DocketNumber: No. 26152-08
Citation Numbers: 134 T.C. 167, 2010 U.S. Tax Ct. LEXIS 8, 134 T.C. No. 8
Judges: \"Dawson, Howard A., Jr.\"
Filed Date: 4/13/2010
Status: Precedential
Modified Date: 1/13/2023
P's only activity is land surveying in Tennessee. P does not employ any licensed engineers, is not associated with any firm that employs licensed engineers, and does not provide any services that State law requires to be performed only by a licensed engineer.
Pursuant to
P asserts that the temporary regulation is invalid or, if valid, means that surveying and mapping services, if performed by an engineer, would qualify as services in the qualifying field of engineering and does not apply in P's situation. P asserts, citing
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*168 OPINION
DAWSON,
This case was submitted fully stipulated under
Petitioner was incorporated under the laws of the State of Tennessee. Its principal place of business is Seymour, Tennessee. Petitioner timely filed Form 1120, U.S. Corporation Income Tax Return, for 2005, reporting taxable income of $ 48,808 and tax of $ 7,321.
Petitioner is in the business of surveying land, and land surveying is the only service petitioner provides. Petitioner does not have any employees who are licensed engineers, is not associated with any firm that employs licensed engineers, and does not provide any services that State law requires to be performed only by a licensed engineer.
A qualified personal service corporation is any corporation that satisfies a function *12 test and an ownership test.
*170 The function test requires that substantially all of the corporation's activities involve the performance of services in the fields of "health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting" (qualifying field). (4) Function test. -- (i) In general. -- A corporation meets the function test if substantially all the corporation's activities for a taxable year involve the performance of services in one or more of the following fields -- (A) Health, (B) Law, (C) Engineering (including surveying and mapping), (D) Architecture, (E) Accounting, (F) Actuarial science, (G) Performing arts, or (H) Consulting. Substantially all of the activities *13 of a corporation are involved in the performance of services in any field described in thepreceding sentence (a qualifying field), only if 95 percent or more of the time spent by employees of the corporation, serving in their capacity as such, is devoted to the performance of services in a qualifying field. For purposes of determining whether this 95 percent test is satisfied, the performance of any activity incident to the actual performance of services in a qualifying field is considered the performance of services in that field. Activities incident to the performance of services in a qualifying field include the supervision of employees engaged in directly providing services to clients, and the performance of administrative and support services incident to such activities.
Respondent determined that petitioner's land surveying constitutes the performance of services in the field of engineering pursuant to
Petitioner asserts that the temporary regulation as interpreted and applied *14 by respondent is invalid in that it expands the meaning of engineering beyond the ordinary meaning and brings into the definition of engineering the entirely separate profession of land surveying. Citing
It is unlawful for any person to practice either land surveying or engineering in Tennessee unless the person has been duly registered or is exempted from registration under Tennessee law.
The *15 practice of land surveying is governed by
A person who has not practiced surveying for at least 10 years and who wishes to practice land surveying in Tennessee must pass the fundamentals of land surveying examination prepared by the National Council of Examiners for Engineering and Surveying (NCEES).
*172 Tennessee statutes and regulations do not define the practice of engineering. However, "Practice of land surveying" means any service of work, the adequate performance of which involves the application of special knowledge of the principles of mathematics, the related physical and applied sciences and the relevant *17 requirements of law for adequate evidence to the act of measuring and locating lines, angles, elevations, natural and man-made features in the air, on the surface of the earth, within underground workings and on the beds of bodies of water for the purpose of determining areas and volumes, for the monumenting of property boundaries and for the platting and layout of lands and subdivisions of land, including the topography, drainage, alignment and grades of streets, and for the preparation and perpetuation of maps, records, plats, field notes, records and property descriptions that represent these surveys * * *
There is some overlap between the functions of a licensed engineer and those of a licensed land surveyor; e.g., either a registered engineer or a registered land surveyor may prepare a detailed topographic map to accompany an application for a coal surface mining operations permit pursuant to 1. Land surveying, measurement and calculation of areas, boundaries, property lines, the subdivision of property and *18 theplotting thereof must be done by a surveyor and his drawing must bear his seal. 2. Subdivision road alignment, road grades, cutting and filling of subdivision lots, and changes to the topography which involves a final grading plan may be performed by either an engineer or a surveyor; the designer's seal must be applied to the drawing. In localities where instability of final grades and slopes requires analysis of soils to prevent conditions hazardous to life and property, design of roads, slopes, ditches, and building sites must be done by an engineer. 3. Culverts, storm drainage pipes, water lines, sewer lines, electric power lines or other utilities not existing prior to development shall not be shown *173 on a subdivision drawing unless that drawing bears the seal of the engineer who designed them. 4. The issue of whether or not the design of storm water drainage systems may be conducted by a licensed land surveyor was addressed in an opinion by the Attorney General's Office on February 9, 2004 (Opinion No. 04-018). That Opinion answers the question: "Does the statute (
Petitioner asserts that because land surveying in Tennessee cannot be performed by a licensed engineer who is not also a licensed land surveyor, land surveying in Tennessee is not in the field of engineering. Petitioner concludes that, consistent with
In
In
In Alron Engg. & Testing Corp. we looked primarily to State law in holding that geotechnical testing was not in the field of engineering. We did not consider other indicia that might indicate that geotechnical engineering is a branch of civil engineering that historically includes geotechnical *22 testing. 5 See
*175 V.
