author: Chief Justice Burger Justice Brennan,

text:
    UNITED STATES v. BOYLE, EXECUTOR OF THE ESTATE OF BOYLE
    No. 83-1266.
    Argued October 10, 1984
    Decided January 9, 1985

      Burger, C. J., delivered the opinion for a unanimous Court. Brennan, J., filed a concurring opinion, in which Marshall, Powell, and O’Connor, JJ., joined, post, p. 252.

      Albert G. Lauber, Jr., argued the cause for the United States. With him on the briefs were Solicitor General Lee, Assistant Attorney General Archer, CarletonD. Powell, and Jo-Ann Horn.

      Thomas E. Davies argued the cause and filed a brief for respondent.
   Chief Justice Burger

delivered the opinion of the Court.

We granted certiorari to resolve a conflict among the Circuits on whether a taxpayer’s reliance on an attorney to prepare and file a tax return constitutes “reasonable cause” under § 6651(a)(1) of the Internal Revenue Code, so as to defeat a statutory penalty incurred because of a late filing.

f — (

A

Respondent, Robert W. Boyle, was appointed executor of the will of his mother, Myra Boyle, who died on September 14, 1978; respondent retained Ronald Keyser to serve as attorney for the estate. Keyser informed respondent that the estate must file a federal estate tax return, but he did not mention the deadline for filing this return. Under 26 U. S. C. § 6075(a), the return was due within nine months of the decedent’s death, i. e., not later than June 14, 1979.

Although a businessman, respondent was not experienced in the field of federal estate taxation, other than having been executor of his father’s will 20 years earlier. It is undisputed that he relied on Keyser for instruction and guidance. He cooperated fully with his attorney and provided Keyser with all relevant information and records. Respondent and his wife contacted Keyser a number of times during the spring and summer of 1979 to inquire about the progress of the proceedings and the preparation of the tax return; they were assured that they would be notified when the return was due and that the return would be filed “in plenty of time.” App. 39. When respondent called Keyser on September 6, 1979, he learned for the first time that the return was by then overdue. Apparently, Keyser had overlooked the matter because of a clerical oversight in omitting the filing date from Keyser’s master calendar. Respondent met with Keyser on September 11, and the return was filed on September 13, three months late.

B

Acting pursuant to 26 U. S. C. § 6651(a)(1), the Internal Revenue Service assessed against the estate an additional tax of $17,124.45 as a penalty for the late filing, with $1,326.56 in interest. Section 6651(a)(1) reads in pertinent part:

“In case of failure ... to file any return ... on the date prescribed therefor . . . , unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount required to be shown as tax on such return 5 percent of the amount of such tax if the failure is for not more than 1 month, with an additional 5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate . . . .” (Emphasis added.)

A Treasury Regulation provides that, to demonstrate “reasonable cause,” a taxpayer filing a late return must show that he “exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time.” 26 CFR §301.6651-1(c)(1) (1984).

Respondent paid the penalty and filed a claim for a refund. He conceded that the assessment for interest was proper, but contended that the penalty was unjustified because his failure to file the return on time was “due to reasonable cause,” i. e., reliance on his attorney. Respondent brought suit in the United States District Court, which concluded that the claim was controlled by the Court of Appeals’ holding in Rohrabaugh v. United States, 611 F. 2d 211 (CA7 1979). In Rohrabaugh, the United States Court of Appeals for the Seventh Circuit held that reliance upon counsel constitutes “reasonable cause” under § 6651(a)(1) when: (1) the taxpayer is unfamiliar with the tax law; (2) the taxpayer makes full disclosure of all relevant facts to the attorney that he relies upon, and maintains contact with the attorney from time to time during the administration of the estate; and (3) the taxpayer has otherwise exercised ordinary business care and prudence. 611 F. 2d, at 215, 219. The District Court held that, under Rohrabaugh, respondent had established “reasonable cause” for the late filing of his tax return; accordingly, it granted summary judgment for respondent and ordered refund of the penalty. A divided panel of the Seventh Circuit, with three opinions, affirmed. 710 F. 2d 1251 (1983).

We granted certiorari, 466 U. S. 903 (1984), and we reverse.

II

A

Congress’ purpose in the prescribed civil penalty was to ensure timely filing of tax returns to the end that tax liability will be ascertained and paid promptly. The relevant statutory deadline provision is clear; it mandates that all federal estate tax returns be filed within nine months from the decedent’s death, 26 U. S. C. 6076(a). Failure to comply incurs a penalty of 5 percent of the ultimately determined tax for each month the return is late, with a maximum of 25 percent of the base tax. To escape the penalty, the taxpayer bears the heavy burden of proving both (1) that the failure did not result from “willful neglect,” and (2) that the failure was “due to reasonable cause.” 26 U. S. C. § 6651(a)(1).

The meaning of these two standards has become clear over the near-70 years of their presence in the statutes. As used here, the term “willful neglect” may be read as meaning a conscious, intentional failure or reckless indifference. See Orient Investment & Finance Co. v. Commissioner, 83 U. S. App. D. C. 74, 75, 166 F. 2d 601, 602 (1948); Hatfried, Inc. v. Commissioner, 162 F. 2d 628, 634 (CA3 1947); Janice Leather Imports Ltd. v. United States, 391 F. Supp. 1235, 1237 (SDNY 1974); Gemological Institute of America, Inc. v. Riddell, 149 F. Supp. 128, 131-132 (SD Cal. 1957). Like “willful neglect,” the term “reasonable cause” is not defined in the Code, but the relevant Treasury Regulation calls on the taxpayer to demonstrate that he exercised “ordinary business care and prudence” but nevertheless was “unable to file the return within the prescribed time.” 26 CFR §301.6651(c)(l)(1984); accord, e. g., Fleming v. United States, 648 F. 2d 1122, 1124 (CA7 1981); Ferrando v. United States, 245 F. 2d 582, 587 (CA9 1957); Haywood Lumber & Mining Co. v. Commissioner, 178 F. 2d 769, 770 (CA2 1950); Southeastern Finance Co. v. Commissioner, 153 F. 2d 205 (CA5 1946); Girard Investment Co. v. Commissioner, 122 F. 2d 843, 848 (CA3 1941); see also n. 1, supra. The Commissioner does not contend that respondent’s failure to file the estate tax return on time was willful or reckless. The question to be resolved is whether, under the statute, reliance on an attorney in the instant circumstances is a “reasonable cause” for failure to meet the deadline.

B

In affirming the District Court, the Court of Appeals recognized the difficulties presented by its formulation but concluded that it was bound by Rohrabaugh v. United States, 611 F. 2d 211 (CA7 1979). The Court of Appeals placed great importance on the fact that respondent engaged the services of an experienced attorney specializing in probate matters and that he duly inquired from time to time as to the progress of the proceedings. As in Rohrabaugh, see id., at 219, the Court of Appeals in this case emphasized that its holding was narrowly drawn and closely tailored to the facts before it. The court stressed that the question of “reasonable cause” was an issue to be determined on a case-by-case basis. See 710 F. 2d, at 1253-1254; id., at 1254 (Coffey, J., concurring).

Other Courts of Appeals have dealt with the issue of “reasonable cause” for a late filing and reached contrary conclusions. In Ferrando v. United States, 245 F. 2d 582 (CA9 1957), the court held that taxpayers have a personal and nondelegable duty to file a return on time, and that reliance on an attorney to fulfill this obligation does not constitute “reasonable cause” for a tardy filing. Id., at 589. The Fifth Circuit has similarly held that the responsibility for ensuring a timely filing is the taxpayer’s alone, and that the taxpayer’s reliance on his tax advisers — accountants or attorneys — is not a “reasonable cause.” Millette & Associates v. Commissioner, 594 F. 2d 121, 124-125 (per curiam), cert. denied, 444 U. S. 899 (1979); Logan Lumber Co. v. Commissioner, 365 F. 2d 846, 854 (1966). The Eighth Circuit also has concluded' that reliance on counsel does not constitute “reasonable cause.” Smith v. United States, 702 F. 2d 741, 743 (1983) (per curiam); Boeving v. United States, 650 F. 2d 493, 495 (1981); Estate of Lillehei v. Commissioner, 638 F. 2d 65, 66 (1981) (per curiam).

► — I HH h-i

We need not dwell on the similarities or differences in the facts presented by the conflicting holdings. The time has come for a rule with as “bright” a line as can be drawn consistent with the statute and implementing regulations. Deadlines are inherently arbitrary; fixed dates, however, are often essential to accomplish necessary results. The Government has millions of taxpayers to monitor, and our system of self-assessment in the initial calculation of a tax simply cannot work on any basis other than one of strict filing standards. Any less rigid standard would risk encouraging a lax attitude toward filing dates. Prompt payment of taxes is imperative to the Government, which should not have to assume the burden of unnecessary ad hoc determinations.

Congress has placed the burden of prompt filing on the executor, not on some agent or employee of the executor. The duty is fixed and clear; Congress intended to place upon the taxpayer an obligation to ascertain the statutory deadline and then to meet that deadline, except in a very narrow range of situations. Engaging an attorney to assist in the probate proceedings is plainly an exercise of the “ordinary business care and prudence” prescribed by the regulations, 26 CFR § 301.6651 — 1(c)(1) (1984), but that does not provide an answer to the question we face here. To say that it was “reasonable” for the executor to assume that the attorney would comply with the statute may resolve the matter as between them, but not with respect to the executor’s obligations under the statute. Congress has charged the executor with an unambiguous, precisely defined duty to file the return within nine months; extensions are granted fairly routinely. That the attorney, as the executor’s agent, was expected to attend to the matter does not relieve the principal of his duty to comply with the statute.

