Vitol, Inc. v. United States
| Decision Date | 23 March 2022 |
| Docket Number | 20-20237 |
| Citation | 30 F.4th 248 |
| Parties | VITOL, INCORPORATED, Plaintiff—Appellant, v. UNITED STATES of America, Defendant—Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Amish M. Shah, Esq., Daniel G. Strickland, Attorney, Eversheds Sutherland (US), L.L.P., Washington, DC, Sarah Paul, Eversheds Sutherland (US), L.L.P., New York, NY, for Plaintiff-Appellant.
Judith Ann Hagley, Esq., Arthur Thomas Catterall, Francesca Ugolini, U.S. Department of Justice, Tax Division, Appellate Section, Washington, DC, for Defendant-Appellee.
Adam P. Feinberg, Esq., Miller & Chevalier Chartered, Washington, DC, for Amicus Curiae Valero Marketing & Supply Company.
Before King, Elrod, and Willett, Circuit Judges.
This interlocutory appeal poses a statutory-interpretation question of first impression: Is butane a "liquefied petroleum gas" (LPG) under 26 U.S.C. § 6426(d)(2) ? Vitol claims that butane is an LPG and therefore an "alternative fuel" that can be mixed with a "taxable fuel" to qualify for the tax credit under § 6426(e). On these grounds, Vitol sued the United States in federal court, seeking an $8.8 million tax refund. Vitol moved for partial summary judgment on whether butane is an LPG under 26 U.S.C. § 6426(d)(2). The trial court denied the motion, concluding that butane is not an LPG under 26 U.S.C. § 6426(d)(2), but certified its order for interlocutory appeal.
Vitol argues that the common understanding of LPG includes butane—game over. The term LPG, however, as used in § 6426(d)(2)'s definition of alternative fuel, fits within a broader statutory scheme that precludes any taxable fuel from also qualifying as an alternative fuel. And butane is a taxable fuel under that same statutory scheme. Text cannot be divorced from context, and statutory meaning is not always common meaning. Congress's words must be read as part of a contextual whole. We affirm the denial of partial summary judgment and conclude that butane is not an LPG under § 6426(d)(2).
The parties do agree on the facts. Vitol sued the United States for a tax refund of $8.8 million, claiming that the IRS should have allowed a tax credit under 26 U.S.C. § 6426(e) for fuel blended with butane, a product Vitol introduced in 2013. Vitol argues that butane is a "liquefied petroleum gas" under § 6426(d)(2) and therefore an "alternative fuel" eligible for the § 6426(e) credit when mixed with a "taxable fuel." The United States argues that butane is a "taxable fuel" and therefore not an eligible "alternative fuel."
Vitol sought partial summary judgment on the legal issue of whether butane is an LPG under § 6426(d)(2). The magistrate judge recommended that the district court deny the motion, concluding that butane was not an LPG under § 6426. The district court adopted the magistrate judge's recommendations, overruling Vitol's objections. The district court granted Vitol's request to certify the order for interlocutory appeal and stayed the case.1 We granted Vitol's motion for leave to file an interlocutory appeal.
The tax code imposes excise taxes on fuel.2 Two of those code provisions matter here, each involving a web of statutory and regulatory definitions. First, § 4081 imposes an excise tax on "taxable fuels," defined at § 4083 to mean "(A) gasoline, (B) diesel fuel, and (C) kerosene." The term "gasoline" is further defined to include "gasoline blend[s]" and, "to the extent prescribed in regulations," "any gasoline blend stock" that is a "petroleum product component of gasoline."3 The regulations include twenty-four examples of "[g]asoline blendstocks," one of which is butane.4
Second, § 4041(a)(2)(A) imposes an excise tax on "alternative fuels," defined there as "any liquid[, ]other than gas oil, fuel oil, or any product taxable under section 4081."5 Regulations referencing § 4041(a)(2)(A) describe alternative fuel as follows: "(1) Except as provided in paragraph ... (2) of this section," alternative fuel "means any liquid fuel," which includes "[a]ny liquefied petroleum gas (such as propane, butane, pentane, or mixtures of the same)."6 Paragraph (2) of that section reiterates that alternative fuel "does not include any product taxable under the provisions of section 4081."7
The above provisions impose taxes, as summarized here:
The tax code also provides credits reducing those § 4081 and § 4041(a)(2)(A) excise taxes, for fuel that is made from certain components.8 The § 4041 tax for alternative fuel can be reduced by the alternative fuel credit at § 6426(d). The § 4081 tax for taxable fuel can be reduced by the alternative fuel mixture credit at § 6426(e), for fuel that is "a mixture of alternative fuel and taxable fuel."9 (Vitol seeks that § 6426(e) credit here.) The definition of "alternative fuel," for purposes of § 6426(d) and (e), comes from § 6426(d) :
The definition of "taxable fuel," for § 6426(e) purposes, incorporates by reference "subparagraph (A), (B), or (C) of section 4083(a)(1)."
