Tupper v. United States (134 F.3d 444, 1998)

TORRUELLA, Chief Judge.

The trustees of both a multiemployer pension plan trust and an annuity plan trust appeal a judgment from the district court. The court held that during 1986, 1987, and 1988, when the plans had failed to meet the requirements of the Employee Retirement Income Security Act (“ERISA”) and Internal Revenue Code (“I.R.C.”) § 401(a), the trusts could not qualify as exempt from taxation as “labor organizations” under I.R.C. § 501(c)(5). We affirm.

BACKGROUND

The Plumbing, Pipe Fitting and Heating Contractors Association of Brockton and Vicinity (the “Employers”) and the Local Union 276 of the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada (the “Union”) entered into collective bargaining agreements in 1959 and 1983 providing for the creation of a defined benefit pension plan and a money purchase annuity plan respectively (the “plans”). According to the plans, half of the trastees of each plan trust are appointed by the Employers and half by the Union. The trustees are currently John F. Tupper, Robert S. Norvish, Raymond F. Brierly, Louis M. Colombo, Edward F. Cruz, and Dennis J. Cruz (the “trustees”). The trusts are funded entirely by employer contributions and exist solely to provide pension and annuity benefits for plan participants and beneficiaries.

In 1974, after the pension plan had been in existence for fifteen years, ERISA was passed. See Pub.L. No. 93-406, 88 Stat. 829. ERISA resulted from a Congressional finding that pension benefits promised to employees were not being adequately protected. See ERISA § 2(a). Congress created a system of tax incentives and penalties in order to ensure protection of these funds. Pursuant to ERISA, a form containing certain information about a pension plan must be filed annually with the IRS in order to qualify the fund for tax exemption under I.R.C. § 401(a). See IRS Form 5500. The plans at issue in this case submitted these forms for 1986,1987, and 1988.

An Internal Revenue Service (“IRS”) audit for those three years revealed that the documents of the plans failed to meet the requirements of I.R.C. § 401(a) and found that the pension trust was not being operated in compliance with its plan. Consequently, the trustees paid over $450,000 in back taxes and then filed claims in federal court for refund, claiming entitlement to a tax exemption under various theories. All of those theories were eventually dismissed by the trustees’ stipulation, save one somewhat novel claim which was the object of the district court’s order and this appeal. The only question at issue in this case is whether the trusts, failing to meet ERISA standards, alternatively qualified for a tax exemption under I.R.C. § 501(c)(5) as “labor organizations.”

The District Court of Massachusetts rejected a magistrate judge’s recommendation that summary judgment be granted in favor of the trusts on this question, granting summary judgment in favor of the United States. This appeal followed.

DISCUSSION

An award of summary judgment is reviewed de novo. See United Nat’l Ins. Co. v. Penuche’s, Inc., 128 F.3d 28, 30 (1st Cir.1997). We view the entire record in the light most hospitable to the party opposing summary judgment, indulging all reasonable inferences in that party’s favor. See Ahern v. O’Donnell, 109 F.3d 809, 811 (1st Cir.1997). However, taxpayers must prove unambiguously that they are entitled to exemptions. See United States v. Wells Fargo Bank, 485 U.S. 351, 354, 108 S.Ct. 1179, 1181-82, 99 L.Ed.2d 368 (1988). Therefore, if “doubts are nicely balanced” regarding the applicability of a tax exemption, the exemption must be accorded its more limited interpretation. Trotter v. Tennessee, 290 U.S. 354, 356, 54 S.Ct. 138, 139, 78 L.Ed. 358 (1933). Thus, while factual doubts must be resolved in favor of the trustees in this case, legal ambiguities must be resolved in favor of the United States. We proceed with these standards in mind.

It is tautological that, when asked to interpret a statute, a court first looks to the text of that statute. See Strickland v. Commissioner, Maine Dep’t of Human Services, 48 F.3d 12, 17 (1st Cir.1995). If our query is not answered by the text, we skeptically examine legislative history in search of an “unmistakable expression of congressional intent” before considering agency interpretations or other devices of construction. See id.

Thus, we begin our analysis with I.R.C. § 501(c)(5), which provides a tax exemption for “labor organizations.” However, this term is not defined in the statute. Furthermore, the legislative history regarding this provision offers no insights into whether a pension trust established pursuant to collective bargaining and controlled jointly by the union and the employers was meant to be exempt from taxation. See Stichting Pensioenfonds Voor de Gezondheid v. United States, 129 F.3d 195, 198 (D.C.Cir.1997)(“