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The Complainant is Eurobet UK Limited, Barking, United Kingdom of Great Britain and Northern Ireland, represented by Diane Penfold, Barking, United Kingdom of Great Britain and Northern Ireland.
The Respondent is Grand Slam Co, Las Vegas, Nevada, United States of America.
The domain name at issue, <wwweurobet.com> (the "Domain Name"), was at the time the Complaint was filed registered with GKG.NET, INC (formerly GK Group LLC). The Domain Name was then temporarily registered with Melbourne IT Limited, D/B/A Internet Names Worldwide but is now again registered with GKG.NET, INC (formerly GK Group LLC).
The WIPO Arbitration and Mediation Center (the "Center") received the Complaint on September 22, 2003, (electronic version) and on September 25, 2003, (hard copy). On September 23, 2003, the Center transmitted by email to GKG.NET, INC (formerly GK Group LLC) a request for registrar verification in connection with the Domain Name. On September 24, 2003, GKG.NET, INC (formerly GK Group LLC) transmitted by email to the Center its verification response and confirmed that it was the Registrar for the Domain Name and the Respondent is listed as the registrant of the Domain Name. Further, the Registrar provided contact details for the administrative, billing, and technical contact and confirmed that the Uniform Domain Name Dispute Resolution Policy (the "Policy") applied to the Domain Name. The Center verified that the Complaint satisfied the formal requirements of the Policy, the Rules for Uniform Domain Name Dispute Resolution Policy (the "Rules"), and the WIPO Supplemental Rules for Uniform Domain Name Dispute Resolution Policy (the "Supplemental Rules").
In accordance with paragraphs 2(a) and 4(a) of the Rules, the Center formally notified the Respondent of the Complaint, and the administrative proceedings commenced on September 26, 2003. In accordance with paragraph 5(a) of the Rules, the due date for Response was October 16, 2003.
The proceeding was suspended at the Complainant�s request on October 8, 2003, due to the fact that the Complainant had received an e-mail from the Respondent offering to transfer the Domain Name.
The proceeding was reinstated, again at the Complainant�s request, on November 17, 2003, due to the fact that a letter requesting that the Domain Name be transferred, signed by the Respondent, was not sufficient in order to execute the transfer. In accordance with paragraph 5 of the Rules, the due date for Response was November 25, 2003.
The Respondent did not submit any response. Accordingly, the Center notified the Respondent�s default on November 26, 2003.
The Center appointed Markus S. Hellgren as the sole panelist in this matter on December 4, 2003. The Panel finds that it was properly constituted. The Panel has submitted the Statement of Acceptance and Declaration of Impartiality and Independence, as required by the Center to ensure compliance with paragraph 7 of the Rules. The Panel was required to forward its decision to the Center by December 18, 2003, in accordance with paragraph 15 of the Rules.
The Complainant is one of the biggest on-line bookmakers in the world and is ultimately owned by Coral Eurobet Holdings Limited. The Eurobet business was established in 1995. Eurobet has websites located at, inter alia, "www.eurobet.com", "www.eurobet.co.uk" (both first registered in 1995), "www.eurobetcasino.com" and "www.eurobetgames.com" and has in excess of 200,000 customers in over 100 countries. The .com website is translated into 17 languages, in addition to being available in English. For the financial year ended September 29, 2002, the turnover for the Coral Eurobet group was in excess of �2 billion, of which the Eurobet Internet betting business contributed �336 million.
UK Trademark Registration No. 2048351 EUROBET BOOKMAKERS & Device, filing date December 12, 1995, in International Class 41.
Community Trademark Registration No. 272237 EUROBET BOOKMAKERS & Device, filing date June 7, 1996, in International Class 41.
Community Trademark Registration No. 1936376 EUROBET & Device, filing date November 2, 2000, in International Class 41.
Australian Trademark Registration No. 856512 EUROBET & Device, filing date November 8, 2000, in International Class 41.
Singaporean Trademark Registration No. T00/19760G EUROBET & Device, filing date November 11, 2000, in International Class 41.
Chinese Trademark Registration No. 1794338 EUROBET & Device, filing date June 21, 2002, in International Class 41.
All of these trademarks are used to indicate the provision of gaming, gambling and betting services (class 41).
Eurobet is also the owner of a number of domain names containing the trademark "EUROBET".
The Domain Name resolves to a website called "www.mysportsbook.com" which is a direct competitor of the Complainant, offering sports betting and gaming products.
"www.mysportsbook.com" is registered to Knot International Gaming Inc.
