TC 4808.In the Oregon Tax Court. Magistrate Division, Income Tax.
October 20, 2009.
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ORDER DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANT’S CROSS-MOTION FOR SUMMARY JUDGMENT
HENRY C. BREITHAUPT.
I. INTRODUCTION
This matter comes before the court on cross-motions for summary judgment by Plaintiffs, Don A. and Patricia A. Austin (taxpayers), and Defendant, Department of Revenue (the department). The tax years at issue are 2002 and 2003. (Ptfs’ Mot for Summ J at 1; Def’s Cross-Mot for Summ J and Resp at 1 [hereinafter Def’s Cross-Mot for Summ J].)
II. STATEMENT OF FACTS
Taxpayer lives in Turner, Oregon, where he has lived since at least 1997.[1] (Stip Facts at 1, ¶ 1.) Taxpayer is a construction worker and has been employed by various construction businesses as a carpenter since at least 1997. (Id. at 1, ¶¶ 2-6.) Each of taxpayer’s jobs lasted less than one year. (Id. at 3, ¶ 9; 4, ¶ 14.) Taxpayer prefers to work in the area where he lives. (Id. at 2, ¶ 7.) Taxpayer has requested that his employers assign work to him within that area, which his employers have done when possible. (Id.) However, the nature of the construction business of taxpayer’s employers is such that jobs are widely dispersed over a broad area. (Id.)
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The chart below shows the percentages of time taxpayer worked in Salem metropolitan area, [2] and other metropolitan areas[3] for years 1997 through 2003. (Def’s Aff of Schweigert at 3-4; Stip Facts at 2-3, ¶ 8.)[4] In 2002 and 2003, taxpayer drove daily to each work location and drove to his home in Turner at the end of each day. (Stip Facts at 2, ¶ 8.)
For 2002 and 2003, the tax years at issue, taxpayers claimed a deduction for daily travel expenses for travel between taxpayer’s home in Turner and temporary work locations outside of the Salem area. (Compl at 2; Def’s Answer at 2.) The department denied those deductions.
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(Compl, Ex A at 20, 24.) The department issued taxpayers a Notice of Assessment for the 2002 tax year on October 26, 2005, and on June 27, 2006 for the 2003 tax year. (Id.) Taxpayers appealed to the Magistrate Division. Austin v. Dept. of Rev., TC-MD No 060634C (Nov 21, 2007). The Magistrate Division denied taxpayers’ appeal and taxpayers appealed to the Regular Division. (Compl at 1.) The assessed taxes, and interest for the years at issue have been paid. (Compl at 1; Def’s Answer at 1.)
III. ISSUE
May taxpayers deduct the traveling expenses for tax years 2002 and 2003?
IV. ANALYSIS
On this question, Oregon law makes no adjustments to the rules under the Internal Revenue Code (IRC) and therefore, federal law governs the analysis. See ORS 316.007; ORS 316.012(1).[5] Further, it is undisputed by the parties that the view of the Commissioner of Internal Revenue as to the legal analysis is dispositive. See id. In general, taxpayers are not allowed a deduction for personal or living expenses. IRC § 262(a).[6]
Treasury Regulation section 1.262-1(b)(5) provides, in relevant part:
“The taxpayer’s costs of commuting to his place of business or employment are personal expenses and do not qualify as deductible expenses.”
Revenue Ruling 99-7 provides an exception to that general rule, stating:
“A taxpayer may deduct daily transportation expenses incurred in going between the taxpayer’s residence and a temporary
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work location outside the metropolitan area where the taxpayer lives and normally works. * * * [D]aily transportation expenses incurred in going between the taxpayer’s residence and a temporary work location within that metropolitan area are nondeductible commuting expenses.”
Rev Rul 99-7, 1999-1 CB 361 (emphasis in original). To allow taxpayers a deduction for daily traveling expenses, this court must find (1) that travel was to temporary work locations; (2) that taxpayer lived in a certain metropolitan area; and (3) that taxpayer “normally” worked in the metropolitan area that he lived. Id. The parties agree that taxpayer (1) traveled to temporary work locations; and (2) lived in the Salem metropolitan area. (See Stip Facts at 3, ¶ 9; Ptfs’ Mot for Summ J at 4-5; Def’s Cross-Mot for Summ J at 7.) The focus must be on whether taxpayer “normally” worked in the Salem metropolitan area.
A. “Normally”
Taxpayers must show that taxpayer “normally” worked in the Salem metropolitan area.[7] Taxpayers assert that to “normally” work in the metropolitan area that that taxpayer lived, taxpayer must have worked in the Salem metropolitan area somewhere between zero percent and 25 percent of the time, depending upon other circumstances. (See Ptfs’ Mot for Summ J at 6-9.) One circumstance to which the taxpayers point is taxpayer’s request to employers to work in Salem when work was available. (See Ptfs’ Mot for Summ J at 8-9.) Taxpayers arrive at that percentage by citing calculations derived from cases where a deduction for travel expenses was granted, and reading in a “fairly low standard” from a case where the deduction was not granted. (Id. at 7-9.)[8] The department asserts that for taxpayer to “normally” work in the Salem
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metropolitan area, he must work in the Salem metropolitan area more often than any other metropolitan area, citing synonyms for “normally.” (Def’s Cross-Mot for Summ J at 7.)