When a court reviews an agency's construction of the statute which it administers, "if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute."
The words of a statute should be given their normal meaning and effect in the absence of a showing that some other meaning was intended.
Congress enacted
The conference report on the Tax Reform Act of 1986, Pub. L. 99-514, sec. 801, 100 Stat. 2345, states: A qualified personal service corporation is a corporation that meets both a function test and an ownership test. The function test is met if substantially all the activities of the corporation are the performance of services in the field of health, law, engineering (including surveying and mapping), architecture, accounting, actuarial science, performing arts or consulting. [H. Conf. Rept. 99-841 (Vol. II), at II-285 (1986),
*177 The conference report shows that Congress intended surveying and mapping to be treated as services performed in the field of engineering for purposes of the function test. 6*27 The temporary regulation reflects that intent.
Webster's Third New International Dictionary 752 (1993) defines "engineering" as: the science by which the properties of matter and the sources of energy in nature are made useful to man in structures, machines and products -- see chemical engineering, civil engineering, electrical engineering, hydraulic engineering, industrial engineering, mechanical engineering, municipal engineering, sanitary engineering[.]
The field of engineering includes any branch of engineering. See
Webster's Third New International Dictionary 413 (2002) defines "civil engineering" as "a branch of engineering concerned primarily with public works (as
"The traditional concept of civil engineering is the integrated practice of engineering embracing a number of related specialty areas including, but not limited to, construction, transportation, structures, water resources and environmental, and geotechnical engineering." American Society of *178 Civil Engineers (ASCE) Policy Statement 432 (first approved 1994, adopted May 2, 2008). 7
ASCE recently adopted Policy Statement 333 (adopted April 24, 2007), in response to *29 "some confusion with respect to the role of civil engineers in the practice of surveying" and the "lack of understanding on the part of certain engineering disciplines, other than civil, of the importance of surveying to the practice of civil, aeronautical, mechanical, and mining engineering, among others." Engineering surveying is defined as those activities involved in the planning and execution of surveys for the location, design, construction, operation, and maintenance of civil and other engineered projects. Such activities include: The preparation of survey and related mapping specifications; Execution of photogrammetric and field surveys for the collection of required data, including topographic and hydrographic data; Calculation, reduction and plotting of survey data for use in engineering design; Design and provision of horizontal and vertical control survey networks; Provision of line and grade and other layout work for construction and mining activities; Execution and certification of quality control spatial measurements during construction; Monitoring of ground and structural stability, including alignment observations, *30 settlement levels, and related reports and certifications; Measurement of material and other quantities for inventory, economic assessment and cost accounting purposes; Execution of as built surveys and preparation of related maps and plans and profiles upon completion of construction; and Analysis of errors and tolerances associated with the measurement, field layout and mapping or other plots of survey measurement required in support of engineering projects. Engineering surveying may be regarded as a specialty within the broader professional practice of engineering and, with the exception of boundary, right of way, or other cadastral 8 surveying, includes all surveying *179 and mapping activities required to support the sound conception, planning, design, construction, maintenance and operation of engineered projects. Engineering surveying does not include surveys for the retracement of existing land ownership boundaries or the creation of new boundaries. * * * * * * * Engineering surveying is one of the necessary skills of a civil engineer. A civil engineer may specialize in engineering surveying, thereby developing the necessary expertise in the execution and analysis of measurements to *31 the highest level practicable. The engineering surveyor, as a specialist, supports and serves other civil engineers in their task of designing and constructing manmade works for the benefit of mankind. While a civil engineer may not engage full time in engineering surveying and may not be considered an expert on all aspects of engineering surveying, they must be well qualified to perform those aspects of surveying relevant to their professional activities.