This case is not one in which a taxpayer has relied on the erroneous advice of counsel concerning a question of law. Courts have frequently held that “reasonable cause” is established when a taxpayer shows that he reasonably relied on the advice of an accountant or attorney that it was unnecessary to file a return, even when such advice turned out to have been mistaken. See, e. g., United States v. Kroll, 547 F. 2d 398, 395-396 (CA7 1977); Commissioner v. American Assn. of Engineers Employment, Inc., 204 F. 2d 19, 21 (CA7 1953); Burton Swartz Land Corp. v. Commissioner, 198 F. 2d 558, 560 (CA5 1952); Haywood Lumber & Mining Co. v. Commissioner, 178 F. 2d, at 771; Orient Investment & Finance Co. v. Commissioner, 83 U. S. App. D. C., at 75, 166 F. 2d, at 603; Hatfried, Inc. v. Commissioner, 162 F. 2d, at 633-635; Girard Investment Co. v. Commissioner, 122 F. 2d, at 848; Dayton Bronze Bearing Co. v. Gilligan, 281 F. 709, 712 (CA6 1922). This Court also has implied that, in such a situation, reliance on the opinion of a tax adviser may constitute reasonable cause for failure to file a return. See Commissioner v. Lane-Wells Co., 321 U. S. 219 (1944) (remanding for determination whether failure to file return was due to reasonable cause, when taxpayer was advised that filing was not required).

When an accountant or attorney advises a taxpayer on a matter of tax law, such as whether a liability exists, it is reasonable for the taxpayer to rely on that advice. Most taxpayers are not competent to discern error in the substantive advice of an accountant or attorney. To require the taxpayer to challenge the attorney, to seek a “second opinion,” or to try to monitor counsel on the provisions of the Code himself would nullify the very purpose of seeking the advice of a presumed expert in the first place. See Haywood Lumber, supra, at 771. “Ordinary business care and prudence” do not demand such actions.

By contrast, one does not have to be a tax expert to know that tax returns have fixed filing dates and that taxes must be paid when they are due. In short, tax returns imply deadlines. Reliance by a lay person on a lawyer is of course common; but that reliance cannot function as a substitute for compliance with an unambiguous statute. Among the first duties of the representative of a decedent’s estate is to identify and assemble the assets of the decedent and to ascertain tax obligations. Although it is common practice for an executor to engage a professional to prepare and file an estate tax return, a person experienced in business matters can perform that task personally. It is not unknown for an executor to prepare tax returns, take inventories, and carry out other significant steps in the probate of an estate. It is even not uncommon for an executor to conduct probate proceedings without counsel.

It requires no special training or effort to ascertain a deadline and make sure that it is met. The failure to make a timely filing of a tax return is not excused by the taxpayer’s reliance on an agent, and such reliance is not “reasonable cause” for a late filing under § 6651(a)(1). The judgment of the Court of Appeals is reversed.

It is so ordered.

Justice Brennan,

with whom Justice Marshall, Justice Powell, and Justice O’Connor join,

concurring.

I concur that the judgment must be reversed. Although the standard of taxpayer liability found in 26 U. S. C. § 6651(a)(1) might plausibly be characterized as ambiguous, courts and the Internal Revenue Service have for almost 70 years interpreted the statute as imposing a standard of “ordinary business care and prudence.” Ante, at 245-246. I agree with the Court that we should defer to this longstanding construction. Ante, at 246, n. 4. I also agree that taxpayers in the exercise of ordinary business care and prudence must ascertain relevant filing deadlines and ensure that those deadlines are met. As the Court correctly holds, a taxpayer cannot avoid the reach of § 6651(a)(1) merely by delegating this duty to an attorney, accountant, or other individual. Ante, at 250, 252.

I write separately, however, to underscore the importance of an issue that the Court expressly leaves open. Specifically, I believe there is a substantial argument that the “ordinary business care and prudence” standard is applicable only to the “ordinary person” — namely, one who is physically and mentally capable of knowing, remembering, and complying with a filing deadline. In the instant case, there is no question that the respondent not only failed to exercise ordinary business care in monitoring the progress of his mother’s estate, but also made no showing that he was unable to exercise the usual care and diligence required of an executor. The outcome could be different if a taxpayer were able to demonstrate that, for reasons of incompetence or infirmity, he understandably was unable to meet the standard of ordinary business care and prudence. In such circumstances, there might well be no good reason for imposing the harsh penalty of § 6651(a)(1) over and above the prescribed statutory interest penalty. See 26 U. S. C. §§ 6601(a), 6621(b).

The Court proclaims the need “for a rule with as ‘bright’ a line as can be drawn,” and it stresses that the Government “should not have to assume the burden of unnecessary ad hoc determinations.” Ante, at 248, 249. On the other hand, it notes that the “bright line” might not cover a taxpayer who is “incapable by objective standards of meeting the criteria of ‘ordinary business care and prudence,’” reasoning that “the disability alone could well be an acceptable excuse for a late filing.” Ante, at 248, n. 6.

I share the Court’s reservations about the sweep of its “bright line” rule. If the Government were determined to draw a “bright line” and to avoid the “burden” of “ad hoc determinations,” it would not provide for any exemptions from the penalty provision. Congress has emphasized, however, that exemptions must be made where a taxpayer demonstrates “reasonable cause.” 26 U. S. C. § 6651(a)(1). Accordingly, the IRS already allows dispensations where, for example, a taxpayer or a member of his family has been seriously ill, the taxpayer has been unavoidably absent, or the taxpayer’s records have been destroyed. Internal Revenue Manual (CCH) §4350, (24) ¶22.2(2) (Mar. 20, 1980) (Audit Technique Manual for Estate Tax Examiners). Thus the Government itself has eschewed a bright-line rule and committed itself to necessarily case-by-case decisionmaking. The gravamen of the IRS’s exemptions seems to be that a taxpayer will not be penalized where he reasonably was unable to exercise ordinary business care and prudence. The IRS does not appear to interpret its enumerated exemptions as being exclusive, see id., ¶ 22.2(3), and it might well act arbitrarily if it purported to do otherwise. Thus a substantial argument can be made that the draconian penalty provision should not apply where a taxpayer convincingly demonstrates that, for whatever reason, he reasonably was unable to exercise ordinary business care.

Many executors are widows or widowers well along in years, and a penalty against the “estate” usually will be a penalty against their inheritance. Moreover, the principles we announce today will apply with full force to the personal income tax returns required of every individual who receives an annual gross income of $1,000 or more. See 26 U. S. C. § 6651(a)(1); see also §6012. Although the overwhelming majority of taxpayers are fully capable of understanding and complying with the prescribed filing deadlines, exceptional cases necessarily will arise where taxpayers, by virtue of senility, mental retardation, or other causes, are understandably unable to attain society’s norm. The Court today properly emphasizes the need for efficient tax collection and stern incentives. Ante, at 248-249. But it seems to me that Congress and the IRS already have made the decision that efficiency should yield to other values in appropriate circumstances.

Because the respondent here was fully capable of meeting the required standard of ordinary business care and prudence, we need not decide the issue of whether and under what circumstances a taxpayer who presents evidence that he was unable to adhere to the required standard might be entitled to relief from the penalty. As the Court has expressly left this issue open for another day, I join the Court’s opinion.

       The Internal Revenue Service has articulated eight reasons for a late filing that it considers to constitute “reasonable cause.” These reasons include unavoidable postal delays, the taxpayer’s timely filing of a return with the wrong IRS office, the taxpayer’s reliance on the erroneous advice of an IRS officer or employee, the death or serious illness of the taxpayer or a member of his immediate family, the taxpayer’s unavoidable absence, destruction by casualty of the taxpayer’s records or place of business, failure of the IRS to furnish the taxpayer with the necessary forms in a timely fashion, and the inability of an IRS representative to meet with the taxpayer when the taxpayer makes a timely visit to an IRS office in an attempt to secure information or.aid in the preparation of a return. Internal Revenue Manual (CCH) § 4350, (24) ¶ 22.2(2) (Mar. 20, 1980) (Audit Technique Manual for Estate Tax Examiners). If the cause asserted by the taxpayer does not implicate any of these eight reasons, the district director determines whether the asserted cause is reasonable. “A cause for delinquency which appears to a person of ordinary prudence and intelligence as a reasonable cause for delay in filing a return and which clearly negatives willful neglect will be accepted as reasonable.” Id., ¶ 22.2(3).

       Section 6081(a) of the Internal Revenue Code authorizes the IRS to grant “a reasonable extension of time,” generally no longer than six months, for filing any return.