To determine the meaning of “normally” within Revenue Ruling 99-7, this court looks to federal interpretation of an undefined word because “[i]t is the intent of the Legislative Assembly * * * to make the Oregon personal income tax law identical in effect to the provisions of the federal Internal Revenue Code.” ORS 316.007. When a federal statute is at issue, federal case law governs statutory interpretation. See Shaw v. PACC Health Plan, Inc., 322 Or 392, 400-02, 908 P2d 308 (1995); see also Butler v. Dept. of Rev., 14 OTR 195, 199 (1997). In interpreting statutes, federal law dictates that unless otherwise defined, a term is given its ordinary meaning. BP America Prod. Co. v. Burton, 549 US 84, 91-92, 127 S Ct 638, 166 L Ed 2d 494 (2006) (reviewing Black’s Law Dictionary definitions in interpreting a federal statute). The same analysis, beginning with the ordinary meaning, has been applied to the interpretation of an IRS Announcement. U.S. v. Wealth Tax Advisory Servs., Inc., 526 F3d 528, 530-31 (9th Cir 2008) (reviewing Webster’s Third New International Dictionary and Black’s Law Dictionary to determine the “plain meaning” in interpreting “memoranda” in Announcement 2002-2, 2002-1 CB 304). “Normally” is not defined in Revenue Ruling 99-7 or in prior revenue rulings. Therefore, this court considers the ordinary meaning of “normally.” The meaning of “normally” is defined as “in a normal manner: to a normal degree” and [commonly, usually]: in normal circumstances: under normal conditions.” Webster’s Third New Int’l Dictionary 1540 (unabridged ed 2002)). “Commonly” is defined “as a general thing: often in the usual course of events: [usually, ordinarily]: to a degree that is common[.]” Id. at 459. “Usually” is defined as “by or according to habit or custom: [habitually, customarily]” and “more often than not: most
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often: as a rule: [ordinarily].” Id. at 2524. Black’s Law Dictionary
defines “normally” “[a]s a rule; regularly; according to rule, general custom, etc.” Id. at 1059 (6th ed 1990).
The definitions of “normally” do not include a specific numeric value creating a bright-line rule, nor do the definitions imply a threshold percentage, although “more often than not” suggests over 50 percent. Instead, the ordinary meaning of “normally” includes references to the “degree,” the “circumstances,” and “conditions,” suggesting that the meaning of “normally” depends upon the facts at issue and not a bright-line rule or percentage. “Normally” is defined above as meaning “commonly” or “usually.” See Webster’s Third New Int’l Dictionary 1540. However, those words do not have the same meaning. “Commonly” is defined as “often in the usual course of events,” but “usually” is defined as “more often than not[.]” Id. at 459, 2524. While these words appear to have different meanings, there are distinct similarities. Just as “normally” includes references to the “degree,” the “circumstances,” and “conditions,” the definitions for “commonly” and “usually” include references to “habit,” “custom,” and “degree.” None of these terms define a specific numeric value, but rather a case-by-case judgment considering the facts at issue.
In Daiz v. Commissioner, the U.S. Tax Court applied Revenue Ruling 94-47, the predecessor ruling to 99-7, which contained identical language to that in 99-7. 84 TCM (CCH) 148, WL 1796832 at *4-*5 (2002). In Daiz, the taxpayer was a nurse who “regularly” worked and maintained an apartment in the Stockton, California area. Id. at *1. The taxpayer did so for several years before her employer assigned her work at various locations outside of the Stockton area. Id. The taxpayer was assured by her employer that the assignments outside of the Stockton area were temporary and that she would be reassigned to work in the Stockton area Id. The taxpayer claimed a deduction for travel expenses to those temporary work locations outside of
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Stockton on her federal income tax return. Id. at *2. The Tax Court allowed the deduction stating that the taxpayer had met the requirements of Revenue Ruling 94-47. Id. at *5. The court stated:
“[Taxpayer] had established her home near her place of employment and only accepted temporary assignments outside that area on the promise of reassignment within the Stockton area. * * * Under these circumstances, in our view throughout the year in issue [taxpayer] properly regarded the Stockton vicinity as the metropolitan area where she `lives and normally works.'”
Id. The Tax Court held that the taxpayer’s traveling expenses were deductible. Id.