When the registration of the Domain Name first came to the attention of the Complainant, the Whois information for the Domain Name was given as Grand Slam Co., Chopsticks Town. The e-mail address shown is the same e-mail address as given in the Whois information for Knot International Gaming Inc.
The Complainant wrote to the Respondent on May 6, 2003, but the letter was returned. The Complainant then re-sent the letter by e-mail on May 27, 2003, but no response was received from the Respondent.
"willfully providing inaccurate information or willfully failing to update information promptly will constitute a material breach of this Agreement and will be sufficient basis for cancellation of your domain name registration".
Following a slight delay due to a misunderstanding between the Complainant and the Registrar, the Registrar then contacted the Respondent regarding the Whois information. On August 14, 2003, the Registrar�s representative informed the Complainant that the Domain Name had been placed on lock and hold due to invalid contact information and that the Respondent had been told that they would have to update the information and give a written guarantee that the Domain Name was not being used wrongfully before they would be able to use the Domain Name again.
However, on September 1, 2003, the Complainant became aware that the Domain Name had been reinstated and that the Whois information had been changed. The new Whois address was exactly the same as that for Knot International Gaming Inc., thus further proving a connection between Grand Slam Co and Knot International Gaming Inc.
The Complainant decided on September 1, 2003, to write to the Respondent again, at the new address, but no response was received to the letter. The Complainant also attempted to telephone the Respondent but the telephone number given proved to be false. This false information was again pointed out to the Registrar, who again wrote to the Respondent asking them to provide proof of their contact information. In response to this, the Respondent again changed the Whois database information, to that currently provided.
The Complainant has shown that it has received an e-mail of October 1, 2003, from the Respondent offering to transfer the Domain Name. Further, the Complainant has also shown that the Respondent has signed a letter requesting that the Domain Name be transferred to the Complainant. However, the signed letter, which was not on letter headed paper and did not contain the Respondent�s address, was not sufficient in order to execute the transfer of the Domain Name to the Complainant.
The Complainant contends that the Domain Name is confusingly similar to the trademarks in which the Complainant has rights.
Further, the Complainant contends that the Domain Name is virtually identical to the Complainant�s trademark "EUROBET" except that a "www" has been added to the front.
The Complainant refers to Reuters Limited v. Global Net 2000, Inc, WIPO Case No. D2000-0441 and state that in this case it was noted that the letters ""www"�have no distinguishing capacity in the context of domain names" and, in addition,"have the effect of focusing particular attention on the word succeeding them". In this respect the Complainant also refers to Ticketmaster Corporation v. Woofer Smith, WIPO Case No. D2003-0346.
The Complainant contends that the addition of "www" in front of the domain <eurobet.com> makes the Domain Name confusingly similar to the Complainant�s trademarks and domain names.
ii) The Respondent does not have any trademarks in the name "Eurobet" and is not recognisable by that name. Furthermore, the website "wwweurobet.com" resolves not to a site named or trademarked "EUROBET" but to a competitor gambling site unconnected with the trademark "EUROBET".
i) Eurobet is one of the world�s largest Internet bookmakers and has been in existence since 1995, at which time the domain names <eurobet.com> and <eurobet.co.uk> were registered. The Respondent did not register the Domain Name until April 2000. The Complainant believes that the Respondent was fully aware of Eurobet's existence when the Domain Name was purchased. The Respondent is clearly associated with Knot International Gaming Inc. which owns the website "mysportsbook.com", a betting and gaming site, in direct competition with Eurobet. This can be seen from the common Whois information used from time to time by the two organisations. Not only was the address for the two organisations the same at one point, but also the two have used the same e-mail address. Furthermore, the e-mail address clearly reflects the Respondent�s involvement in the gaming industry. As such, it would be aware of its competitors in this market, including Eurobet.
ii) The Respondent has a history of typosquatting by registering the names of well-known and reputable betting and gaming organisations with "www" in front, and then using the website in question to divert web users to gaming and sports betting sites associated with the Respondent and its affiliates. The following are examples that the Complainant has found where the Respondent has, in bad faith, registered a domain name containing another organisation�s name with "www" in front and no period between, and then diverted customers who go to that site to a website registered by Knot International Gaming Inc.: Harrah�s Las Vegas, Inc v. Grand Slam Co., NAF FA0205000114339, Hilton Group plc v. Grand Slam Co. WIPO Case No. D2003-0136 and Youbet.com, Inc v. Grand Slam Company, WIPO Case No. D2002-0711.
