opinion: COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. Charles N. ANDERSON and Grace M. Anderson, Respondents.
  No. 16389.
  United States Court of Appeals Sixth Circuit.
  Dec. 23, 1966.
  Frederick Youngman, Dept, of Justice, Washington, D. C. (Louis F. Oberdor-fer, Asst. Atty. Gen., Lee A. Jackson, Robert N. Anderson, Michael K. Cava-naugh, Attys., Dept, of Justice, Washington, D. C., on the brief), for petitioner.
  Richard J. Brentlinger, Columbus, Ohio (Ray G. Brown, Columbus, Ohio, on the brief), for respondents.
  Before McALLISTER, Senior Circuit Judge, CELEBREZZE, Circuit Judge, and WILSON, District Judge .
  Frank W. Wilson, District Judge, Eastern District of Tennessee, sitting by designation.
  WILSON, District Judge.
  This case comes before the Court upon the petition of the Commissioner of Internal Revenue seeking a review of the decision of the Tax Court of the United States. The Tax Court held, among other things, that the value of meals and lodging furnished the taxpayer by his employer was properly excluded by the taxpayer from gross income under the provisions of Section 119 of the Internal Revenue Code of 1954. (26 U.S.C. 1958 ed., Sec. 119) The facts, as found by the Tax Court, are not here disputed. The Commissioner does insist, however, that the Tax Court was in error in construing that portion of the statute which requires that meals and lodging be furnished “on the business premises of the employer” as a condition to their value being excluded from gross income in determining the taxpayer’s income tax liability. Thus, the single issue presented upon this appeal is one of statutory construction.
  The facts as found by the Tax Court, and insofar as relevant to the issue presented upon this petition for review, are as follows:
  Charles N. Anderson, herein referred to as the taxpayer, was employed by the Lincoln Lodge Corporation as the manager of the Lincoln Lodge, a motel located in Columbus, Ohio, such employment beginning upon the date of the motel’s opening on July 1, 1956, and continuing through the years 1958, 1959 and 1960, which form the three taxable years here involved. During the first year of operation, the taxpayer, his wife and three children lived in the motel in a two-room combination livingroom, bedroom, and kitchen suite. The unsatisfactory nature of such crowded quarters as a family residence was shortly called to the employer’s attention. After considering the loss of revenue occasioned by the taxpayer’s occupying additional space within the motel, the employer decided to look for a house close by and move the taxpayer and his family out of the motel. The taxpayer’s preference for a home some several blocks from the motel was rejected by the employer, who desired for business reasons to keep its motel manager as close to the motel as possible. The employer considered, but likewise rejected, building a new residence upon the motel property, inasmuch as that land was considered by the employer to be too valuable for such a use. A lot was finally selected at 191 Schoolhouse Lane in nearby Lincoln Village, the lot being described as “two short blocks” from the motel, and being the closest available property zoned for single residence. The property was paid for by Lincoln Lodge Corporation. The Corporation also paid for the construction of a single family-residence thereon. For reasons not here relevant, title to the property was initially taken in the taxpayer’s name, and later transferred to the name of Lincoln Lodge Corporation, but no issue exists but that the employer furnished all funds for the purchase and construction of the residence and was the owner of the property at all times and for all purposes relevant to this lawsuit. The taxpayer, as manager of the Lincoln Lodge, was required by his employer to be available upon a 24 hour a day basis in order to oversee. the management and operation of the motel. For this reason he was required by his employer, as a condition of his employment, to live in the house at 191 Schoolhouse Lane, which was described as being approximately a four minute walk or a two minute drive from the main lobby of the motel or, as stated above, “two short blocks” from the motel. Upon completion of construction of the house in July of 1957, the taxpayer and his family moved into it. The home was provided by the employer without cost to the taxpayer. The employer also paid all utilities at the home, as well as all laundry, dry cleaning, and cleaning expenses. Additionally, the employer furnished the taxpayer’s family with milk and certain staple groceries without cost to the taxpayer.
