L & S Indus. & Marine, Inc. v. U.S.
| Decision Date | 18 June 2009 |
| Docket Number | Civil No. 08-1251 (JNE/SRN). |
| Citation | 633 F.Supp.2d 727 |
| Parties | L & S INDUSTRIAL & MARINE, INC., Plaintiff, v. UNITED STATES of America, Defendant. |
| Court | U.S. District Court — District of Minnesota |
Thomas A. Forker, Esq., and Gordon P. Heinson, Esq., Fabyanske Westra Hart & Thomson, PA, appeared for Plaintiff L & S Industrial & Marine, Inc.
Michael R. Pahl, Esq., U.S. Department of Justice, Tax Division, appeared for Defendant United States of America.
L & S Industrial & Marine, Inc. (L & S), brings this action against the United States of America, seeking a refund of certain taxes paid and "an order requiring the IRS to abate [certain] unpaid assessments." The government counterclaimed, seeking a judgment in the amount of the unpaid assessments. The case is before the Court on L & S's Motion for Summary Judgment. For the reasons set forth below, the Court grants the motion.
The parties have stipulated to the following facts:
L & S Industrial & Marine, Inc. contracts with the U.S. Army Corps of Engineers to dredge portions of inland waterways. The dredging is done to keep the river channel open to shipping. The contract will specify the area and the amount of sediment and other material that is to be dredged from the river. The U.S. Army Corps of Engineers may tell L & S Industrial & Marine, Inc. where to dispose of the sediment and other material that is dredged. L & S Industrial & Marine, Inc. moves their equipment and vessels to the site of the dredging operation on the inland waterway and uses their equipment and vessels to dredge the river and move the sediment and other material to another location.
In August 2007, pursuant to 26 U.S.C. § 4042 (2006) and related regulations, the Internal Revenue Service assessed against L & S taxes on fuel of approximately $17,000, plus interest and penalties. L & S paid $183.15 in taxes in September 2007. However, L & S now disputes whether its activities—dredging inland waterways pursuant to a contract with the U.S. Army Corps of Engineers— render it subject to the fuel tax under section 4042, and L & S seeks a refund and "an order requiring the IRS to abate the unpaid assessments."1
There being no material facts in dispute, the Court addresses solely the legal issues of whether section 4042 is applicable to L & S's activities and whether L & S is entitled to judgment as a matter of law as a result. See Fed. R.Civ.P. 56(c). No court has previously examined section 4042 in any detail. The Court's "objective in interpreting a federal statute is to give effect to the intent of Congress." United States v. McAllister, 225 F.3d 982, 986 (8th Cir.2000) (quotation marks omitted). Id. (citation omitted). "Only if the statute is ambiguous [should a court] look to the legislative history to determine Congress's intent." United States v. Maswai, 419 F.3d 822, 824 (8th Cir.2005) (quotation marks omitted). Sec. Bank Minn. v. Comm'r, 994 F.2d 432, 441 (8th Cir.1993) (quotation marks omitted).2
Section 4042(a) imposes "a tax on any liquid used during any calendar quarter by any person as a fuel in a vessel in commercial waterway transportation." "[C]ommercial waterway transportation" is defined as:
any use of a vessel on any inland or intracoastal waterway of the United States—
(A) in the business of transporting property for compensation or hire, or
(B) in transporting property in the business of the owner, lessee, or operator of the vessel (other than fish or other aquatic animal life caught on the voyage).
26 U.S.C. § 4042(d)(1). Section 4042(c) creates exemptions from the fuel tax for certain vessels and uses, none of which are applicable to L & S:
(1) Deep-draft ocean-going vessels.— The tax imposed by subsection (a) shall not apply with respect to any vessel designed primarily for use on the high seas which has a draft of more than 12 feet.
(2) Passenger vessels.—The tax imposed by subsection (a) shall not apply with respect to any vessel used primarily for the transportation of persons.
(3) Use by state or local government in transporting property in a state or local business.—Subparagraph (B) of subsection (d)(1) shall not apply with respect to use by a State or political subdivision thereof.
(4) Use in moving LASH and SEABEE ocean-going barges.—The tax imposed by subsection (a) shall not apply with respect to use for movement by tug of exclusively LASH (Lighter-aboard-ship) and SEABEE ocean-going barges released by their ocean-going carriers solely to pick up or deliver international cargoes.
L & S argues that the tax is inapplicable because the phrase "transporting property" should be construed to include only movement of commercial cargo or freight. In contrast, the government asserts that the word "property" in section 4042(d) should be construed broadly. Accordingly, the government contends that L & S was "transporting property in the business of the owner, lessee, or operator" within the meaning of section 4042(d)(1)(B) because L & S transported its dredging equipment and vessels in connection with its dredging activities. The government does not contend that section 4042(d)(1)(A) is applicable to L & S, and it disclaims any argument that sediment and other byproducts of dredging constitute "property" within the meaning of the statute.
"The Court will avoid an interpretation of a statute that renders some words altogether redundant and should avoid a statutory construction that would render another part of the same statute superfluous." United States v. Stanko, 491 F.3d 408, 413 (8th Cir.2007) (citation omitted) (quotation marks omitted). If "transporting property" included any movement of a vessel used as a vessel, section 4042 would be applicable to any vessel used for commercial purposes. This result would render the phrase "transporting property" superfluous. Accordingly, the Court concludes that it is clear that L & S's movement of its vessels, standing alone, does not qualify as "transporting property" for purposes of section 4042(d).
In ascertaining the meaning of the phrase "transporting property" in section 4042(d)(1), the Court considers the phrase "other than fish or other aquatic animal life caught on the voyage" to be significant. This latter phrase constitutes an exception to the meaning of "transporting property" rather than an exemption from the class of vessels subject to the tax. As a practical matter, any vessel that is used at least in part to catch fish or other aquatic life will necessarily have on board equipment for that purpose. Consequently, if carrying such equipment for use in catching fish qualified as "transporting property" within the meaning of section 4042(d)(1), a fishing vessel would be taxable throughout its entire voyage regardless of whether it caught and transported fish, and the reference in the statute to "fish or other aquatic life caught on the voyage" would be meaningless. Accordingly, carrying fishing equipment for use in catching fish cannot belong to the class of activities that constitute "transporting property" within the meaning of section 4042(d)(1). While carrying dredging equipment for use in dredging and carrying fishing equipment for use in fishing are not perfect analogues, they both appear to belong to the same general class of activities; for example, both dredging equipment and fishing equipment, at least when not carried as commercial cargo, are used to complete a task during a vessel's voyage. Because of these similarities, the Court concludes that the language of the statute, though not free of ambiguity, indicates that movement of dredging equipment aboard L & S's vessels as part of L & S's dredging activities does not qualify as "transporting property" for purposes of section 4042(d)(1).
Review of the relevant legislative history—identified by both parties as a 1977 report of the House Ways and Means Committee, H.R.Rep. No. 95-545(II), at 38-54 (1977), as reprinted in 1978 U.S.C.C.A.N. 3721, 3721-32—reinforces the Court's tentative interpretation of the language of section 4042. As is relevant to this case, the report explains the tax as follows:
AT PRESENT THERE IS NO FEDERAL EXCISE TAX IMPOSED ON DIESEL FUEL CONSUMED BY COMMERCIAL CARGO VESSELS USING THE FEDERALLY-BUILT-AND-MAINTAINED INLAND WATERWAY SYSTEM.
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