       Congress added the relevant language to the tax statutes in 1916. For many years before that, § 3176 mandated a 50 percent penalty “in ease of a refusal or neglect, except in cases of sickness or absence, to make a list or return, or to verify the same . . . .” Rev. Stat. §3176 (emphasis added). The Revenue Act of 1916 amended this provision to require the 50 percent penalty for failure to file a return within the prescribed time, “except that, when a return is voluntarily and without notice from the collector filed after such time and it is shown that the failure to file it was due to a reasonable cause and not due to willful neglect, no such addition shall be made to the tax.” Revenue Act of 1916, ch. 463, § 16,39 Stat. 756, 775 (emphasis added). No committee reports or congressional hearings or debates discuss the change in language. It would be logical to assume that Congress intended “willful neglect” to replace “refusal” — both expressions implying intentional failure — and “[absence of] reasonable cause” to replace “neglect” — both expressions implying carelessness.

       Respondent contends that the statute must be construed to apply a standard of willfulness only, and that the Treasury Regulation is incompatible with this construction of the statute. He argues that the Regulation converts the statute into a test of “ordinary business care,” because a taxpayer who demonstrates ordinary business care can never be guilty of “willful neglect.” By construing “reasonable cause” as the equivalent of “ordinary business care,” respondent urges, the IRS has removed from consideration any question of willfulness.
      We cannot accept this reasoning. Congress obviously intended to make absence of fault a prerequisite to avoidance of the late-filing penalty. See n. 3, supra. A taxpayer seeking a refund must therefore prove that his failure to file on time was the result neither of carelessness, reckless indifference, nor intentional failure. Thus, the Service’s correlation of “reasonable cause” with “ordinary business care and prudence” is consistent with Congress’ intent, and over 40 years of case law as well. That interpretation merits deference. See, e. g., Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837, 844, and n. 14 (1984).

       Although at one point the Court of Appeals for the Sixth Circuit held that reliance on counsel could constitute reasonable cause, see In re Fisk’s Estate, 203 F. 2d 358, 360 (1953), the Sixth Circuit appears now to be following those courts that have held that the taxpayer has a nondelegable duty to ascertain the deadline for a return and ensure that the return is filed by that deadline. See Estate of Geraci v. Commissioner, 32 TCM 424, 425 (1973), aff’d, 502 F. 2d 1148 (CA6 1974), cert. denied, 420 U. S. 992 (1975); Estate of Duttenhofer v. Commissioner, 49 T. C. 200, 205 (1967), aff’d, 410 F. 2d 302 (CA6 1969) (per curiam).

       The administrative regulations and practices exempt late filings from the penalty when the tardiness results from postal delays, illness, and other factors largely beyond the taxpayer’s control. See supra, at 243, and n. 1. The principle underlying the IRS regulations and practices— that a taxpayer should not be penalized for circumstances beyond his control — already recognizes a range of exceptions which there is no reason for us to pass on today. This principle might well cover a filing default by a taxpayer who relied on an attorney or accountant because the taxpayer was, for some reason, incapable by objective standards of meeting the criteria of “ordinary business care and prudence.” In that situation, however, the disability alone could well be an acceptable excuse for a late filing.
      But this case does not involve the effect of a taxpayer’s disability; it involves the effect of a taxpayer’s reliance on an agent employed by the taxpayer, and our holding necessarily is limited to that issue rather than the wide range of issues that might arise in future cases under the statute and regulations. Those potential future cases are purely hypothetical at the moment and simply have no bearing on the issue now before us. The concurring opinion seems to agree in part. After four pages of discussion, it concludes:
      “Because the respondent here was fully capable of meeting the required standard of ordinary business care and prudence, we need not decide the issue of whether and under what circumstances a taxpayer who presents evidence that he was unable to adhere to the required standard might be entitled to relief from the penalty.” Post, at 255.
      This conclusion is unquestionably correct. See also, e. g., Reed v. Ross, 468 U. S. 1, 8, n. 5 (1984); Heckler v. Day, 467 U. S. 104, 119, nn. 33 and 34 (1984); Kosak v. United States, 465 U. S. 848, 853, n. 8 (1984); Bell v. New Jersey, 461 U. S. 773, 779, n. 4 (1983).

       Many systems that do not collect taxes on a self-assessment basis have experienced difficulties in administering tax collection. See J. Wagner, France’s Soak-the-Rieh Tax, Congressional Quarterly (Editorial Research Reports), Oct. 12, 1982; Dodging Taxes in the Old World, Time, Mar. 28, 1983, p. 32.

       A number of courts have indicated that “reasonable cause” is a question of fact, to be determined only from the particular situation presented in each particular case. See, e. g., Estate of Mayer v. Commissioner, 351 F. 2d 617 (CA2 1965) (per curiam), cert. denied, 383 U. S. 935 (1966); Coates v. Commissioner, 234 F. 2d 459, 462 (CA8 1956). This view is not entirely correct. Whether the elements that constitute “reasonable cause” are present in a given situation is a question of fact, but what elements must be present to constitute “reasonable cause” is a question of law. See, e. g., Haywood Lumber & Mining Co. v. Commissioner, 178 F. 2d 769, 772 (CA2 1950); Daley v. United States, 480 F. Supp. 808, 811 (ND 1979). When faced with a recurring situation, such as that presented by the instant case, the courts of appeals should not be reluctant to formulate a clear rule of law to deal with that situation.

       Courts have differed over whether a taxpayer demonstrates “reasonable cause” when, in reliance on the advice of his accountant or attorney, the taxpayer files a return after the actual due date but within the time the adviser erroneously told him was available. Compare Sanderling, Inc. v. Commissioner, 571 F. 2d 174, 178-179 (CA3 1978) (finding “reasonable cause” in such a situation); Estate of Rapelje v. Commissioner, 73 T. C. 82, 90, n. 9 (1979) (same); Estate of DiPalma v. Commissioner, 71 T. C. 324, 327 (1978) (same), acq., 1979-1 Cum. Bull. 1; Estate of Bradley v. Commissioner, 33 TCM 70, 72-73 (1974) (same), aff’d, 511 F. 2d 527 (CA6 1975), with Estate of Kerber v. United States, 717 F. 2d 454, 454-455, and n. 1 (CA8 1983) (per curiam) (no “reasonable cause”), cert. pending, No. 83-1038; Smith v. United States, 702 F. 2d 741, 742 (CA8 1983) (same); Sarto v. United States, 563 F. Supp. 476, 478 (ND Cal. 1983) (same). We need not and do not address ourselves to this issue.

       For each month or fraction of a month that a tax return is overdue, 26 U. S. C. § 6651(a)(1) provides for a mandatory penalty of 5% of the tax (up to a maximum of 25%) “unless it is shown that [the failure to file on time] is due to reasonable cause and not due to willful neglect.” As Judge Posner observed in his dissent below, “in making ‘willful neglect’ the opposite of ‘reasonable cause’ the statute might seem to have modified the ordinary meaning of ‘reasonable’. . . .” 710 F. 2d 1251, 1256 (CA7 1983).

       As the Court emphasizes, this principle of nondelegation does not extend to situations in which a taxpayer reasonably relies on expert advice concerning substantive questions of tax law, such as whether a liability exists in the first instance. Ante, at 250-251.

       It is difficult to perceive a material distinction, for example, between a filing delay that results from a serious illness in the taxpayer’s immediate family or a taxpayer’s unavoidable absence — situations in which the IRS excuses the delay — and a filing delay that comes about because the taxpayer is infirm or incompetent. The common thread running through all these unfortunate situations is that the taxpayer, for reasons beyond his control, has been unable to exercise ordinary business care and prudence.


source: Caselaw Access Project

author: Justice White Justice Rehnquist,

license: Public Domain

text:
    LAWRENCE COUNTY et al. v. LEAD-DEADWOOD SCHOOL DISTRICT NO. 40-1
    No. 83-240.
    Argued October 30, 1984
    Decided January 9, 1985

      White, J., delivered the opinion of the Court, in which Burger, C. J., and Brennan, Marshall, Blackmun, Powell, and O’Connor, JJ., joined. Rehnquist, J., filed a dissenting opinion, in which Stevens, J., joined, post, p. 270.

      Alan Raywid argued the cause for appellants. With him on the brief were John D. Seiver and Roger Tellinghuisen.

      Deputy Solicitor General Claiborne argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Lee, Assistant Attorney General Habicht, Carolyn F. Corwin, Anne S. Almy, and Anne H. Shields.

      A. P. Fuller argued the cause and filed a brief for appellee.

        Frederic Lee Ruck filed a brief for the National Association of Counties et al. as amici curiae urging reversal.

        Mark V. Meier henry, ■ Attorney General, and Mark Smith, Assistant Attorney General, filed a brief for the State of South Dakota as amicus curiae urging affirmance.

   Justice White

delivered the opinion of the Court.

The issue presented in this appeal is whether a State may regulate the distribution of funds that units of local government in that State receive from the Federal Government in lieu of taxes under 31 U. S. C. §6902. The Supreme Court of South Dakota sustained a state statute requiring local governments to spend these moneys in the same manner as they distribute taxes, holding that it was not inconsistent with the federal law. Because the language and legislative history of the federal statute indicate that Congress intended local governments to have more discretion in spending federal aid than the State would allow them, we hold that the state statute is invalid under the Supremacy Clause. Hence, we reverse.