  The Tax Court found the fair rental value of the residence to be in the sum of $1920.00 per year, the value of utilities furnished to be in the sum of $600.00 per year, the value of laundry, dry cleaning-, and cleaning services to be in the sum of $600.00 per year and the value of milk and staple groceries furnished to be in the sum of $300.00 per year. These values are not here in dispute. Thus, for each of the three tax years here involved the value of meals furnished the taxpayer by his employer was in the sum of $300.00 per year and the value of- lodging was in the sum of $3120.00.
  No issue is here raised by the Commissioner with reference to the conclusions of the Tax Court that the meals and lodging were furnished for the convenience of the employer and the conclusion that the taxpayer was required to accept the lodging as a condition of his employment. Rather, it is the conclusion of the Tax Court that the meals were furnished and the lodging provided “on the business premises of the employer”, and were thus properly excludable from gross income by the taxpayer for the years 1958, 1959 and 1960 that forms the issue presented upon this Petition for Review.
  Section 61 of the Internal Revenue Code of 1954 defines gross income as “ * * * all income from whatever source derived, including * * * [c] ompensation for services”. (26 U.S.C. 1958 ed., Sec. 61) The relevant Treasury regulations in this regard provide that, “If services are paid for other than in money, the fair market value of the property or services taken in payment must be included in income.” [26 C.F.R., Sec. 1.61-2 (d)]
  It is thus obvious that the value of meals and lodging received by the taxpayer in return for his services as manager of the motel would properly be includable in his gross income for the tax years involved unless excluded under another provision of the 1954 Code. See Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218; Commissioner of Internal Revenue v. Lo Bue, 351 U.S. 243, 76 S.Ct. 800, 100 L.Ed. 1142; Commissioner v. Glen-shaw Glass Co., 348 U.S. 426, 75 S.Ct. 473, 99 L.Ed. 483.
  As authority for excluding the value of meals and lodging from gross income, the taxpayer relies upon Section 119 of the 1954 Code. This section provides in relevant part as follows:
  SEC. 119. Meals or lodging furnished for the convenience of the employer.
  There shall be excluded from gross income of an employee the value of any meals or lodging furnished to him by his employer for the convenience of the employer, but only if—
  (1) in the case of meals, the meals are furnished on the business premises of the employer, or
  (2) in the case of lodging, the employee is required to accept such lodging on the business premises of his employer as a condition of his employment.
  ******
  (26 U.S.C. 1958 ed., Sec. 119)
  Thus, the conditions for excluding the value of lodging furnished an employee are three: namely, (1) that such lodging be furnished for the convenience of the employer; (2) that it be located on the business premises of the employer; and (3) that the employee be required to accept such lodging as a condition of his employment. The conditions for excluding the value of meals furnished an employee are two: namely, (1) that such meals be furnished for the convenience of the employer and (2) that they be furnished “on the business premises of the employer”.
  The Tax Court in an unreviewed opinion, and without any specific effort at defining the statutory language “on the business premises of the employer”, concluded that since the employer, motivated by business reasons, and for his own convenience, acquired the residence within two short blocks of the motel and required the taxpayer to live there to be more readily available at the motel on 24 hour a day call, the residence was “on the business premises” of the employer within the meaning of Sec. 119. The specific language of the opinion in this regard was as follows:
  “In our view to conclude that property owned by an employer within two short blocks of a facility being managed by the employee who is required to be available on a 24 hour call for management of the employer’s business, is not on the business premises of the employer within the meaning of Section 119, where the employee is required to accept such lodgings for the convenience of the employer, is too restrictive an interpretation. We, therefore, hold that the lodgings furnished to petitioner were furnished to him by his employer for the convenience of the employer and that petitioner was required to accept such lodgings on the business premises of his employer as a condition of his employment.”
