Purina May Not Deduct Cash Distribution Redemptive Dividends

petitioner-appellant, * "summaryjudgmentisappropriatewhentherearenogenuineissuesofmaterial the judgment of the tax court is affirmed. * indicates the scope of the exception: * f.3d 390, 391 (8th cir. 1997). this court also reviews de novo the tax court's benton, circuit judge. total $9,406,031 $9,406,030 $12,112,941 interpretation of tax statutes. see scherbart v. comm'r, 453 f.3d 987, 989 (8th cir. caseofregulatedinvestmentcompaniesand real estate investment trusts, dividends. consistent with the cursory briefing, the tax court did not discuss this taxpayer to take a deduction-for-dividends-paid within the meaning of � 561. section applications of � 561. ralston responds that the treasury regulation pre-dates �� 2006). when a participant left ralston, the participant was required to direct the esop ___________ no. 09-1381 expressly referencing � 561. participating employees. in 1994 and 1995,ralston claimed deductions, totaling over accumulated taxable income under section 535, undistributed personal holding passmore v. astrue, 533 f.3d 658, 660 (8th cir. 2008) ("`this panel is bound by 1981) ("because a `conference report represents the final statement of terms agreed the income tax legislation of which it is an integral part." comm'r v. engle, 464 u.s. ___________ * appeal from the united states filed: february 9, 2010 house bill * evidence in the light most favorable to the nonmoving party. see cox v. comm'r, 121 162(k) trumps the legislative history ralston cites. see sierra club v. clark, 755 f.2d 404(k) and 162(k), and still refers to a repealed section of the code (� 556). ralston see also 26 u.s.c. � 583 (1954 code, repealed 1976) (under the 1954 code, for cash distribution redemptive dividends. ralston purina co. v. comm'r, 131 t.c. ___________ the conference agreement generally follows the senate amendment, v. helvering, 292 u.s. 435, 440 (1934); deputy v. du pont, 308 u.s. 488, 493 before loken, chief judge, arnold and benton, circuit judges. section 404(k)." each code section listed in the treasury regulation expressly shares of ralston common stock, or a combination of both. if a participant elected 1995 $6,277,965 $7,088,374 $8,205,589 cash distribution total cash concludes that the regulation's list is not exhaustive, and that � 404(k)'s "deduction exception, except to say: "the redemption dividends do not fall within the exceptions the house bill provides that no portion of payments by a corporation agree that � 561 defines the deduction-for-dividends-paid for regulated investment ___________ -- hereafter ralston, its name during the relevant years -- could not deduct payments the deduction allowed by � 404(k)(1). in general mills, inc. v. united states, 554 the exception in � 162(k)(2)(a)(iii) applies only where the code has authorized the facts of gmi do not materially differ from the facts here, gmi controls. see, e.g., deduction-for-dividends-paid includes "only dividends described in section 316." total cash distributed to a participant. 29 (2008). ralston appeals. having jurisdiction under 26 u.s.c. � 7482, this court 162(k)(2)a)(iii) and in sections implementing the sections that expressly incorporate permitted by � 162(k)(2)(a)(iii). the tax court ruled for the commissioner. int'l paper co., 529 f.3d 828, 831 (8th cir. 2008), citing fed. r. civ. p. 56(c). this section 163, (2) amounts constituting dividends for purposes of the ralston argues that it is claiming a "deduction for dividends paid" within the because the parties stipulated that ralston paid � 316 dividends to the trust, ralston b. the parties agree that � 561 does not in itself authorize a deduction, but rather 404(k)(1) allows a deduction, � 162(k)(1) bars it." gmi, 554 f.3d at 730. since the 1 fact, and the moving party is entitled to a judgment as a matter of law." bearden v. f.3d 727, 730 (8th cir. 2009) ("gmi"), this court held that � 162(k)(1) bars a conferencereportonthededuction-for-dividends-paidexceptionin�162(k)(2)(a)(iii) (citations omitted). tax year dividends dividends to participants 1.561-1(a) (1962) ("the deduction for dividends paid is applicable in determining for the eighth circuit 26 u.s.c. �� 401(a), 401(k), 4975(e)(7). a trust held the esop's assets, primarily v. * tax court. the first issue is whether 26 u.s.c. � 162(k)(1) � enacted two years later � bars � 162(k)(2)(a)(iii) exception. iii. ______________________________ a. -4- -2- -5- ii. with certain modifications and clarifications . . . . 554 f.3d at 728. one exception, � 162(k)(2)(a)(iii), provides that �162(k)(1) shall � 583 allowed banks a deduction for dividends paid on certain preferred stock, i. company that is an open-end mutual fund in connection with the 404(k) does not authorize such a deduction. therefore, ralston may not deduct its $66 million, for its stated dividends on the preferred stock, which are not at issue. 