In each of the above cases it was held that Grand Slam Co was cybersquatting and a transfer of the domain name(s) to the complainant was ordered.
It will be noted that the address given for Grand Slam Co. in respect of each of these domain names was Chopsticks Town, Thailand, the first address the Respondent gave in the Whois information for the registration of the Domain Name. This address is blatantly invented and is clear evidence of the Respondent�s bad faith, as is the repeated failure to give true and correct information.
iii) The Complainant also draws the Panel�s attention to Hilton Group & Others v. Universal Internet Technologies, Inc., WIPO Case No. D2001-0812, in which the panelist commented that "It is difficult to conceive of a more blatant attempt to attract Internet users to the�.. website [than] through the registration and use of domain names simply as pointers to the latter website". Notwithstanding the pattern that the Respondent has established of registering domain names in bad faith, the registration and use of the Domain Name solely to point at a competitor�s website and divert traffic that was seeking the Complainant�s site, clearly shows that the Domain Name was registered and is being used in bad faith.
iv) Given the circumstances and the Respondent�s previous history, it is obvious that the sole purpose of the registration of the Domain Name was, and still is, to misleadingly divert potential customers of Eurobet to the website of one of its competitors, "www.mysportsbook.com", for the commercial gain of the Respondent and its associate, Knot International Gaming Inc., by creating a likelihood of confusion with Eurobet as to source, sponsorship, affiliation or endorsement of the site (which is evidence of bad faith registration under clause 4b(iv) of the Policy).
Web users going to the "www.wwweurobet.com" site will expect to end up at a site connected with Eurobet, a highly reputable international bookmaker and may even think that the site "www.mysportsbook.com" is affiliated with, or sponsored by, Eurobet. The Respondent�s continued use of the Domain Name therefore misleads consumers and tarnishes the good name and trademarks of the Complainant. In addition, the Respondent is also deliberately trying to disrupt the business of the Complainant by diverting the Complainant�s customers to the site of the Respondent�s associate (which is further evidence of bad faith under clause 4b(iii) of the Policy).
In conclusion, the Complainant contends that the Respondent has infringed the Complainant's trademark by registering "wwweurobet.com", is creating confusion with the Complainant�s mark in the minds of web users, has no legitimate reason to use this domain name and that the Domain Name was registered and is continuing to be used in bad faith for the reasons given above.
The situation in which a Respondent has agreed to transfer the disputed domain name during proceedings has been raised in a number of previous cases. See e.g. Deutsche Bank AG v. Carl Seigler, WIPO Case No. D2000-0984, Juventus F.C. S. p. A v. Sergio Braganca, WIPO Case No. D2000-1466 and Microsoft Corporation v. StepWeb, WIPO Case No. D2000-1500.
In these cases, the Panels found that a situation similar to the situation in the present case was sufficient in order to transfer the domain name to the Complainant. In the present case, the Complainant has received an e-mail from the Respondent offering to transfer the Domain Name. However, the Center has not received a response from the Respondent agreeing to transfer the Domain Name and the Panel therefore deems that it should proceed to make substantive findings.
The Complainant and Eurobet (Gibraltar) Limited, are wholly owned indirect subsidiaries of Coral Eurobet Holdings Limited. Eurobet (Gibraltar) Limited is the company which owns the "Eurobet" trademarks on behalf of the Coral Eurobet group of companies and it has licensed the use of the "Eurobet" trademarks to the Complainant.
The Panel deems that the circumstances shown by the Complainant is sufficient in order to find that the Complainant has rights in the trademark EUROBET even though it is not the owner of the trademark registrations in question.
The Complainant has rights in the trademark EUROBET. The Domain Name consists of the mark EUROBET, the addition of "www" in front of the mark and the gTLD ".com". The gTLD ".com" and the addition of "www" in front of the mark have no significance when determining whether or not the Domain Name is confusingly similar to the trademark. Accordingly, the Panel finds that the Domain Name is confusingly similar to the trademark EUROBET in which the Complainant has rights.
The Complainant contends that it has not given license or any other authorization to the Respondent to use its trademarks. Further, the Complainant contends that the Respondent does not have any trademarks in the name "EUROBET" and is not recognisable by that name.
The Respondent has shown that the Domain Name resolves to a website called "www.mysportsbook.com" which is a competitor of the Complainant. Such use does not amount to a right to or legitimate interest in the Domain Name. The Panel finds that the Complainant has thereby made a prima facie showing that Respondent has no rights to or legitimate interests in the Domain Name.