  Thus, the Court below appears to have interpreted the phrase “on the business premises of the employer” as including any residential property owned by the employer and furnished the employee, provided (1) it was acquired from business motives; (2) it was in the vicinity of or “within two short blocks” of the place where the employee performed his duties; and (3) the employee was required to accept it as a condition of his employment. With this pragmatic conclusion this Court is unable to agree.
  Before undertaking a construction or definition of the statutory language “on the business premises of the employer” as that phrase is used in Sec. 119, it is proper to call attention to the well settled rule of statutory construction which requires that provisions within tax legislation granting exemptions be strictly construed in accordance with their terms. Helvering v. Northwest Steel Rolling Mills, 311 U.S. 46, 61 S.Ct. 109, 85 L.Ed. 29; United States v. Stewart, 311 U.S. 60, 61 S.Ct. 102, 85 L.Ed. 40; Commissioner of Internal Revenue v. Jacobson, 336 U.S. 28, 69 S.Ct. 358, 93 L.Ed. 477; Curtis v. United States, 336 F.2d 714, 721 (C.A.6th); Nielsen v. United States, 333 F.2d 615, 617 (C.A.6th). As the Supreme Court stated in United States v. Stewart, supra, 311 U.S. p. 71, 61 S.Ct. p. 109:
  “ * * * respondent has succeeded only in casting some doubt on the proper construction of the statute-Yet those who seek an exemption from-, a tax must rest it on more than a doubt, or ambiguity. Bank of Commerce v. [State of] Tennessee, 161 U.S. 134, 146 [16 S.Ct. 456, 460, 40 L.Ed. 645] ; Id. 163 U.S. 416, 423 [16 S.Ct. 1113, 41 L.Ed. 211]. Exemptions from taxation cannot rest upon mere implications. United States Trust Co. [of New York] v. Helvering, 307 U.S. 57, 60, [59 S.Ct. 692, 693, 83, L.Ed. 1104]. As stated by Mr. Justice Cardozo in Trotter v. [State of] Tennessee, 290 U.S. 354, 356 [54 S.Ct. 138, 139, 78 L.Ed. 358], ‘Exemptions from taxation are not to be enlarged by implication if doubts are nicely balanced.’ And see Pacific Co., Ltd. v. Johnson, 285 U.S. 480, 491, [52 S.Ct. 424, 426, 76 L.Ed. 893]. Hence broad, generalized statutory exemptions have frequently been construed narrowly and confined to those situations where the subject matter of the exemption was directly, not indirectly or remotely, involved. Mur-dock v. Ward, 178 U.S. 139, [20 S.Ct. 775, 44 L.Ed. 1009]; Hale v. [Iowa] State Board of Assessment and Review, 302 U.S. 95, [58 S.Ct. 102, 82 L.Ed. 72]; United States Trust Co. [of New York] v. Helvering, supra. •» # * ”
  The requirement that meals and lodging must be furnished and accepted “on the business premises of the employer” is new in the 1954 Code. The original version of the statute, as enacted in the House of Representatives, used the term “place of employment”. This term was changed by the Senate to “business premises” and this change was acceded to by the House. H. Conference Rep. No. 2543, 83rd Cong., 2d Sess., p. 27 [3 U.S.C.Cong. & Adm.News (1954) 5280, 5286.] Nothing in the Senate or Conference report suggests that the term “business premises” was intended to extend the exclusion beyond the version offered by the House which used the phrase “place of employment”. Indeed the Senate Report stated [S.Rep. No. 1622, 83d Cong., 2d Sess., p. 19 (3 U.S.C.Cong. & Adm.News (1954) 4621, 4649)]:
  The House and your committee has adopted provisions designed to end the confusion as to the tax status of meals and lodging furnished an employee by his employer. Under both bills meals and lodging are to be excluded from the employee’s income if they are furnished at the place of employment and the employee is required to meet certain other conditions specified below.