696,710(8thcir.2009). section162(k)(2)(a)(iii)permitsadeduction-for-dividends- for the cash distribution redemptive dividends, or alternatively that a deduction is ralston invokes this exception to justify deducting its cash distribution redemptive redemptive redemptive distributions ralston preferred stock. ralston contributed to the esop for the benefit of plain language rule of statutory construction requires examining the text of the statute holding company taxes, and for purposes of the regular income tax in the -6- 608, 615 (8th cir. 1985), quoting demby v. schweiker, 671 f.2d 507, 510 (d.c. cir. united states court of appeals for dividends paid on certain employer securities" authorizes a � 561 deduction-for- ralston seeks to deduct $9,406,030, the value of the cash distribution indopco, inc. v. comm'r, 503 u.s. 79, 84 (1992), quoting new colonial ice co. real estate investment trust taxable income under section 857."). that of the revenue acts, however precise its language, cannot be ascertained if it be distribute to the participant a "cash distribution redemptive dividend" as part of the in gmi, the parties agreed that no exception in � 162(k)(2) applied. see gmi, the government interprets the treasury regulation as listing the only to by both houses, next to the statute itself it is the most persuasive evidence of ___________ companies and real estate investment trusts, and for the purposes of computing the dividends-paid. provided in section 162(k)." ralston, 131 t.c. at 35. cash distribution redemptive dividends. "[t]he true meaning of a single section of a statute in a setting as complex as are strictly construed and allowed only `as there is a clear provision therefor.'" redemptive dividends. ralston argues that 26 u.s.c. � 404(k)(1) allows a deduction redemption of its stock upon demand of a shareholder . . . . thetaxcourtruled,onsummaryjudgment,thatnestl�purinapetcarecompany or (3) otherwise deductible expenses incurred by a regulated investment conference agreement cash, the trust could require that ralston purchase stock from it, paying the trust a affirms. court reviews the tax court's grant of summary judgment de novo and views the -3- section 561)" needed to satisfy the exception in � 162(k)(a)(iii). accumulated earnings tax and personal holding company tax. see treas. reg. � incomeundersection556,investmentcompanytaxableincomeundersection852,and submitted: december 15, 2009 in 1989, ralston established an employee stock ownership plan ("esop"). see the language of the code refutes ralston's conclusion. "the long established congressional intent.'"). the conference report confirms the language of the code. concludes it paid dividends within the meaning of � 561, and therefore satisfies the � 561. see 26 u.s.c. �� 547, 564, 565, 860, 4981, 4982.1 to convert the value of preferred stock allocated to his or her esop account into cash, (1940). because � 404(k) does not provide for a deduction-for-dividends-paid under meaning of � 561. section 561 refers to �� 562 and 563 for the rules to determine the eighth circuit precedent' and cannot overrule an earlier decision by another panel.") commissioner of internal revenue, * ralston contends authorizes its deduction, does not reference � 561. "[d]eductions boise cascade v. united states, 329 f.3d 751 (9th cir. 2003)). "in sum, while � incorporates the dividends paid deduction "as defined in section 561." see 26 u.s.c. f.3d 162, 166-67 (3d cir. 2009) (following the gmi opinion, and disagreeing with as a whole by considering its context, object, and policy." knudsen v. irs, 581 f.3d 4075, 4256. ralston emphasizes the years-earlier floor statements about � 404(k), notapplyto: "anydeductionfor dividends paid (within themeaningofsection561)." section 404(k), which �� 535(a), 545(a), 852(a), 857(a). the code only references � 561 in � deduction under � 404(k) for amounts paid to a corporation's esop trust in order to in connection with a redemption of its stock is deductible . . . . redeem shares of the corporation's stock. see also conopco, inc. v united states, 572 respondent-appellee. * company income under section 545, undistributed foreign personal holding company dividend (a "redemptive dividend"). from the redemptive dividend, the trust could paid "within the meaning of section 561." it does not say "within the meaning of accumulated earnings, personal holding company, and foreign personal senate amendment deduction-for-dividends-paid. ralston focuses on the general rule in � 562(a) that the reflecting congress's intent to encourage esops. the later conference report on � except the provision does not apply to (1) interest deductible under defines a deduction that another section of the code may authorize. the parties also h.r. rep. no. 99-841, at ii-168 (conf. rep. 1986), reprinted in 1986 u.s.c.c.a.n. nestl� purina petcare co., * considered apart from related sections, or if the mind be isolated from the history of 1994 $3,128,066 $2,317,656 $3,907,352 � 561, ralston does not have a "deduction for dividends paid (within the meaning of the senate amendment is generally the same as the house bill, 206, 223 (1984), quoting helvering v. morgan's inc., 293 u.s. 121, 126 (1934). the