A number of WIPO cases have established that, by virtue of paragraph 4(c) of the Policy, once a Complainant establishes a prima facie case that Respondent has no rights or legitimate interests in respect of the domain name, the burden of production on this factor shifts to the Respondent. See e.g. Document Technologies, Inc. v. International Electronic Communications Inc., WIPO Case No. D2000-0270 and Six Continents Hotels, Inc. v. Seweryn Nowak, WIPO Case No. D2003-0022.
The Respondent has failed to meet that burden and the Panel therefore finds that the Respondent has no rights to or legitimate interests in the Domain Name.
As stated above, the Respondent has shown that the Domain Name resolves to a website called "www.mysportsbook.com" which is a competitor of the Complainant. This is a clear indication that the Respondent was aware of the trademark EUROBET when registering the Domain Name. In addition, the many arbitral decisions rendered against the Respondent show that its behavior is part of an overall pattern of registering third party trademarks with "www" in front as domain names. The Respondent�s practice of profiting from third party trademarks is a clear indication of its bad faith registration and use of the Domain Name.
The Complainant has shown that there is a connection between the Respondent and Knot International Gaming Inc. which is a competitor of the Complainant and the owner of the domain name <mysportsbook.com>. This fact and the fact that the Domain Name resolves to the website "www.mysportsbook.com" show that the Respondent has registered the Domain Name primarily for the purpose of disrupting the business of a competitor which is evidence of bad faith according to paragraph 4(b)(iii) of the Policy.
Further, the Respondent is using the Domain Name intentionally to attract, for commercial gain, Internet users to the website located at "www.mysportsbook.com" by creating a likelihood of confusion with the Complainant�s trademark. This is evidence that the domain name at issue was registered and is being used in bad faith according to paragraph 4(b)(iv) of the Policy.
Finally, the fact that the Respondent has previously provided invalid contact information further strengthens the Panel�s findings.
For all the foregoing reasons, in accordance with Paragraphs 4(i) of the Policy and 15 of the Rules, the Panel orders that the domain name, <wwweurobet.com>, be transferred to the Complainant.


Meier, Kennedy, Quinn & Shumaker and Timothy P. Quinn and Gordon W. Shumaker, St. Paul, Minn., for intervenors-appellees Dennis J. Berthiaume, et al.
Briggs & Morgan and John R. Kenefick, St. Paul, Minn., for intervenors-appellees Brenda B. Becker, et al.
Warren Spannaus, Atty. Gen., State of Minn., Douglas C. Blomgren, William P. Marshall, Sp. Asst. Attys. Gen., St. Paul, Minn., for appellee Clyde E. Allen, Jr.
William I. Kampf, St. Paul, Minn., for appellants.
Leo Pfeffer, New York City, for amicus curiae.
Before LAY, Chief Judge, and HENLEY and ARNOLD, Circuit Judges.
Minnesota Statute § 290.09, subdivision 22, authorizes a limited income tax deduction to Minnesota taxpayers for certain school-related expenses incurred on behalf of dependents. The plaintiffs-taxpayers in this action claim that the statute advances an establishment of religion and restrains free exercise of religion in violation of the first and fourteenth amendments of the United States Constitution. The district court granted the Commissioner's and intervening taxpayers' motions for summary judgment and held that the statute is "neutral on its face and in its application and does not have a primary effect of either advancing or inhibiting religion." Mueller v. Allen, 514 F. Supp. 998, 1003 (D. Minn. 1981).1 This appeal followed. We affirm the judgment of the district court.
Section 290.09, subdivision 22,2 authorizes a deduction to gross income for tuition, textbook, and transportation expenses incurred on behalf of dependents attending elementary or secondary schools. The deduction is limited to actual expenses incurred up to a $500 maximum per dependent in grades K to 6 and a $700 maximum per dependent in grades 7 to 12. Deductible expenses under subdivision 22 are restricted to those incurred in conjunction with schools which, inter alia, enable a Minnesota resident to fulfill state compulsory attendance laws. This restriction apparently encompasses public and nonpublic, secular and sectarian, educational institutions.
The district court found that subdivision 22 operates as a true tax "deduction," as opposed to a "credit." The taxpayer realizes a tax benefit only in the event that the resulting decrease in net taxable income places the taxpayer in a lower tax bracket. 514 F. Supp. at 1000.