  The Conference Report likewise contained similar language. There it is stated (H. Conference Rep. No. 2543, supra, p. 27):
  The term “business premises of the employer” is intended, in general, to have the same effect as the term “place of employment” in the House bill. For example, lodging furnished in the home to a domestic servant would be considered lodging furnished on the business premises of the employer. Similarly, meals furnished to a cowhand while herding his employer’s cattle on leased lands, or on national forest lands used under a permit, would also be regarded as furnished on the business premises of the employer. * * ■*
  Thus, it would appear that ownership by the employer of the lodging or the place where the meals are furnished is not intended by Congress to be the crucial test, nor even an essential element, of the meaning of “business premises”. Rather, the emphasis is upon the place where duties of the employee are to be performed.
  This emphasis in defining “business premises” in terms of the place where the employee performs significant duties of his employment is likewise set forth in the pertinent Treasury regulations, Sec. 1.119-1, wherein it is provided :
  SEC. 1.119-1. MEALS AND LODGING FURNISHED FOR THE CONVENIENCE OF THE EMPLOYER.
  ******
  (c) Rules. (1) For purposes of this section, the term “business premises of the employer” generally means the place of employment of the employee. * * * ******
  (26 C.F.R., Sec. 1.119-1.)
  While this Court is not bound by Treasury regulations where they are inconsistent with the revenue statute, which they seek to interpret and implement, they must be sustained unless unreason-ableor plainly inconsistent with the stat- • ute, and may, where long continued with-j out substantial change, be deemed to have ¡received Congressional approval and have jthe effect of law. Morrison v. United States, 355 F.2d 218 (C.A. 6, 1966). As stated in the case of Commissioner of Internal Revenue v. South Texas Lumber Co., 333 U.S. 496, 501, 68 S.Ct. 695, 698, 92 L.Ed. 831:
  “This Court has many times declared that Treasury regulations must be sustained unless unreasonable and plainly inconsistent with the revenue statutes and that they constitute contemporaneous constructions by those charged with administration of these statutes which should not be overruled except for weighty reasons.”
  The phrase “on the business premises of the employer”, as used in Sec. 119, has been the subject of judicial construction in other reported decisions. In the case of United States v. Barrett, 321 F.2d 911 (C.A. 5, 1963) the issue confronting the Court was whether state highway patrolmen were entitled to exclude from gross income the reimbursement received by them from the State of Mississippi for meals purchased at various locations along the highway while on duty. The Commissioner there sought to contend that “business premises” was confined to the State Patrol Headquarters. The Court concluded that since the “business of the state law enforcement agency was not confined to the patrol headquarters, but rather, it covers every road and highway in the State 24 hours a day every day”, the value of meals taken along the highway while on duty was excludable.
  A similar issue involving the exclusion of the value of meals furnished a highway patrolman was presented in the case of United States v. Morelan, 356 F.2d 199 (C.A. 8, 1966) with a similar result being reached. In affirming the decision of the District Judge, reported at 237 F.Supp. 879, the Appeals Court concluded that restaurants near or adjacent to highways were “on the business premises of the employer” for the purpose of determining the excludability of the value of meals taken there by a highway patrolman while on duty.
  Although the Court in each of the foregoing cases rejected the Commissioner’s contention that “business premises” would be limited to premises owned or controlled by the employer, the decisions are consistent with the view that the premises must be those upon which some portion of the employee’s duties were performed. In fact, the test was expressly so stated in the case of United States Junior Chamber of Commerce v. United States, 334 F.2d 660, 160 Ct.Cl. 392 (1964). There the plaintiff had provided a home for its national president. The issue confronting the Court was as to the excludability from gross income under Sec. 119 of the rental value of the lodging thus furnished. Having found as a fact that a significant portion of the president’s duties were performed at the home, the Court held that the rental value of the home was not includable in the president’s gross income. In so holding the Court stated:
  “We think that the business premises of § 119 means premises of the employer on which the duties of the employee are to be performed.”