I

The Payment in Lieu of Taxes Act, 31 U. S. C. §6901 et seq., compensates local governments for the loss of tax revenues resulting from the tax-immune status of federal lands located in their jurisdictions, and for the cost of providing services related to these lands. These “entitlement lands” include wilderness areas, national parks, and lands administered by the Bureau of Land Management. Under §6902, the Secretary of the Interior is required to make annual payments “to each unit of general local government in which entitlement land is located.” The local unit “may use the payment for any governmental purpose.” 31 U. S. C. § 6902(a). Appellant Lawrence County has received in excess of $400,000 under the Act.

In 1979, South Dakota enacted a statute requiring local governments to distribute federal payments in lieu of taxes in the same way they distribute general tax revenues. S. D. Codified Laws §5-11-6 (1980). Since the county allocates approximately 60% of its general tax revenues to its school districts, the state statute would require the county to give the school districts 60% of the § 6902 payments it receives. The county, however, declined to distribute the funds in accordance with the state statute, claiming that the Payment in Lieu of Taxes Act gave it the discretion to spend the funds for any governmental purpose it chose.

This state court litigation arose after the county’s federal court challenge to the state law was dismissed on jurisdictional grounds. Appellee Lead-Deadwood School District No. 40-1 then filed a complaint in state court, seeking a writ of mandamus to compel the county to distribute the federal funds in accordance with the state statute. The Circuit Court for the Eighth Judicial Circuit of South Dakota held that the state statute conflicted with federal law and was therefore invalid under the Supremacy Clause.

The South Dakota Supreme Court reversed. 334 N. W. 2d 24 (1983). The court noted that the only limit imposed on the local government by § 6902 is that the funds must be used for a “governmental purpose.” Since support of school districts is a valid governmental purpose, the court concluded that the state statute was consistent with federal requirements. The court therefore found it unnecessary to go behind the plain language of the statute and examine its legislative history. Two justices dissented, concluding that the statute as a whole, along with the legislative history, indicated that Congress was directing the States to “keep their noses out of the manner in which a county would distribute these funds.” Id,., at 27. We noted probable jurisdiction, 466 U. S. 903 (1984).

II

Even if Congress has not expressly pre-empted state law in a given area, a state statute may nevertheless be invalid under the Supremacy Clause if it conflicts with federal law or “stands as an obstacle to the accomplishment of the full purposes and objectives of Congress.” Silkwood v. Kerr-McGee Corp., 464 U. S. 238, 248 (1984); Hines v. Davidowitz, 312 U. S. 52, 67 (1941). In determining whether the state statute at issue here impeded the operation of the federal Act, the South Dakota Supreme Court limited its inquiry to whether the funding of school districts was a “governmental purpose.” Concluding that it was, the court found no inconsistency between the state and federal provisions. This plain language analysis, however, is seriously flawed.

The Act provides that “each unit of general local government” — in this case, the county — “may” use the moneys for “any” governmental purpose. This language appears to endow local governments with the discretion to spend in-lieu payments for any governmental purpose. It seems to say that if the local unit chooses to spend all of the money on roads, for example, it could do so. Under the state statute, however, that is forbidden: the funds must be allocated among the various services in the same manner as other revenues. The State insists that since money used as the law directs would be spent on proper governmental services, there is no inconsistency with § 6902. Under this interpretation, the word “may” confers no discretion on local governments that is immune from state control. The last sentence of § 6902(a) is drained of almost all meaning, since had it been omitted, the legal position of local governments would be precisely as described by the South Dakota Supreme Court. The sentence would become a mere admonition not to embezzle and to spend federal money on proper purposes. At the very least, § 6902 is ambiguous with respect to the degree of discretion it confers on local governments. Contrary to the views expressed in the court below, it does not of its own force dispose of the county’s case. Resort to other indicia of the meaning of the statutory language is therefore appropriate.

First, we note that the Department of the Interior, the agency charged with administration of the Act, has consistently adhered to the view that local government units retain the discretion to spend the in-lieu payments for any governmental purpose they choose. In 1977, soon after the Act was passed, the Department promulgated 43 CFR § 1881.2 (1983), which provides that “[t]he monies paid to entitled units of local government may be used for any governmental purpose.” The Department has consistently interpreted the statute as foreclosing limitations on the use of in-lieu funds. Brief for United States as Amicus Curiae 18. The interpretation of an agency charged with the administration of a statute is entitled to substantial deference, Blum v. Bacon, 457 U. S. 132, 141 (1982), if it is a sensible reading of the statutory language, which it surely is in this case, and if it is not inconsistent with the legislative history, an inquiry that we now undertake.

The Payment in Lieu of Taxes Act was passed in response to a comprehensive review of the policies applicable to the use, management, and disposition of federal lands. Public Land Law Review Commission, One Third of the Nation’s Land (1970). The Federal Government had for many years been providing payments to partially compensate state and local governments for revenues lost as a result of the presence of tax-exempt federal lands within their borders. But the Public Land Law Review Commission and Congress identified a number of flaws in the existing programs. Prominent among congressional concerns was that, under systems of direct payment to the States, local governments often received funds that were insufficient to cover the full cost of maintaining the federal lands within their jurisdictions. Where these lands consisted of wilderness or park areas, they attracted thousands of visitors each year. State governments might benefit from this federally inspired tourism through the collection of income or sales taxes, but these revenues would not accrue to local governments, who were often restricted to raising revenue from property taxes. Yet it was the local governments that bore the brunt of the expenses associated with federal lands, such as law enforcement, road maintenance, and the provision of public health services.

A second defect in the existing schemes was that the States had too much leeway with respect to the disbursement of the funds.

“Many of the revenue sharing provisions permit the States to make the decisions on how the funds will be distributed. In far too many States, the result has been that the funds are either kept at the State level and not distributed to local governments at all or are parcelled out in a manner which provides shares to local governments other than those in which the Federal lands are situated and where the impacts of the revenue and fee generating activities are felt.” S. Rep. No. 94-1262, p. 9 (1976).

The School District acknowledges that this legislative history evidences a clear intent to distribute funds directly to units of local government, bypassing the State. But it argues that the South Dakota statute poses no impediment to the accomplishment of this goal: federal money still flows directly to the county; none of it is thereafter “parcelled out” to other counties that have no federal lands within their borders; and the federal statute merely defines the “point of distribution” of funds, the State having authority to prescribe the “plan of distribution.”

As we see it, however, Congress was not merely concerned that local governments receive adequate amounts of money, and that they receive these amounts directly. Equally important was the objective of ensuring local governments the freedom and flexibility to spend the federal money as they saw fit. The Senate Committee on Interior and Insular Affairs, for example, observed:

“[T]oo many of the [existing] revenue sharing provisions restrict the use of funds to only a few governmental services — most often the construction and maintenance of roads and schools. Yet, local governments are called upon to provide many other services to the Federal lands or as a direct or indirect result of activities on the Federal lands. ... It is only the most fortunate of local governments which is able to juggle its budget to make use of those earmarked funds in a manner which will accurately correspond to its community’s service and facility needs.” Ibid.

Similarly, the House Committee concluded not only that “payments under [the Act] should go directly to units of local government,” but also that “these new payments should [not] be restricted or earmarked for use for specific purposes.” H. R. Rep. No. 94-1106, p. 12 (1976). The floor debates on the Act are replete with similar statements. The South Dakota statute, mandating that local governments spend these funds according-to a specific formula, runs directly counter to this objective. If the State may dictate a “plan” of distribution, as the School District contends, it may impose exactly the kinds of restrictions on the use of funds that Congress intended to prohibit.

That Congress made a knowing choice to vest discretion in local governments over the expenditure of in-lieu moneys is apparent from the issues posed in the congressional hearings. The question of who should actually receive the payments under the Act was the subject of extensive discussion before the House Committee, and several alternatives were considered. Although a number of witnesses advocated payments directly to the State, others argued that the counties were the appropriate recipients because, among other considerations, the counties were in the best position to determine what local functions were most in need of additional funds.

Congress also recognized that the costs associated with maintaining and serving federal lands were varied and unpredictable, and that local governments needed the flexibility to allocate in-lieu payments to these needs as they arose. The House and Senate Committee Reports listed, as examples of services required by the presence of federal lands, law enforcement, public health, sewage disposal, libraries, hospitals, recreational facilities, and search and rescue missions. The picture that emerges from the hearings on the Act is that there are many counties in which much of the land is owned by the Federal Government, and whose populations are markedly increased by tourists and hunters in the summer, in deer season, or on the weekends. These transients suffer accidents requiring emergency services or hospitalization for which they cannot always pay; commit crimes that call for police protection, prosecution, and incarceration; create waste that necessitates the construction of sewage treatment plants; use roads that must be paved and maintained; and generally impose a strain on a county’s limited resources without providing much in the way of compensating revenues. One cost unlikely to increase with the presence of this largely uninhabited federal land, however, is that of education.

Two other features of the statutory scheme shed some light on the meaning of §6902. Another provision of the Act, 31 U. S. C. § 6904(b), provides expressly that in the case of certain additional short-term federal payments in connection with the acquisition of park or wilderness areas, the Secretary “shall distribute payments proportionally to units and school districts that lost real property taxes because of the acquisition of the interest.” That Congress explicitly provided for a proportionate allocation to school districts under this provision indicates that local governments were not to be required to allocate § 6902 funds to school districts. See Fedorenko v. United States, 449 U. S. 490, 512 (1981).

