
taxpayers in years after 2002 to take full advantage of the
Relief Rule. The primary economic effect of the Relief Rule
would have occurred in 2002 and 2003, based on the
deductions and refunds it would generate. That economic
effect depended, in large part, on a taxpayer having
accumulated NOLs in prior years that it could carry forward
to 2001 or 2002 to offset income in those years, or having
excess income in prior years that could be offset by carrying
back NOLs from 2001 or 2002. Therefore, to the extent that
the Relief Rule has any economic effect after 2003, it would
not be anomalous or “absurd” for the economic benefit to
depend on the taxpayer having accumulated NOLs prior to
2001 that could be carried forward. Even in 2001 or 2002,
much of the benefit of the Rule would only be available to
taxpayers that had accumulated NOLs before 2001 or 2002.14
Therefore, the plain meaning of the term “carryovers” is
consistent with its purpose as expressed in the limited
legislative history and what we can infer from the economic
effect of the original version of the Rule. Because the plain
meaning of the term “carryovers” does not produce a result

14

As the Commissioner points out, a taxpayer whose 2001 tax year
ended prior to September 11, 2001 could have accrued NOLs in 2001 that
could be carried back under the Relief Rule, even though it would be
impossible for the losses that gave rise to the NOLs to have been caused
by the September 11 terrorist attacks. Thus, regardless of whether
“carryovers” means “carryforwards” or both “carryforwards” and
“carrybacks,” the extent to which a given taxpayer could benefit from the
Rule could vary with the amount of pre-9/11 NOLs that the taxpayer had
accrued. The fact that following the plain meaning of the term
“carryovers” will have the same economic affect only confirms our
reliance on it.

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that is unreasonable and plainly at odds with the policy of this
legislation, the term “carryovers” in § 56(d)(1)(A)(ii)(I)
means NOLs that are carried forward from a tax year to a
subsequent tax year.
IV.

Conclusion

The Tax Court interpreted the term “carryovers” in the
Relief Rule (§ 56(d)(1)(A)(ii)(I)) correctly, because it
interpreted the term according to its plain meaning. The plain
meaning is confirmed by the context of the Relief Rule and
the sparse legislative history available for the statute.
AFFIRMED.

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