Plaintiffs contend that statistical evidence allegedly demonstrates that an overwhelming majority of taxpayers who utilize the deduction authorized by Minn.Stat. § 290.09, subd. 22, have dependents attending parochial schools; thus, it is urged that the statute has the primary effect of supporting and advancing religion in violation of the Establishment Clause of the first amendment. Plaintiffs also argue that the statute does not have a valid secular purpose and that it fosters an impermissible entanglement between church and state.
The first amendment states in part that "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof." U.S.Const., amend. I.5 Despite the apparent absolute prohibition contained in the Establishment and Free Exercise Clauses, a strict policy of total separation of church and state has been neither advocated nor enforced in this nation. As Justice Powell observed, existing standards do not necessarily afford "bright line" guidance. Committee for Public Education & Religious Liberty v. Nyquist, 413 U.S. 756, 760-61, 93 S. Ct. 2955, 2959-2960, 37 L. Ed. 2d 948 (1973).
Without repeating the history of the Establishment Clause,6 we note that, although a law may be one respecting the establishment of religion while aiding all religions equally and without promoting a state religion, see Everson v. Board of Education, 330 U.S. 1, 15, 67 S. Ct. 504, 511, 91 L. Ed. 711 (1947), a law that indirectly benefits religion or religious institutions is not invalid per se on those grounds. See, e.g., Wolman v. Walter, 433 U.S. 229, 97 S. Ct. 2593, 53 L. Ed. 2d 714 (1977) (law providing loan of textbooks purchased with state funds and provision of diagnostic services to nonpublic schools upheld); Hunt v. McNair, 413 U.S. 734, 93 S. Ct. 2868, 37 L. Ed. 2d 923 (1973) (law providing aid to church colleges through revenue bonds for construction upheld); Tilton v. Richardson, 403 U.S. 672, 91 S. Ct. 2091, 29 L. Ed. 2d 790 (1971) (law providing grants to church colleges for construction of buildings used for secular purposes upheld); Walz v. Tax Commission, 397 U.S. 664, 90 S. Ct. 1409, 25 L. Ed. 2d 697 (1970) (law providing real estate tax exemptions to churches upheld); Board of Education v. Allen, 392 U.S. 236, 88 S. Ct. 1923, 20 L. Ed. 2d 1060 (1968) (law providing for loan of state textbooks to nonpublic schools upheld). See also Widmar v. Vincent, --- U.S. ----, 102 S. Ct. 269, 70 L. Ed. 2d 440 (1981) (Establishment Clause does not preclude use of state university facilities by registered student religious organization).
Much of the recurring case law in this area has evolved around the troublesome relationship between religion and education, see Nyquist, 413 U.S. at 772, 93 S. Ct. at 2965, and, while seemingly inconsistent, has developed into a three-part test. In order to pass constitutional muster, a statute which allegedly violates the Establishment Clause must, first, have a secular legislative purpose; second, have a principal or primary effect that neither advances nor inhibits religion; and third, not foster an excessive government entanglement with religion. Lemon v. Kurtzman, 403 U.S. 602, 612-13, 91 S. Ct. 2105, 2111, 29 L. Ed. 2d 745 (1971).
Plaintiffs allege that Minn.Stat. § 290.09, subd. 22, does not satisfy the secular purpose requirement of Lemon v. Kurtzman.7 The gist of plaintiffs' argument is that the preeminent purpose of the statute must necessarily be to aid religion because statistics show that the overwhelming effect of the statute is to aid taxpayers with dependents in sectarian schools. Cf. Stone v. Graham, 449 U.S. 39, 41, 101 S. Ct. 192, 193, 66 L. Ed. 2d 199 (1980) (preeminent purpose of Kentucky statute requiring posting Ten Commandments in public school classrooms is religious notwithstanding avowed secular purpose). Defendants urge that plaintiffs are "boot strapping" their "secular purpose" attack with the "primary effects" prong of their argument, and that a statute may violate the Establishment Clause and still have a valid secular purpose. See Meek v. Pittenger, 421 U.S. 349, 363, 95 S. Ct. 1753, 1762, 44 L. Ed. 2d 217 (1975); Committee for Public Education & Religious Liberty v. Nyquist, 413 U.S. 756, 773, 93 S. Ct. 2955, 2965-2966, 37 L. Ed. 2d 948 (1973). Defendants further urge that section 290.09, subd. 22, has the valid secular purpose of seeking to assist Minnesota taxpayers in providing dependents with a safe, effective and diverse educational environment. Cf. Wolman v. Walter, 433 U.S. 229, 236, 97 S. Ct. 2593, 2599, 53 L. Ed. 2d 714 (1977) (purpose of Ohio statute authorizing funding for use of nonpublic school children for, inter alia, purchase of secular textbooks was to reflect state's "legitimate interest in protecting the health of its youth and in providing a fertile educational environment for all the schoolchildren of the State").