  An even more pertinent decision to the issue now confronting this Court is that of Dole v. Commissioner, 43 T.C. 697, as affirmed by the Court of Appeals for the First Circuit at 351 F.2d 308. The significance of the Dole case lies not so much in its factual similarity with the present case as in the fact that the decision of the Tax Court in the Anderson case upon the issue of “business premises” was specifically rejected by the Court of Appeals. The excludability by employees under Sec. 119 of the fair rental value of Company-owned housing furnished for the convenience of the employer was there involved. In an opinion concurred in by a majority of the Tax Court, that Court stated:
  “There is still another, and equally compelling, reason for holding that petitioners have failed to bring themselves within the purview of section 119. These company-owned houses were not located ‘on the business premises’ of the Packard Mills. Congress has plainly stated that the phrase ‘on the business premises’ generally means at the place of employment. See H. Rept. No. 1337, 83d Cong., pp. 18, A39 (1954); S. Rept. No. 1662, 83d Cong., pp. 19, 190 (1954); and Conference Report, H. Rept. No. 2543, 83d Cong., pp. 26-27. We think the phrase should be construed to mean either (1) living quarters that constitute an integral part of the business property or (2) premises on which the company carries on some of its business activities. We doubt whether Congress ever intended section 119 to apply to situations such as this, where the employee does his work in one location and resides at another location some distance away. Whatever may be said .of the factual conclusion reached in Charles N. Anderson [Dec. 26,806], 42 T.C. 410 (1964), on appeal (C.A. 6, November 20, 1964), that the residence of the motel manager, being within ‘two short blocks’ of the motel, was sufficiently integrated with the motel property as to be ‘on the business premises,’ the facts here do not permit ■ any such ultimate conclusion.”
  In a concurring opinion Judge Raum of the Tax Court went on to explicitly disapprove of the Tax Court decision in the Anderson case in the following terms:
  “The matter probably would never have reached this present state of apparent confusion and disagreement among the members of this Court were it not for the unreviewed decision in Charles N. Anderson [Dec. 26,-806], 42 T.C. 410. I think that Anderson is distinguishable for the reason articulated in the majority opinion. But I also think that it is wrong and that it should be overruled to put an end to the confusion that it has created.
  “The fact that the motel manager’s house in Anderson was ‘only two short blocks’ (42 T.C. at p. 415) from the motel property should have been totally irrelevant. The house either was or was not ‘on the business premises’, and I can find no basis in the statute to stretch those premises ‘two short blocks’, or ‘one short block’, or even ‘one-half short block’ beyond the perimeter of the motel property. Of course, if ‘two short blocks’ are not fatal, it is easy to see how one might be tempted to enlarge the distance to the one mile involved herein, or, for that matter, two miles or five miles. The real difficulty is that neither the residence in Anderson nor any single residence involved herein is ‘on the business premises’ of the employer. And in view of the mischief generated by Anderson I think it should be explicitly disapproved.”
  The Court of Appeals in affirming, did so specifically upon the opinion of Judge Raum.
  Each of the foregoing cases is consistent with an interpretation of the phrase “on the business premises of the employer” as requiring that meals be furnished or lodging be provided at a place where the employee performs some significant portion of his duties. That this is not a complete definition of the concept of “business premises,” however, may be illustrated by the case of Boykin v. Commissioner of Internal Revenue, 260 F.2d 249 (C.A. 8, 1958). There a physician employed by the Veterans Administration was assigned living quarters in a residence located upon a Veterans Hospital grounds. While no duties were performed by the employee at the residence, but rather at the hospital, no issue was raised in the case but that under Sec. 119 the lodging was upon the hospital grounds and therefore upon the premises where the employer’s business was conducted, i.e., the hospital. The Court accordingly saw no occasion to raise the “business premises” issue, but rather the case went off upon the meaning of other terms within the statute, which terms are not here in issue.