Preparation of a detailed topographic map to accompany an application for a coal surface mining operations permit and subdivision road alignment, road grades, cutting and filling of subdivision lots, and changes to the topography which involves *32 a final grading plan fall within the ASCE definition of surveying engineering. In Tennessee those activities may be performed by a licensed land surveyor as well as a licensed engineer.
ASCE publishes various journals that provide technical information for the civil engineering profession, including the Journal of Surveying Engineering. An article on the history of engineering surveying by William E. Kreisle published in the Journal of Surveying Engineering traces the development of the engineering surveyor, his equipment, and his methods. Kreisle, "History of Engineering Surveying", 114 J. Surveying Engineering, 102-124 (1988). In the abstract of the article, Kreisle observes that "The engineering surveyor, who evolved from the land surveyor, was the forerunner of all civil engineers, including the founders of the American Society of Civil Engineers."
The inclusion of surveying in the field of engineering is supported by the legislative history. Civil engineering is a branch of engineering, and land surveying falls within the ordinary meaning of engineering and historically is regarded as within the field of engineering. The fact that *33 land surveying may be performed by an individual who is not a licensed engineer does not remove those services from the "field of engineering". See
"The meaning of the words or the legal status of circumstances for federal tax purposes need not be identical to their meaning or their legal effect under state law." Here we are concerned only with the meaning and application of a statute enacted by Congress, in the exercise of its plenary power under the Constitution, to tax income. The exertion of that power is not subject to state control. It is the will of Congress which controls, and the expression of its will in legislation, in the absence of language evidencing a different purpose, is to be interpreted so as to give a uniform application to a nation-wide scheme *34 of taxation. * * * State law may control only when the federal taxing act, by express language or necessary implication, makes its own operation dependent upon state law. * * *
We can find no basis in the text of Both the terms and the purposes of the statute, as well as the legislative history, show that Congress had in mind no * * * patchwork plan *35 * * *. * * * Nothing in the statute's background, history, terms or purposes indicates its scope is to be limited by * * * varying local conceptions, either statutory or judicial, or that it is to be administered in accordance with whatever different standards the respective states may see fit to adopt for the disposition of unrelated, local problems. * * *
Similarly, nothing in the backgrounds, histories, terms, or purposes of
Whether a service is performed in one of the qualifying fields under
We hold that
To reflect the foregoing,
1. Unless otherwise indicated, section references are to the Internal Revenue Code in effect for 2005, and Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. Respondent previously filed a motion for summary judgment pursuant to
3. Petitioner has not asserted that it does not satisfy the ownership test and is deemed, therefore, to have conceded that the ownership test is satisfied if its land surveying is in the field of engineering.↩
4. The NCEES prepares separate fundamentals of engineering exams for the seven major engineering disciplines (chemical, civil, electrical, environmental, industrial, mechanical, and other disciplines); two-thirds of the questions cover all disciplines (breadth part) and one-third cover the specific discipline (depth part). Eleven percent of the questions in the depth part of the fundamentals of engineering examination for civil engineering are questions on surveying.
NCEES prepares separate principles and practice of engineering examinations in 25 engineering disciplines or subdisciplines. The civil engineering exam covers five subdisciplines-construction, geotechnical, structural, transportation, and water resources and environmental -- and consists of a breadth part and a depth part. The breadth part contains questions from all five subdisciplines of civil engineering. The depth exams focus more closely on a single subdiscipline of civil engineering.↩
5. The NCEES principles and practice of engineering breadth examination for civil engineering includes questions on material testing (e.g., concrete, soil, asphalt) and subsurface exploration and sampling (soil classification and boring log interpretation). The depth exam for geotechnical civil engineering includes questions on subsurface exploration and sampling, covering drilling and sampling procedures, soil classification, general rock characterization, boring log interpretation, and in situ testing.↩
6. The year after the enactment of The personal service income of corporations owned by its employees is taxed to the employee-owners at the individual graduated rates as it is paid out as salary. The committee believes that it is inappropriate to allow the retained earnings to be taxed at the lower corporate graduated rates. [H. Rept. 100-391 (Part 2), at 1097 (1987).]↩
7. The American Society of Civil Engineers, founded in 1852, is America's oldest national engineering society, representing more than 147,000 members of the civil engineering profession worldwide. See
8. Webster's Third New International Dictionary 311 (2002) defines "cadastral" as "1: of or relating to the records of a cadastre: concerned with assembling or keeping the records necessary to the cadastre 2
9. Under
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