These provisions reducing taxes can be summarized as follows:
As discussed above, § 4083 defines taxable fuel to mean gasoline, including gasoline blend stocks as provided by regulation (one of which lists butane as an example).
The trial court had jurisdiction under 28 U.S.C. § 1346(a) and 26 U.S.C. § 7422. We accepted interlocutory appellate jurisdiction under 28 U.S.C. § 1292(b) based on the certification of the trial court.
The parties agree that the standard of review is de novo. Vitol argues on reply that this is not an appeal from a grant of summary judgment, susceptible of affirmance on any grounds supported by the record; rather, our review on interlocutory appeal is limited to questions material to the trial court's order. The import of this argument is unclear—the order on appeal is a denial of partial summary judgment. But we can disregard it, given the parties' agreement and precedent stating that "statutory interpretation of the Internal Revenue Code ... is a matter of law that we review de novo."10
For the following reasons, the plain language of the statute, taken in context, excludes butane from the definition of a liquefied petroleum gas under § 6426(d)(2). Therefore, we AFFIRM the denial of partial summary judgment. Relying on the statute's plain language, we need not and do not address the absurdity canon, Revenue Ruling 2018–2, or Vitol's affidavit.
We begin with some housekeeping items:
First, we apply the standard tools of statutory interpretation in their proper order. The United States begins by urging us to construe the credit narrowly because tax credits are a matter of legislative grace. But that's not the right order. The narrow construction of tax breaks is a substantive canon of statutory interpretation.11 And "substantive canons of construction are not applied at the outset of textual inquiry."12 13 Therefore, only if we determine that a statute is ambiguous—that is, "after plain meaning and application of the interpretive canons are found lacking"—"do the so-called substantive canons ... come into play."14
Second, we need not consider legislative history or abstract congressional purpose. "The truest indication of what Congress intended is what Congress enacted."15 The United States makes several arguments invoking legislative history, including some that postdates the statute in question, and both parties argue that their interpretations of the statute best serve the statute's purpose. We decline to consider the legislative history, not least because the United States relies heavily on subsequent legislative history, which is deemed unauthoritative even by judges who consider legislative history.16
Having set the textual table, we begin "by examining the plain language" of the statute,17 the words Congress chose.18 We assume that the plain meaning of those words is the same as their ordinary (i.e. , "common" or "natural") meaning,19 which is often derived from dictionaries.20 Of course, this assumption is not set in stone and yields when (1) the statute provides another definition,21 or (2) when the ordinary meaning is incompatible with the statutory context.22
Based on the statutory text and context, we conclude that butane is not an LPG under § 6426(d)(2). Although the common meaning of LPG includes butane, § 6426(d)(2) is a subsidiary part of a broader statutory framework that treats a given fuel as either a taxable fuel or an alternative fuel, but not both. Section 6426 separates taxable fuels and alternative fuels using two distinct subparts. And in those subparts, § 6426 expressly references the structural relationships between its credits and the taxes they offset, imposed at § 4081 and § 4041. And those provisions, in turn, define alternative fuels to exclude any taxable fuel. Thus, the statutory framework is mutually exclusive: A given fuel is either taxable or alternative, but not both. The statutory context of § 6426 provides sound reason to depart from butane's...
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