Case law applying the “normally works” requirement in Revenue Ruling 99-7, and its predecessor, Revenue Ruling 94-47, also suggests that “normally” does not include a specific numeric value. In Daiz, the court did not discuss a specific numeric value when deciding whether the taxpayer had “normally” worked in the Stockton area. See id. at *4-*5. Instead, the court discussed that the taxpayer had “regularly” worked in the Stockton area prior to the tax year at issue, while the taxpayer did not work at all in the Stockton area during the tax year at issue. Id. at *1. The court also considered that the taxpayer was assured by her employer that she would be reassigned to the Stockton area, where she “regularly” worked in prior years. Id. The facts in Daiz are distinguishable from that of taxpayer here. Taxpayer has not asserted that he was assured that he would “normally” work in the Salem metropolitan area. Taxpayer states that the nature of taxpayer’s employers’ construction business is that jobs would be “widely dispersed over a broad area[.]” (Stip Facts at 2, ¶ 7.) While the taxpayer i Daiz worked “regularly” in the Stockton area prior to the tax years at issue, taxpayer, here, in years prior to the tax years at issue worked “over a broad area.” (Id.)
In this case, taxpayer’s pattern in metropolitan areas changed from year to year, and in some cases to a radical degree. (See Stip Facts, Ex 3.) This suggests that taxpayer did not
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“normally” work in the Salem metropolitan area. In years prior to, and including the tax years at issue, 1997 through 2003, taxpayer worked in the Salem metropolitan area in significantly varying amounts of time, and in two years, not at all.[9] (See id.) In 1997, taxpayer worked in the Salem metropolitan area 30 percent of the time; in 1998, 32 percent of the time; in 2000, 16 percent of the time; in 2001, 72 percent of the time; and in 1999 and in 2002, taxpayer did no work in the Salem metropolitan area. (See id.) Those significant variations show that taxpayer did not work in the Salem metropolitan area “usually,” “commonly,” or as a “general custom.” Webster’s at 1540; Black’s at 1059. The chart below displays the significance of those variations.[10]
Taxpayers respond that the average percentage of time worked in the Salem metropolitan area over a longer period should be considered. (Ptfs’ Mot for Summ J at 10.) Taxpayers assert that from 1997 to 2006, taxpayer worked in the Salem metropolitan area on average somewhere between 21.12 percent and 29.65 percent of the time, depending on what areas are included in
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the Salem metropolitan area. (Id. at 14.)[11] However, the ordinary meaning of “normally” and the case law applying the “normally works” requirement suggest no such average as to the analytical test. See Webster’s at 1540; see also Daiz, 84 TCM (CCH) 148, WL 1796832 at *4-*5. The court declines to apply such an average or specific numeric value when none has been created by federal law. Rather, a review of year by year statistics is needed, following which a qualitative judgment must be reached. Here, the court concludes that taxpayer did not “normally” work in the Salem metropolitan area.[12]
B. No special exception for construction workers
Taxpayers assert that due to the temporary nature and broad geographic range of construction work, taxpayer chose to live in Turner as a business decision because Turner is within the broad area in which that work was likely to be located. (Ptfs’ Mot for Summ J at 8.) However, the general rule of IRC section 262(a) is that commuting expenses are personal and are not deductible business expenses. This general rule has been held to apply to a taxpayer even when “necessity rather than preference,” affects a taxpayer’s choice of where to live. See Deblock v. Dept. of Rev., 286 Or 735, 739, 596 P2d 560 (1979) (citing Sanders v. Commisioner, 439 F2d 296, 299 (9th Cir), cert den 404 US 864 (1971)).
In Aldea v. Commissioner, the U.S. Tax Court ruled on a similar case applying the “normally” works requirement as set out in Revenue Ruling 94-47 and Revenue Ruling 99-7.
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79 TCM (CCH) 1917, WL 371549 (2000). In Aldea, the taxpayer was an apprentice ironworker who argued that “the temporary nature of her employment [was] sufficient in and of itself to entitle her to deductions for commuting expenses.” Id. at *3. The Tax Court held that the taxpayer was properly denied the deduction because taxpayer did not “ordinarily work in the metropolitan area in which she lives.” Id. at *3-*4.
Taxpayers state that taxpayer knew that the nature of construction work was such that “he would be required to travel considerable distances to an unending succession of temporary job sites.” (Ptfs’ Mot for Summ J at 8.) Despite any necessity, however, because taxpayer does not “normally” work in the metropolitan area where he lives, taxpayer is not allowed a deduction because of the temporary nature of his work. Here, as in Aldea, there is no special exception to IRC section 262(a) that allows a deduction for traveling expenses to construction workers who travel to temporary work locations, even if necessity requires taxpayer travel a considerable distance each day.
V. CONCLUSION
For the reasons stated above, the court concludes that taxpayer did not “normally” work in the Salem metropolitan area and taxpayers were, therefore, properly denied travel expenses to taxpayer’s temporary work locations for tax years 2002 and 2003. Now, therefore,
IT IS ORDERED that the Plaintiffs’ Motion for Summary Judgment is denied and Defendant’s Cross-Motion for Summary Judgment is granted.
Dated this ___ day of October, 2009.
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THIS DOCUMENT WAS SIGNED BY JUDGE HENRY C. BREITHAUPT ON OCTOBER 20,2009, AND FILED THE SAME DAY. THIS IS A PUBLISHED DOCUMENT.
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