A subsequent amendment to the Act provides additional support for this interpretation. See Red Lion Broadcasting Co. v. FCC, 395 U. S. 367, 380-381 (1969). In 1983, Congress amended the Act to authorize States to make limited redistributions of payments among “units of general purpose local government” within the same county. Pub. L. 98-63, 97 Stat. 324, 31 U. S. C. §6907 (1982 ed., Supp. II). This amendment indicates that Congress found it necessary to provide expressly that States might reallocate funds in certain limited circumstances and that absent such express authority, States may not interfere in a county’s decision-making with respect to these federal funds. The amendment also demonstrates that even when Congress determined that funds should be reallocated to smaller governmental units, it was careful to provide that those units have responsibility for “general purpose” local government. School districts and water districts, being limited to a single purpose, were thus excluded once again from direct receipt of this form of federal aid.

Against this background, we have little trouble in concluding that Congress intended to prohibit the kind of state-imposed limitation on the use of in-lieu payments represented by the South Dakota statute challenged in this case.

III

The School District and the State, as amicus curiae, argue that the South Dakota statute is a limited and therefore acceptable intrusion on a county’s discretion, merely requiring it to spend in-lieu payments in the same manner as it spends tax revenues. But we are inclined to credit the county’s insistence that the intrusion would not be negligible, or even modest. Absent elaborate and speculative calculations and budget juggling, the allocation of federal payments in the same proportion as local revenue would most likely result in a windfall for school districts and other entities that are already fully funded by local revenues. The federal money would not serve its intended purpose of compensating local governments for extraordinary or additional expenditures associated with federal lands. A county conceivably could avoid this result, but the strong congressional concern that local governments have maximum flexibility in this area indicates that counties should not encounter substantial interference from the State in allocating funds to the area of greatest need.

The School District and the State also argue that because of concerns of federalism, the Federal Government may not intrude lightly into the State’s efforts to provide fiscal guidance to its subdivisions. The Federal Government, however, has not presumed to dictate the manner in which the counties may spend state in-lieu-of-tax payments. Rather, it has merely imposed a condition on its disbursement of federal funds. The condition in this instance is that the counties should not be denied the discretion to spend §6902 funds for any governmental purpose, including expenditures that are linked to federal lands within their borders. It is far from a novel proposition that pursuant to its powers under the Spending Clause, Congress may impose conditions on the receipt of federal funds, absent some independent constitutional bar. In our view, Congress was sufficiently clear in its intention to funnel § 6902 moneys directly to local governments, so that they might spend them for governmental purposes without substantial interference.

IV

Because existing methods of funding did not provide local governments with the funds and flexibility needed to meet the demands created by the presence of federal lands in their jurisdictions, Congress crafted a scheme designed to ensure that the funds would reach and be placed at the disposal of the affected local governments. The attempt of the South Dakota legislation to limit the manner in which counties or other qualified local governmental units may spend federal in-lieu-of-tax payments obstructs this congressional purpose and runs afoul of the Supremacy Clause. Congress intended the affected units of local government, such as Lawrence County, to be the managers of these funds, not merely the State’s cashiers.

Accordingly, the judgment of the South Dakota Supreme Court is

Reversed.

Justice Rehnquist,

with whom Justice Stevens joins,

dissenting.

In Hunter v. Pittsburgh, 207 U. S. 161 (1907), this Court unanimously described the “settled doctrines of this Court” with respect to States, on the one hand, and counties and other municipal corporations within them, on the other:

“Municipal corporations are political subdivisions of the State, created as convenient agencies for exercising such of the governmental powers of the State as may be entrusted to them. For the purpose of executing these powers properly and efficiently they usually are given the power to acquire, hold, and manage personal and real property. The number, nature and duration of the powers conferred upon these corporations and the territory over which they shall be exercised rests in the absolute discretion of the State.” Id., at 178.

Flying in the face of this settled doctrine, the Court today holds that Congress, by providing for payments of federal funds in lieu of taxes to counties in South Dakota, implicitly prohibited the State of South Dakota from regulating in any way the manner in which its counties might spend those funds. Recognizing that the statutory language does not support such a result, the Court seeks to glean from bits and pieces of the testimony of witnesses before congressional Committees, and from selected statements in Committee Reports which do not address the question here at issue, ammunition for the result it reaches. I do not think the Court’s opinion succeeds in this rather formidable task.

The statute in question, 81 U. S. C. § 6902(a), provides:

“The Secretary of the Interior shall make a payment for each fiscal year to each unit of general local government in which entitlement land is located. A unit may use the payment for any governmental purpose.”

Surely the normal reading of this language would be that appellant Lawrence County is entitled to receive a payment each year from the Secretary of the Interior, and that it may use this payment for any purpose lawful under the system of laws that regulates its activities. The statutes of South Dakota constitute the system of laws regulating Lawrence County. They require in this case that all “in-lieu payments” received by the county, whether from the State or the Federal Government, shall be distributed by the county “in the same manner as taxes are distributed.” S. D. Codified Laws §5-11-6 (1980). In Lawrence County this would mean that appellee Lead-Deadwood School District would receive 60% of the payment. The Court’s opinion, however, says the State may not impose such a neutral requirement on the county’s disposition of the federal in-lieu payments. The opinion is necessarily premised on the assumption that the words “governmental purpose” in the federal statute somehow emancipate the county from the state regimen as to what is and is not a proper governmental purpose for a county. The Court apparently creates a new federal definition of “governmental purpose,” the confines of which are left wholly undeveloped.

The Court relies upon the “administrative construction” of the Act as a primary reason for reaching the result that it does. But the vaunted “administrative construction” simply restates the statutory language in the form of a regulation, 43 CFR § 1881.2 (1983), without any explanatory language. The Court says that “[t]he department has consistently interpreted the statute as foreclosing limitations on the use of in-lieu funds” and cites to a reference in the brief of the United States in this case. Ante, at 261. But the part of the brief cited by the Court refers to a regulation prohibiting school districts from receiving funds directly, and to the above-quoted language simply repeating the words of the statute. Neither of the regulations relied upon supports the Court’s bland statement that administrative regulations have foreclosed limitations by the State on the counties’ use of in-lieu funds.

Other legislative materials upon which the Court relies are similarly inapt or ambiguous. The conclusion of the House Committee, for example, H. R. Rep. No. 94-1106, p. 12 (1976), that “these new payments should [not] be restricted or earmarked for use for specific purposes” does not by its terms, or fairly interpreted, prohibit States from having any say in the way counties may spend federal in-lieu payments. This statement could just as fairly be interpreted as indicating an intention on the part of Congress not to restrict or earmark such in-lieu funds for a particular purpose.

This two-sentence statutory provision enacted by Congress certainly does not proclaim by its language any single meaning, but one would be hard pressed to derive a more tortured meaning from it than that chosen by the Court. It may be that Congress, by providing that payments be made directly to the counties rather than to the States, implied a desire to have the money spent in the counties. But nothing in the South Dakota statute requires any contrary result; all the South Dakota statute requires is that the counties allocate a part of the money to school districts within the county, just as general tax revenues and state in-lieu payments are allocated. The Court’s collection of reasons why Congress intended to prohibit this result is simply not convincing in the light of the long history of treatment of counties as being by law totally subordinate to the States which have created them. I would therefore affirm the judgment of the Supreme Court of South Dakota.

       The Payment in Lieu of Taxes Act formerly appeared at 31 U. S. C. § 1601 et seq. (1976 ed.). Title 31 of the United States Code was recodified in 1982 by Pub. L. 97-258, 96 Stat. 877 et seq. The recodification did not make any substantive change in the law. See H. R. Rep. No. 97-651, p. 3 (1982).

       Other “entitlement lands” are lands used by the Army Corps of Engineers for water resource development projects and dredge disposal areas, as well as lands on which semiactive and inactive military installations are located. See 31 U. S. C. §6901(1).

       A “unit of general local government” is defined elsewhere in the Act to include “a county (or parish), township, ... or city where the city is independent of any other unit of general local government.” 31 U. S. C. § 6901 (as amended by Pub. L. 98-63, 97 Stat. 323). Special purpose public bodies, such as school boards, are not included in the definition. H. R. Rep. No. 94-1106, p. 12 (1976). See also 43 CFR § 1881.0-5(b)(2) (1983).

       Section 6902(a) provides in full: “The Secretary of the Interior shall make a payment for each fiscal year to each unit of general local government in which entitlement land is located. A unit may use the payment for any governmental purpose.”

       The statute provides: “The county auditor shall distribute federal and state payments in lieu of tax proceeds in the same manner as taxes are distributed.”

       The county originally sought a declaratory judgment that the state statute conflicted with the federal Act and was therefore invalid under the Supremacy Clause. The Federal District Court entered a declaratory judgment in favor of the county. Lawrence County v. South Dakota, 513 F. Supp. 1040 (SD 1981). The Court of Appeals for the Eighth Circuit vacated that judgment, however, concluding that the county’s invocation of the Supremacy Clause did not convert the action into one arising under federal law for purposes of federal jurisdiction under 28 U. S. C. § 1331. 668 F. 2d 27 (1982). This ruling was erroneous. In Shaw v. Delta Air Lines, Inc., 463 U. S. 85 (1983), we granted declaratory relief to a party challenging a state statute on pre-emption grounds, reaffirming the general rule that “[a] plaintiff who seeks injunctive relief from state regulation, on the ground that such regulation is pre-empted by a federal statute which, by virtue of the Supremacy Clause of the Constitution, must prevail, thus presents a federal question which the federal courts have jurisdiction under 28 U. S. C. § 1331 to resolve.” Id., at 96, n. 14.

