Tax Court Deploys Interpretive Tools to Resolve Complex Transaction/Scheme to Exploit Statutory Glitch (9/17/26)

In Sysco Corp. v. Commissioner, T.C. Memo. 2026-84, TC here at # 108 dtd 9/14/26 & GS here, the Court rejects Sysco’s attempts to avoid the result of prior T.C. decisions resolving the issue in Sysco. Varian Medical Systems, Inc. & Subs. v. Commissioner (Varian I), 163 T.C. 76 (2024) (reviewed), and Varian Medical Systems, Inc. & Subs. v. Commissioner (Varian II), No. 8435- 23, 166 T.C. (Apr. 8, 2026).

In this blog, I do not address the substantive issue that the parties fussed about. Rather, I address the tools of statutory interpretation the Court claimed to deploy in resolving the interpretive issue.

My basic theory of statutory interpretation is that it is in many ways similar to factfinding—it is lawfinding. In factfinding, relevant evidence generally should be considered for what it is worth. See FRE 401 and 402. So, too, in statutory interpretation relevant evidence as to the meaning of the statutory text should be considered for what it is worth. My main beef in the current statutory interpretation milieu is the notion that interpreters should categorically reject legislative history (other than statutory history). 

Let’s walk through how the court deploys the tools of statutory interpretation:

1. the Court “begin[s] with the [statutory] text.” (*7.) I fully agree with that and cannot imagine anyone who would disagree. Indeed, on this point, I agree with Justice Kagan’s famous statement that “We’re all textualists now.)

2. Immediately after stating the obvious starting point (#1), the Court jumps into quicksand: “when the statute does not define a term, “we ask what that term’s ‘ordinary, contemporary, common meaning’ was when Congress enacted” the relevant text. The court correctly cites cases that do stand for the proposition and, I suppose, the proposition is correct, provided that there is more nuance. How does one determine the statutory term’s “ordinary, contemporary, common meaning” relevant to its meaning in a complex tax statute?

3. The court then looks first to the definition of “taxpayer” in the Code (§ 7701(a)(14), “taxpayer”). Well, who can argue with that interpretive step if it is relevant to the interpretive issue involved (as to which I take no position)?

4. The court then looks to the “history of section 246(c)(1).” That’s pretty straightforward; courts should use relevant statutory history (I also take no position on whether the statutory history is relevant to the issue in the case). The court draws three “conclusions.” (*9.) No quibble with that. Again the issue is relevance.

5. The Court then deploys the “normal rule of statutory interpretation that identical words used in different parts of the same statute are generally presumed to have the same meaning” (*9 n. 10.) Again, I do not quibble with that.

6. The Court then deploys the interpretive gem that words in the statute “mean[] the same thing today as it did when it was enacted.” (*9.) I have no problem with that as an interpretive tool.

7. The Court then addresses some of the potential problems with Sysco’s interpretation. (*10-11.) No quarrel.

8. From those tools, as deployed, the Court determines that “In short, Sysco’s valiant efforts to find a statutory hook for its position do not carry the day.” (*11.) 

9. The Court then dabbles in questionable consideration of other tools for statutory interpretation, as follows:

a. The Conference Report for the statute that was enacted. (*14-*15.) The Court makes a back-handed swat at the Conference Report—“Even “’[f]or those who consider legislative history relevant,’ Warger v. Shauers, 574 U.S. 40, 48 (2014)”—before concluding that the Conference Report does not speak to the issue. The Court does not indicate any awareness that Conference Reports, while legislative history, are at the top of the class of legislative history, the most persuasive form of legislative history.

b. In that discussion, the Court then footnotes its own dismissal of The JCT Staff General Explanation (“Blue Book”). (*15 n. 16.) The Court repeats Justice Scalia’s famous statement that the Blue Book has no authority beyond that of a law review article. The Court cites Justice Scalia’s Opinion of the Court in United States v. Woods, 571 U.S. 31, 48 (2013) and Tax Court later opinions quoting Justice Scalia. Justice Scalia’s notion is nonsense, hence the Court’s repeat of the notion in Sysco is nonsense. I am not saying that, in Sysco, the Blue Book should have changed the outcome. I am just saying that the Blue Book is worthy of more consideration than a law review article. In my Federal Tax Procedure Book (Student Ed. pp. 16-17; Practitioner Ed. p. 29) I address that spurious notion (although it is much beloved by committed textualists) as follows (footnotes omitted, except one):

Is the Blue Book written by those intimately involved in the legislative process no more persuasive than a law review article? What does it mean for the Blue Book to be persuasive? There is one analog to the Blue Book. Shortly after enactment of the Administrative Procedure Act (“APA”), the Attorney General published a Manual on the Administrative Procedure Act (1947) (“AG Manual on APA”). The Supreme Court has said that the Manual is entitled to “some deference because of the role played by the Department of Justice in drafting the legislation.”n140 If the AG Manual on APA interpretation of the APA is entitled to deference (or at least consideration), then the JCT’s Blue Book which shares the key legislative process characteristic should be entitled to some consideration. The deference (or some extra interpretive oomph) that may attach to the AG Manual on APA and the Blue Book may function somewhat like Chevron deference formerly attaching to agency statutory interpretations based upon statutory ambiguity.
   n140 Kisor v. Wilkie, 588 U.S. 558, 582 (2019) (plurality op inion, quote cleaned up; citing Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U.S. 519, 546 (1978)); Steadman v. SEC, 450 U.S. 91, 102 n. 22 (1981) (also citing Vermont Yankee); and see also Robin J. Arzt, Recommendations for a New Independent Adjudication Agency to Make the Final Administrative Adjudications of Social Security Act Benefit s Claims, 23 J. Nat'l Ass'n Admin. L. Judges 267, 330-31 (2003) (citing Vermont Yankee and Steadman and stating that the Manual is part of the legislative history of the APA”; the statement of its status as legislative history is perhaps hyperbole in today ’s refined notions of legislative history, but it does come close).

10. Finally, if your goal is to discern the original public meaning of statutory text, whose understanding of the meaning do you consult? Is it Joe Blow on the street who has never read a statute and has no sense of legislature-speak? See Jack N. Rakove, Joe the Ploughman Reads the Constitution, or, the Poverty of Public Meaning Originalism, 48 San Diego L. Rev. 575 (2011). Do you instead pull the target meaning from dictionaries? If so which dictionaries? Take the statute text involved in Sysco. That text was not written for Joe Blow who would not have a clue even with the best dictionaries as to its meaning as applicable in the case. Oh, of course, he could say what the text meant to him but nobody in his right mind would rely on his interpretation. (That might be just a way of saying that Sysco was served well with high priced lawyers it used rather that Joe Blow.) The best meaning would be the meaning of those skilled in linguistics and legislature-speak.