  Having thus considered the language of the statute, together with the legislative history, the Treasury regulations, and the relevant case authority from other jurisdictions, while all the time bearing in mind the rule of statutory construction as hereinabove stated, this Court is of the opinion that the phrase “on the business premises of the employer,” as used in Sec. 119, means that in order for the value of meals or lodging to be excluded from gross income, the meals must be furnished or the lodging be provided either at a place where the employee performs a significant portion of his duties or on the premises where the employer conducts a significant portion of his business.
  Returning now to the decision of the Tax Court, we are of the opinion that the Tax Court arrived at an erroneous construction of the phrase “business premises”. It has construed the phrase as requiring only that the meals be furnished or the lodging be provided upon property acquired by the employer from business motives, provided that such property is located in the vicinity of or “within two short blocks” of other property upon which the employer conducts his business. As regards lodging, the additional requirement imposed by the statute to the effect that the employee be required to accept the lodging as a condition of his employment is apparently included by the Tax Court within its definition of “business premises”.
  To make ownership by the employer from business motives the test of a “business premises” is to fail to provide for instances of meals furnished or lodging provided on non-owned premises, contrary to the expressed Congressional intent, while at the same time opening wide a tax loophole contrary to any expressed Congressional intent.
  To make “two short blocks” or nearness to other business property of the employer the test is to disregard the word “on” as contained in the phrase “on the business premises of the employer”, thereby rendering uncertain that which is certain and requiring litigation in each case to determine what may be sufficiently near under the circumstances of the particular case. Had Congress so intended, it would appear that it could readily have used the words “in the vicinity of” or “nearby” or “close to” or “contiguous to” or similar language, rather than say “on” the business premises.
  To make acceptance by the employee as a condition of his employment the test is to require that which is elsewhere expressly required by the statute and render redundant the phrase “on the business premises of the employer”.
  Examples, of course, can be given where “near” is so nearly equivalent to “on” as to indicate an absurdity in distinguishing between the two. However, this case does not present such an absurdity. Moreover, there is an element of arbitrariness in the drawing of every line. The drawing of not otherwise unreasonable tax lines is a legitimate function of Congress. When Congress drew this line so as to require that the meals be furnished or the lodging be provided “on the business premises of the employer”, it is not the proper function of a court to disregard that line and substitute a line of its own choosing.
  The Tax Court did not purport to find that any significant portion of the taxpayer’s duties were performed within the residence provided for his use. Merely being “on call” would not of itself form a basis for such a finding. The evidence is undisputed that the residence was located upon property separate and apart from the motel. The duties of the employee were performed at the motel. The residence therefore was not itself a business premises. The business of the employer was located at, the motel. The residence therefore was; not on the business premises of the employer. Rather, the residence was provided and the meals were furnished upon a premises other than the business premises of the employer.
  The decision of the Tax Court will be reversed and a judgment will enter in accordance with this opinion.
instruction: What follows is an opinion from a United States Court of Appeals. You will be asked a question pertaining to issues that may appear in civil law issues involving government actors. The issue is: "Did the court conclude that it should defer to agency discretion? For example, if the action was committed to agency discretion. Answer the question based on the directionality of the appeals court decision. If the court discussed the issue in its opinion and answered the related question in the affirmative, answer "Yes". If the issue was discussed and the opinion answered the question negatively, answer "No". If the opinion considered the question but gave a mixed answer, supporting the respondent in part and supporting the appellant in part, answer "Mixed answer". If the opinion does not discuss the issue, or notes that a particular issue was raised by one of the litigants but the court dismissed the issue as frivolous or trivial or not worthy of discussion for some other reason, answer "Issue not discussed". If the opinion considered the question but gave a "mixed" answer, supporting the respondent in part and supporting the appellant in part (or if two issues treated separately by the court both fell within the area covered by one question and the court answered one question affirmatively and one negatively), answer "Mixed answer". If the opinion either did not consider or discuss the issue at all or if the opinion indicates that this issue was not worthy of consideration by the court of appeals even though it was discussed by the lower court or was raised in one of the briefs, answer "Issue not discussed".