"Includes" in Title 26
The meaning of the term “includes” as used in Title 26 was raised on my Tips and Tricks group. One poster found the definition in the code itself:
TITLE 26 > Subtitle F > CHAPTER 79 > § 7701
§ 7701. Definitions
(c) Includes and including
The terms "includes" and "including" when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined.
When I saw this string come up I remembered a phrase “ejusdem generis” and I did a search in the U.S. Supreme Court data base and I came up with the attached case Helvering v. Stockholms Enskilda Bank, 55 S. Ct. 50, 293 U.S. 84 (U.S. 1934). In the case the bank had won up through the Circuit Court succeeding in getting each respective court to hold that they did not owe the tax based on the principle of “ejusdem generis.” That principle is explained and discussed in the case itself. What I found more interesting were some of the quotes leading up to the reversal of the lower courts:
“ Atlantic Cleaners & Dyers v. United States , supra, was a suit brought to enjoin appellants from continuing an alleged conspiracy in restraint of trade and commerce in cleaning, dyeing, and otherwise renovating clothes contrary to § 3 of the Sherman Anti-trust Act. The defense was that appellants were engaged solely in the performance of labor and service in cleaning, dyeing and renovating wearing apparel, etc., and that this did not constitute "trade" within the meaning of the act. The argument was that since the words "trade or commerce" in § 1 of the act, which dealt with interstate commerce, must be construed not to include a business such as that carried on by appellant, the identical words used in § 3 dealing with restraint of trade or commerce within the District of Columbia should be given the same interpretation. Considering the subject matter of the act, and the scope of the legislative power exercised in the one case as compared with that exercised in the other, we held otherwise. In arriving at the conclusion that the word "trade" as used in § 3 was to be given a broader interpretation than the same word as used in § 1, we considered the history leading up to and accompanying the passage of the Sherman Act, the mischief to be remedied, and other circumstances, and held that Congress intended to exercise all the power it possessed; and since the scope of its power in dealing with the District was more extensive than when dealing with interstate commerce, we gave to the word "trade" its full meaning under § 3, unaffected by the narrower meaning which it might have under § 1. The considerations invoked in that case are equally applicable here.” (emphasis mine)
Today, there is again, a similar application of this case to taxing statutes; those being subtitle A of Title 26. Again, with respect to Title 26, Congress has two powers; one power over the District of Columbia which is “more extensive” and a more limited power when dealing with the residents of the “several states.” To me, this means that the principles of statutory construction must be harnessed to these same principles; i.e., the Internal Revenue Code must be interpreted in light of the restrictions of the Federal Constitution.
“To ascertain the meaning of the words of a statute, they may be submitted to the test of all appropriate canons of statutory construction, of which the rule of ejusdem generis is only one.”
Surely, one of the principles of statutory construction is that a statute may not be construed in a manner that is contrary to the Supreme Law of the Land; i.e., the Constitution.
“ The general object of this act is to put money into the federal treasury; and there is manifest in the reach of its many provisions an intention on the part of Congress to bring about a generous attainment of that object by imposing a tax upon pretty much every sort of income subject to the federal power.”
I included this quote to demonstrate the Supreme Court’s acknowledgement that there are incomes that are not subject to the federal power! There are specific clauses of the Constitution that deal with how Congress may reach the Citizens and residents of the several states; a direct tax is not one of them.
“ In the foregoing discussion, we have not been unmindful of the rule, frequently stated by this court, that taxing acts "are not to be extended by implication beyond the clear import of the language used," and that doubts are to be resolved against the government and in favor of the taxpayer.”
Man does this have an effect on the interpretation of “includes!” I wonder when the last time was that a court quoted this in a decision.
“The intention of the lawmaker controls in the construction of taxing acts as it does in the construction of other statutes, and that intention is to be ascertained, not by taking the word or clause in question from its setting and viewing it apart, but by considering it in connection with the context, the general purposes of the statute in which it is found, the occasion and circumstances of its use, and other appropriate tests for the ascertainment of the legislative will.” (emphasis mine)
Since when did the legislatures set out to pass statutes contrary to the Constitution? When using principles of statutory construction, courts start out with the presumption that the statute is Constitutional. They give the legislatures the benefit of the doubt; they treat them as though they gave due consideration to the provisions of the Constitution before writing and passing legislation. A court would never hold that the legislatures passed legislation with the intent to violate the Constitution.
“ "The rule of strict construction is not violated by permitting the words of a statute to have their full meaning, or the more extended of two meanings. The words are not to be bent one way or the other, but to be taken in the sense which will best manifest the legislative intent. United States v. Hartwell, 6 Wall. 385, 396; United States v. Corbett, 215 U.S. 233, 242." Sacramento Nav. Co. v. Salz, 273 U.S. 326, 329. The rule of strict construction applies to penal laws, but such laws are not to be construed so strictly as to defeat the obvious intention of the legislature; or so applied as to narrow the words of the statute to the exclusion of cases which those words, in the sense that the legislature has obviously used them, would comprehend.” (emphasis added)
Now, to understand the full import of the above quote, insert the word Constitution into the above quote where the words “legislative” and “legislature” appear and you have a quote that reads thus:
“ "The rule of strict construction is not violated by permitting the words of a statute to have their full meaning, or the more extended of two meanings. The words are not to be bent one way or the other, but to be taken in the sense which will best manifest the Constitutional intent. United States v. Hartwell, 6 Wall. 385, 396; United States v. Corbett, 215 U.S. 233, 242." Sacramento Nav. Co. v. Salz, 273 U.S. 326, 329. The rule of strict construction applies to penal laws, but such laws are not to be construed so strictly as to defeat the obvious intention of the Constitution; or so applied as to narrow the words of the statute to the exclusion of cases which those words, in the sense that the Constitution has obviously used them, would comprehend.”
What this is is an argument for dealing with the expansive interpretation that courts have given the term “includes.” In past decisions they have tried to say that includes adds on to what was said in general previously; includes means everything plus these other things too.
Those of you who have studied the Constitutional provisions respecting direct and indirect taxes and taxes on privilege may have some specifics to add to this. If you do add to this post, please send your additions directly to me at legalbearatlegalbears.com. Bear
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