How Do You Interpret Terms Used in Statutes?

By on February 26, 2018

Statutes in the Internal Revenue Code (Code), like statutes in other areas of the law, are filled with terms that invite differing interpretations. As a general rule, a statutory term should be given its normal and customary meaning. This might entail resorting to common dictionary definitions from Webster’s or Black’s Law Dictionary. It might also entail looking to the established meaning of the term in the relevant industry. But what if the Code provides a specific definition of a term that varies from the ordinary meaning?

In Digital Realty Trust, Inc. v. Somers, S.Ct. No. 16-1276 (Feb. 21, 2018), the parties disputed the meaning of the term “whistleblower” as set forth in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The statute at issue specifically defined the term “whistleblower” to mean “any individual who provides … information relating to a violation of the securities laws to the [Securities and Exchange] Commission.” The question before the Court was whether the statute extended to an individual who had not reported a violation of the laws to the Commission fell within the definition of a whistleblower.

The Court answered the question in the negative: “‘When a statute includes an explicit definition, we must follow that definition,’ even if it varies from a term’s ordinary meaning. Burgess v. United States, 553 U.S. 124, 130 (2008) (internal quotation marks omitted).” Thus, because the specific definition of “whistleblower” in the relevant statute required providing information to the Commission, an individual who did not do so failed to meet the definitional requirements of the statute.

Practice Point: Taxpayers and their advisors must constantly review and interpret provisions of the Code, including the meaning of specific terms used by Congress. The Supreme Court’s holding in Digital Realty Trust confirms that if a specific definition is provided then it must be followed even if that definition is contrary to the normal and customary meaning or the established meaning in the relevant industry.

Andrew R. Roberson
Andrew (Andy) R. Roberson focuses his practice on tax controversy and litigation matters. He represents clients before the Internal Revenue Service (IRS) Examination Division and Appeals Office and has been involved in over 75 matters at all levels of the federal court system, including the US Tax Court and Federal District Courts, several US Courts of Appeal and the Supreme Court. Andy has experience settling tax disputes through alternative dispute resolution procedures, including Fast Track Settlement and Post-Appeals Mediation, and in representing clients in Compliance Assurance Process (CAP) audits. In addition to representing corporations and partnerships in tax disputes, he also represents high net-worth individuals and assists taxpayers needing to make voluntary disclosures. Read Andy Roberson's full bio.

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