       The regulation exempts from this discretion payments required to be allocated proportionately to school districts under 31 U. S. C. § 6904. See infra, at 267. Two courts have found these regulations consistent with the Act. See Altus-Denning School District No. 31 v. Franklin County, 568 F. Supp. 95, 102 (WD Ark. 1983); Kendall v. Towns County, 146 Ga. App. 760, 247 S. E. 2d 577 (1978). In Altus-Denning, the court also held that an Arkansas statute, if interpreted to require counties to share § 6902 payments with school districts, would conflict with the Act’s “any governmental purpose” language.

       See S. Rep. No. 94-1262, pp. 5-6 (1976).

         Id., at 8-9. See also H. R. Rep. No. 94-1106, at 6.

       See also ibid.

       See 122 Cong. Rec. 25747 (1976) (statement of Rep. Weaver) (revenue-sharing payments are inadequate because earmarked for roads and schools, when needs are fire protection, sewage treatment, etc.); id., at 25750 (statement of Rep. Baucus); id., at 25754 (statement of Rep. McCormack).

       Hearings on H. R. 1678 and Related Bills before the Subcommittee on the Environment of the House Committee on Interior and Insular Affairs, 93d Cong., 2d Sess., 60 (1974) (statement of Rep. Dick Shoup of Montana). See also id., at 137 (statement of Kent Nelson, Six-County Economic Development District), 146-149 (statements of Hector Chiara and Guido Raehiele, Commissioners, Carbon County, Utah), 169-170 (statement of Dixie Leavitt, Utah State Senator). One reason this subject was under discussion was that a few years earlier, state-county rivalry had erupted over the distribution of general federal revenue-sharing funds. Representative Morris Udall, who chaired the hearings, referred to this controversy several times, asking witnesses to comment on whether payments in lieu of taxes should be distributed to the States or to local governments. See, e. g., id., at 71-72, 85-86, 146, 157. Pros and cons of both methods were aired, and various witnesses argued that state supervision was necessary to ensure that federal funds reached areas that did not themselves contain federal lands but felt the impact of their presence in neighboring counties. See id., at 17, 27-28, 85-86, 146. Thus, the decision to distribute the funds directly to the local governments was a considered one.

       See H. R. Rep. No. 94-1106, at 6; S. Rep. No. 94-1262, at 9.

       See Hearings on H. R. 9719 before the Subcommittee on Energy and the Environment of the House Committee on Interior and Insular Affairs, 94th Cong., 1st Sess., 21 (1975) (hereinafter 1975 Hearings) (statement of George Buzianis, Chairman of Tooele County Commission, Utah); id., at 29 (statement of Calvin Black, Commissioner, San Juan County, Utah); id., at 102-103 (statement of Eyer Boies, Chairman of Board of County Commissioners, Elko County, Nevada); id., at 111 (statement of James Fairfield, Mineral County Board of Commissioners); id., at 258 (remarks of Rep. Jim Santini of Nevada); id., at 298 (statement of Rep. James Oberstar of Minnesota).

         Id., at 33 (statement of Ivan Matheson, Chairman, County Official Association); id., at 103 (statement of Eyer Boies, Chairman of Board of County Commissioners, Elko County, Nevada); id., at 151 (submission of Bill MacDonald, District Attorney, Humboldt County, Nevada); id., at 258 (remarks of Rep. Jim Santini of Nevada).

         Id., at 22 (statement of George Buzianis, Chairman of Tooele County Commission, Utah) (“[PJolice protection is one main problem, vandalism, and so forth. We do not have funds to go out and police these BLM [Bureau of Land Management] lands”); id., at 151 (submission of Bill MacDonald, District Attorney, Humboldt County, Nevada) (“The vast majority of criminal cases involve transients who are passing through and decide to knock over a general mercantile, give a motel a bad check, burglarize a home or ranch, get a tank of gas and run without paying... etc.”). In one county, the trial of a transient on a murder charge cost $25,000, “[w]ith the budget averaging $10,000 or $15,000 for this type of thing.” Id., at 146 (statement of Kenneth Lee, Lincoln County Commissioner).

         Id., at 45 (submission of Dale Sowards, President, Colorado Counties, Inc.); id., at 298-299 (statement of Rep. James Oberstar of Minnesota).

         Id., at 19 (statement of George Buzianis, Chairman, Tooele County Commission, Utah); id., at 27 (statement of Calvin Black, Commissioner, San Juan County, Utah); id., at 33 (statement of Ivan Matheson, Chairman, County Official Association).

       See id., at 280-281 (statement of Rep. Simon) (noting need for flexibility in distribution of federal funds, since “the need in Pope County is not for the schools”). To the extent that the presence of federal lands does increase education costs, other programs specifically provide compensation to cover those costs. See 31 U. S. C. § 6904(b); 20 U. S. C. § 236 et seq.

       The House Committee Report specifically noted that local governmental units with a single purpose, such as school districts, would not qualify to receive payments directly from the Federal Government. See n. 3, supra.

       Section 6907(a) provides:
      “Notwithstanding any other provision of this chapter, a State may enact legislation which requires that any payments which would be made to units of general local government pursuant to this chapter be reallocated and redistributed in whole or part to other smaller units of general purpose government which (1) are located within the boundaries of the larger unit of general local government, (2) provide general governmental services and (3) contain entitlement lands within their boundaries. Such reallocation or redistribution shall generally reflect the level of services provided by, and the number of entitlement acres within, the smaller unit of general local government.”
      This amendment came in response to a ruling by the Court of Appeals for the Sixth Circuit that the Secretary of the Interior had exceeded his authority under the Act in barring certain townships from receiving funds. Meade Township v. Andrus, 695 F. 2d 1006 (1982). The Secretary had promulgated a regulation allocating revenues to townships only if they were the “principal providers of services” on the local level. The Sixth Circuit held that this regulation conflicted with the Act’s assumption that more than one unit of local government may have jurisdiction over the same entitlement lands, and with the Act’s “expressed preference for smaller ‘units of local government.’” Id., at 1009. Congress amended the Act in 1983 in order to allow the Secretary to continue to make § 6902 payments directly to counties for reasons of administrative efficiency. If, however, in a particular State, the relevant governmental services are actually provided by smaller units than counties, the amendment gives the State the authority to reallocate the funds to those smaller units. See S. Rep. No. 98-141, p. 4 (1983); 129 Cong. Ree. S8444 (June 15, 1983) (statement of Sen. Durenberger).
      There is no indication in the legislative history of the amendment that it was intended to cede any power or money from local governments to the State. After its passage, one of its sponsors made it clear that any cost of administering the reallocation was to be borne by the States, not the local governments. 130 Cong. Rec. E1440-E1441 (Apr. 4, 1984) (statement of Rep. Kogovsek).

       See n. 3 , supra.

       The South Dakota statute, S. D. Codified Laws §5-11-6 (1980), requires that both state and federal in-lieu payments be distributed in the same manner as tax revenues.

       See, e. g., King v. Smith, 392 U. S. 309, 333, n. 34 (1968).


author: Justice White Justice O’Connor,

text:
    OHIO v. KOVACS, dba B & W ENTERPRISES et al.
    No. 83-1020.
    Argued October 10, 1984
    Decided January 9, 1985

      White, J., delivered the opinion for a unanimous Court. O’Connor, J., filed a concurring opinion, post, p. 285.

      E. Dennis Muchnicki, Assistant Attorney General of Ohio, argued the cause for petitioner. With him on the briefs was Anthony J. Celebrezze, Jr., Attorney General.

      Kathryn A. Oberly argued the cause for the United States as amicus curiae urging reversal. With her on the brief were Solicitor General Lee, Assistant Attorney General Habicht, Deputy Solicitor General Claiborne, Peter R. Steenland, Jr., and Dirk D. Snel.

      David A. Caldwell argued the cause and filed a brief for respondent.

      Briefs of amici curiae urging reversal were filed for the Commonwealth of Pennsylvania et al. by Leroy S. Zimmerman, Attorney General, Howard J. Wein, and James D. Morris; and for the Council of State Governments et al. by Lawrence R. Velvet.

   Justice White

delivered the opinion of the Court.

Petitioner State of Ohio obtained an injunction ordering respondent William Kovacs to clean up a hazardous waste site. A receiver was subsequently appointed. Still later, Kovacs filed a petition for bankruptcy. The question before us is whether, in the circumstances present here, Kovacs’ obligation under the injunction is a “debt” or “liability on a claim” subject to discharge under the Bankruptcy Code.

I

Kovacs was the chief executive officer and stockholder of Chem-Dyne Corp., which with other business entities operated an industrial and hazardous waste disposal site in Hamilton, Ohio. In 1976, the State sued Kovacs and the business entities in state court for polluting public waters, maintaining a nuisance, and causing fish kills, all in violation of state environmental laws. In 1979, both in his individual capacity and on behalf of Chem-Dyne, Kovacs signed a stipulation and judgment entry settling the lawsuit. Among other things, the stipulation enjoined the defendants from causing further pollution of the air or public waters, forbade bringing additional industrial wastes onto the site, required the defendants to remove specified wastes from the property, and ordered the payment of $75,000 to compensate the State for injury to wildlife.

Kovacs and the other defendants failed to comply with their obligations under the injunction. The State then obtained the appointment in state court of a receiver, who was directed to take possession of all property and other assets of Kovacs and the corporate defendants and to implement the judgment entry by cleaning up the Chem-Dyne site. The receiver took possession of the site but had not completed his tasks when Kovacs filed a personal bankruptcy petition.

Seeking to develop a basis for requiring part of Kovacs’ postbankruptcy income to be applied to the unfinished task of the receivership, the State then filed a motion in state court to discover Kovacs’ current income and assets. Kovacs requested that the Bankruptcy Court stay those proceedings, which it did. The State also filed a complaint in the Bankruptcy Court seeking a declaration that Kovacs’ obligation under the stipulation and judgment order to clean up the Chem-Dyne site was not dischargeable in bankruptcy because it was not a “debt,” a liability on a “claim,” within the meaning of the Bankruptcy Code. In addition, the complaint sought an injunction against the bankruptcy trustee to restrain him from pursuing any action to recover assets of Kovacs in the hands of the receiver. The Bankruptcy Court ruled against Ohio, In re Kovacs, 29 B. R. 816 (SD Ohio 1982), as did the District Court. The Court of Appeals for the Sixth Circuit affirmed, holding that Ohio essentially sought from Kovacs only a monetary payment and that such a required payment was a liability on a claim that was dis-chargeable under the bankruptcy statute. In re Kovacs, 717 F. 2d 984 (1983). We granted certiorari to determine the dischargeability of Kovacs’ obligation under the affirmative injunction entered against him. 465 U. S. 1078 (1984).

II

Kovacs alleges that the Army Corps of Engineers, using funds recovered from those concerns that generated the wastes, has removed all industrial wastes from the site and that if he has an obligation to pay those expenses, the obligation is owed to the United States, not the State. Kovacs urges that the case is therefore moot. The State argues that the case is not moot because the removal of the barrels and wastes from the surface did not satisfy all of Kovacs’ obligations to clean up the site; it is said that the ground itself remains permeated with toxic materials that must be removed if further pollution of the public waters is to be avoided. We perceive nothing feigned or frivolous about the State’s submission. Sibron v. New York, 392 U. S. 40, 57 (1968). The State surely has a stake in the outcome of this case, United States Parole Comm’n v. Geraghty, 445 U. S. 388, 397 (1980), which in our view is not moot. We proceed to the merits.

Ill

Except for the nine kinds of debts saved from discharge by 11 U. S. C. § 523(a), a discharge in bankruptcy discharges the debtor from all debts that arose before bankruptcy. § 727(b). It is not claimed here that Kovacs’ obligation under the injunction fell within any of the categories of debts excepted from discharge by §523. Rather, the State submits that the obligation to clean up the Chem-Dyne site is not a debt at all within the meaning of the bankruptcy law.

For bankruptcy purposes, a debt is a liability on a claim. § 101(11). A claim is defined by § 101(4) as follows:

“(4) ‘claim’ means—
“(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or “(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unma-tured, disputed, undisputed, secured, or unsecured.”

The provision at issue here is § 101(4)(B). For the purposes of that section, there is little doubt that the State had the right to an equitable remedy under state law and that the right has been reduced to judgment in the form of an injunction ordering the cleanup. The State argues, however, that the injunction it has secured is not a claim against Kovacs for bankruptcy purposes because (1) Kovacs’ default was a breach of the statute, not a breach of an ordinary commercial contract which concededly would give rise to a claim; and (2) Kovacs’ breach of his obligation under the injunction did not give rise to a right to payment within the meaning of § 101(4)(B). We are not persuaded by either submission.

There is no indication in the language of the statute that the right to performance cannot be a claim unless it arises from a contractual arrangement. The State resorted to the courts to enforce its environmental laws against Kovacs and secured a negative order to cease polluting, an affirmative order to clean up the site, and an order to pay a sum of money to recompense the State for damage done to the fish population. Each order was one to remedy an alleged breach of Ohio law; and if Kovacs’ obligation to pay $75,000 to the State is a debt dischargeable in bankruptcy, which the State freely concedes, it makes little sense to assert that because the cleanup order was entered to remedy a statutory violation, it cannot likewise constitute a claim for bankruptcy purposes. Furthermore, it is apparent that Congress desired a broad definition of a “claim” and knew how to limit the application of a provision to contracts when it desired to do so. Other provisions cited by Ohio refute, rather than support, its strained interpretation.

The courts below also found little substance in the submission that the cleanup obligation did not give rise to a right to payment that renders the order dischargeable under §727. The definition of “claim” in H. R. 8200 as originally drafted would have deemed a right to an equitable remedy for breach of performance a claim even if it did not give rise to a right to payment. The initial Senate definition of claim was narrower, and a compromise version, §101(4), was finally adopted. In that version, the key phrases “equitable remedy,” “breach of performance,” and “right to payment” are not defined. See 11 U. S. C. § 101. Nor are the differences between the successive versions explained. The legislative history offers only a statement by the sponsors of the Bankruptcy Reform Act with respect to the scope of the provision:

“Section 101(4)(B) ... is intended to cause the liquidation or estimation of contingent rights of payment for which there may be an alternative equitable remedy with the result that the equitable remedy will be susceptible to being discharged in bankruptcy. For example, in some States, a judgment for specific performance may be satisfied by an alternative right to payment in the event performance is refused; in that event, the creditor entitled to specific performance would have a ‘claim’ for purposes of a proceeding under title 11.”

We think the rulings of the courts below were wholly consistent with the statute and its legislative history, sparse as it is. The Bankruptcy Court ruled as follows, In re Kovacs, 29 B. R., at 818:

“There is no suggestion by plaintiff that defendant can render performance under the affirmative obligation other than by the payment of money. We therefore conclude that plaintiff has a claim against defendant within the meaning of 11 U. S. C. § 101(4), and that defendant owes plaintiff a debt within the meaning of 11 U. S. C. §101(11). Furthermore, we have concluded that that debt is dischargeable.”

The District Court affirmed, primarily because it was bound by and saw no error in the Court of Appeals’ prior opinion holding that the State was seeking no more than a money judgment as an alternative to requiring Kovacs personally to perform the obligations imposed by the injunction. To hold otherwise, the District Court explained, “would subvert Congress’ clear intention to give debtors a fresh start.” App. JA-16. The Court of Appeals also affirmed, rejecting the State’s insistence that it had no right to, and was not attempting to enforce, an alternative right to payment:

“Ohio does not suggest that Kovacs is capable of personally cleaning up the environmental damage he may have caused. Ohio claims there is no alternative right to payment, but when Kovacs failed to perform, state law gave a state receiver total control over all Kovacs’ assets. Ohio later used state law to try and discover Kovacs’ post-petition income and employment status in an apparent attempt to levy on his future earnings. In reality, the only type of performance in which Ohio is now interested is a money payment to effectuate the Chem-Dyne cleanup.
“The impact of its attempt to realize upon Kovacs’ income or property cannot be concealed by legerdemain or linguistic gymnastics. Kovacs cannot personally clean up the waste he wrongfully released into Ohio waters. He cannot perform the affirmative obligations properly imposed upon him by the State court except by paying money or transferring over his own financial resources. The State of Ohio has acknowledged this by its steadfast pursuit of payment as an alternative to personal performance.” 717 P. 2d, at 987-988.

As we understand it, the Court of Appeals held that, in the circumstances, the cleanup duty had been reduced to a monetary obligation.

We do not disturb this judgment. The injunction surely obliged Kovacs to clean up the site. But when he failed to do so, rather than prosecute Kovacs under the environmental laws or bring civil or criminal contempt proceedings, the State secured the appointment of a receiver, who was ordered to take possession of all of Kovacs’ nonexempt assets as well as the assets of the corporate defendants and to comply with the injunction entered against Kovacs. As wise as this course may have been, it dispossessed Kovacs, removed his authority over the site, and divested him of assets that might have been used by him to clean up the property. Furthermore, when the bankruptcy trustee sought to recover Kovacs’ assets from the receiver, the latter sought an injunction against such action. Although Kovacs had been ordered to “cooperate” with the receiver, he was disabled by the receivership from personally taking charge of and carrying out the removal of wastes from the property. What the receiver wanted from Kovacs after bankruptcy was the money to defray cleanup costs. At oral argument in this Court, the State’s counsel conceded that after the receiver was appointed, the only performance sought from Kovacs was the payment of money. Tr. of Oral Arg. 19-20. Had Kovacs furnished the necessary funds, either before or after bankruptcy, there seems little doubt that the receiver and the State would have been satisfied. On the facts before it, and with the receiver in control of the site, we cannot fault the Court of Appeals for concluding that the cleanup order had been converted into an obligation to pay money, an obligation that was dischargeable in bankruptcy.

IV

It is well to emphasize what we have not decided. First, we do not suggest that Kovacs’ discharge will shield him from prosecution for having violated the environmental laws of Ohio or for criminal contempt for not performing his obligations under the injunction prior to bankruptcy. Second, had a fine or monetary penalty for violation of state law been imposed on Kovacs prior to bankruptcy, § 523(a)(7) forecloses any suggestion that his obligation to pay the fine or penalty would be discharged in bankruptcy. Third, we do not address what the legal consequences would have been had Kovacs taken bankruptcy before a receiver had been appointed and a trustee had been designated with the usual duties of a bankruptcy trustee. Fourth, we do not hold that the injunction against bringing further toxic wastes on the premises or against any conduct that will contribute to the pollution of the site or the State’s waters is dischargeable in bankruptcy; we here address, as did the Court of Appeals, only the affirmative duty to clean up the site and the duty to pay money to that end. Finally, we do not question that anyone in possession of the site — whether it is Kovacs or another in the event the receivership is liquidated and the trustee abandons the property, or a vendee from the receiver or the bankruptcy trustee — must comply with the environmental laws of the State of Ohio. Plainly, that person or firm may not maintain a nuisance, pollute the waters of the State, or refuse to remove the source of such conditions. As the case comes to us, however, Kovacs has been dispossessed and the State seeks to enforce his cleanup obligation by a money judgment.

The judgment of the Court of Appeals is

Affirmed.

Justice O’Connor,

concurring.

I join the Court’s opinion and agree with its holding that the cleanup order has been reduced to a monetary obligation dischargeable as a “claim” under §727 of the Bankruptcy Code. I write separately to address the petitioner’s concern that the Court’s action will impede States in enforcing their environmental laws.

To say that Kovacs’ obligation in these circumstances is a claim dischargeable in bankruptcy does not wholly excuse the obligation or leave the State without any recourse against Kovacs’ assets to enforce the order. Because “Congress has generally left the determination of property rights in the assets of a bankrupt’s estate to state law,” Butner v. United States, 440 U. S. 48, 54 (1979), the classification of Ohio’s interest as either a lien on the property itself, a perfected security interest, or merely an unsecured claim depends on Ohio law. That classification — a question not before us — generally determines the priority of the State’s claim to the assets of the estate relative to other creditors. Cf. 11 U. S. C. § 545 (trustee may avoid statutory liens only in specified circumstances). Thus, a State may protect its interest in the enforcement of its environmental laws by giving cleanup judgments the status of statutory liens or secured claims.

The Court’s holding that the cleanup order was a “claim” within the meaning of § 101(4) also avoids potentially adverse consequences for a State’s enforcement of its order when the debtor is a corporation, rather than an individual. In a Chapter 7 proceeding under the Bankruptcy Code, a corporate debtor transfers its property to a trustee for distribution among the creditors who hold cognizable claims, and then generally dissolves under state law. Because the corporation usually ceases to exist, it has no postbankruptcy earnings that could be utilized by the State to fulfill the cleanup order. The State’s only recourse in such a situation may well be its “claim” to the prebankruptcy assets.

For both these reasons, the Court’s holding today cannot be viewed as hostile to state enforcement of environmental laws.

       Kovacs originally filed a reorganization petition under Chapter 11 of the Bankruptcy Code, 11U. S. C. § 1101 et seq., but converted the petition to a liquidation bankruptcy under Chapter 7. See 11 U. S. C. § 1112.

       The Bankruptcy Court held that the requested hearing was an effort to collect money from Kovacs in violation of the automatic stay provision. See 11 U. S. C. § 362. It entered a specific stay as well. The District Court affirmed, ruling that Ohio was trying to enforce a judgment obtained before filing of the bankruptcy petition. The Court of Appeals for the Sixth Circuit also found the hearing barred. In re Kovacs, 681 F. 2d 454 (1982). In that court’s view, while § 362(b) allowed governmental units to continue to enforce police powers through mandatory injunctions, it denied them the power to collect money in their enforcement efforts. Because of the later filing by Ohio of a complaint to declare that Kovacs’ obligations were not claims under bankruptcy, we granted certiorari, vacated the judgment of the Court of Appeals, and remanded to that court to consider whether the dispute over the stay was moot. 459 U. S. 1167 (1983). As far as we are advised, the Court of Appeals has taken no action on the remand.

       H. R. Rep. No. 95-595, p. 309 (1977); S. Rep. No. 95-989, p. 21 (1978). See 2 R. Levin & K. Klee, Collier on Bankruptcy ¶ 101-.04, p. 101-16.4 (15th ed. 1984).

         See 11 U. S. C. § 365 (assumption or rejection of executory contracts and leases).

       Congress created exemptions from discharge for claims involving penalties and forfeitures owed to a governmental unit, 11 U. S. C. § 523(a)(7), and for claims involving embezzlement and larceny. § 523(a)(4). If a bankruptcy debtor has committed larceny or embezzlement, giving rise to a remedy of either damages or equitable restitution under state law, the resulting liability for breach of an obligation created by law is clearly a claim which is nondisehargeable in bankruptcy.

       H. R. 8200, 95th Cong., 1st Sess., 309-310 (House Committee print 1977), as reported September 8, 1977.

       See S. 2266, 95th Cong., 1st Sess., 299 (1977), as introduced October 31, 1977.

       124 Cong. Rec. 32393 (1978) (remarks of Rep. Edwards); see also id., at 33992 (remarks of Sen. DeConcini).

       More fully stated, the Bankruptcy Court’s observations were:
      “What is at stake in the present motion is whether defendant’s bankruptcy will discharge the affirmative obligation imposed upon him by the Judgment Entry, that he remove and dispose of all industrial and/or other wastes at the subject premises. If plaintiff is successful here, it would be able to levy on defendant’s wages, the action prevented by our Prior Decision, after defendant’s bankruptcy case is closed and/or the stay of 11 U. S. C. § 362 as interpreted by our Prior Decision is no longer in force. The parties have crystallized the issue here in simple fashion, plaintiff stoutly insisting that the just identified affirmative obligation is not a monetary obligation, while defendant says that it is. The problem arises, of course, because it is not stated as a monetary obligation. Essentially for this reason plaintiff argues that it is not a monetary obligation. Yet plaintiff in discussing the background for the Judgment Entry says that it expected that defendant would generate sufficient funds in his ongoing business to pay for the clean-up. Moreover, we take judicial notice that plaintiff sought discovery with respect to defendant’s earnings, the matter dealt with in our Prior Decision, for the purpose of levying upon his wages, a technique which has no application other than in the enforcement of a money judgment. There is no suggestion by plaintiff that defendant can render performance under the affirmative obligation other than by the payment of money. We therefore conclude that plaintiff has a claim against defendant within the meaning of 11 U. S. C. § 101(4), and that defendant owes plaintiff a debt within the meaning of 11 U. S. C. § 101(11). Furthermore, we have concluded that that debt is dischargeable.” 29 B. R., at 818.

       We were advised at oral argument that the receiver at that time was still in possession of the site, although he was contemplating terminating the receivership. Tr. of Oral Arg. 4, 56-57. We were also advised that it was difficult to tell exactly who owned the property at 500 Ford Boulevard and that although the trustee did not formally abandon the property, he did not seek to take possession of it. Id., at 55, 58.

       The State relies on Penn Terra, Ltd. v. Department of Environmental Resources, 733 F. 2d 267 (CA3 1984). There, the Court of Appeals for the Third Circuit held that the automatic stay provision of 11U. S. C. § 362 did not apply to the State’s seeking an injunction against a bankrupt to require compliance with the environmental laws. This was held to be an effort to enforce the police power statutes of the State, not a suit to enforce a money judgment. But in that case, there had been no appointment of a receiver who had the duty to comply with the state law and who was seeking money from the bankrupt. The automatic- stay provision does not apply to suits to enforce the regulatory statutes of the State, but the enforcement of such a judgment by seeking money from the bankrupt — what the Court of Appeals for the Sixth Circuit concluded was involved in this case — is another matter.

       The commencement of a case under the Bankruptcy Code creates an estate which, with limited exceptions, consists of all of the debtor’s property wherever located. 11U. S. C. § 541. The trustee, who is to be appointed promptly in Chapter 7 cases, is charged with the duty of collecting and reducing the property of the estate and is to be accountable for all of such property. 11 U. S. C. § 704. A custodian of the debtor’s property appointed before commencement of the case is required to deliver the debt- or’s property in his custody to the trustee, unless the bankruptcy court concludes that the interest of creditors would be better served by permitting the custodian to continue in possession and control of the property. 11 U. S. C. § 543. After notice and hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value to the estate. 11 U. S. C. § 554. Such abandonment is to the person having the possessory interest in the property. S. Rep. No. 95-989, p. 92 (1978). Property that is scheduled but not administered is deemed abandoned. 11 U. S. C. § 554(e). Had no receiver been appointed prior to Kovacs’ bankruptcy, the trustee would have been charged with the duty of collecting Kovacs’ nonexempt property and administering it. If the site at issue were Kovacs’ property, the trustee would shortly determine whether it was of value to the estate. If the property was worth more than the costs of bringing it into compliance with state law, the trustee would undoubtedly sell it for its net value, and the buyer would clean up the property, in which event whatever obligation Kovacs might have had to clean up the property would have been satisfied. If the property were worth less than the cost of cleanup, the trustee would likely abandon it to its prior owner, who would have to comply with the state environmental law to the extent of his or its ability.