The district court found no indicia of an invalid nonsecular purpose of Minn.Stat. § 290.09, subd. 22. 514 F. Supp. at 1001. We concur. The manifest purpose of the challenged statute is to provide all taxpayers a benefit which will operate to enhance the quality of education in both public and private schools.
Plaintiffs focus their constitutional challenge on the "primary effect" of the tuition portion of the statute.8 At trial they relied upon statistical calculations based upon data provided by the Minnesota Department of Education indicating that of the 90,954 pupils who attended nonpublic schools in 1979-80,9 4.56% attended purportedly nonsectarian schools. During 1978-79, 3.71% of the 88,524 pupils in nonpublic schools attended nonsectarian schools. Plaintiffs urge here that the State loses over 2.4 million dollars in revenue from this deduction and that 71% of this amount is due to benefits given to parents with dependent children in sectarian schools. Plaintiffs assert that these facts, coupled with the fact that Minnesota public schools are tuition-free to most residents, show that the overwhelming percentage of tax relief granted under the statute is for tuition expenditures for religiously-affiliated education. Therefore, it is argued that the primary effect of the statute is the support and advancement of religion, thus falling within the purview of Committee for Public Education & Religious Liberty v. Nyquist, 413 U.S. 756, 93 S. Ct. 2955, 37 L. Ed. 2d 948 (1973); Public Funds for Public Schools v. Byrne, 590 F.2d 514 (3d Cir.), aff'd mem., 442 U.S. 907, 99 S. Ct. 2818, 61 L. Ed. 2d 273 (1979); and Rhode Island Federation of Teachers v. Norberg, 630 F.2d 855 (1st Cir. 1980).
Defendants oppose this argument on both factual and legal grounds. Plaintiffs' statistical evidence is challenged on the grounds that it fails to account for tax benefits running to taxpayers with dependents in public and nonsectarian private schools with ordinary tuition expenses, with textbooks and transportation expenses, and with summer school and driver's education class tuition expenses. The district court found that plaintiffs' statistical argument contained "omissions of serious significance" and held that the benefited class under Minn.Stat. § 290.09, subd. 22, was sufficiently broad that the primary effect did not serve to promote or inhibit religion. 514 F. Supp. at 1002-03.
Defendants also claim that a de jure, not a de facto, analysis is the proper test in ascertaining the breadth of the benefited class. Defendants submit that the Supreme Court has adopted the de facto approach urged by plaintiffs only when confronted with a statute that does not extend its benefits to a broad class of beneficiaries. Compare Walz v. Tax Commission, 397 U.S. 664, 90 S. Ct. 1409, 25 L. Ed. 2d 697 (1970); Board of Education v. Allen, 392 U.S. 236, 88 S. Ct. 1923, 20 L. Ed. 2d 1060 (1968); and Everson v. Board of Education, 330 U.S. 1, 67 S. Ct. 504, 91 L. Ed. 711 (1947) (broad class) with Committee for Public Education & Religious Liberty v. Nyquist, 413 U.S. 756, 93 S. Ct. 2955, 37 L. Ed. 2d 948 (1973); and Public Funds for Public Schools v. Byrne, 590 F.2d 514 (3d Cir.), aff'd mem., 442 U.S. 907, 99 S. Ct. 2818, 61 L. Ed. 2d 273 (1979) (narrow class).
Defendants urge that Minn.Stat. § 290.09, subd. 22, is a general welfare measure, that any benefits flowing to religious schools by way of possible incentive to taxpayers to send their dependents to private school are both remote and incidental, that the primary benefit is to individual parents and students, and that such a tuition and transportation deduction has been authorized since 1955. These factors, it is argued, when viewed in light of the breadth of the affected class of beneficiaries, precipitate toward a finding of neutrality.
Since the three-judge decision in M.C.L.U. v. Roemer, the First Circuit in Rhode Island Federation of Teachers v. Norberg, 630 F.2d 855 (1st Cir. 1980), held unconstitutional a Rhode Island tax statute which was nearly identical to the challenged Minnesota statute. The Norberg court found that, although a deduction was available to taxpayers with dependents attending public and nonpublic schools, 94% of students attending nonpublic and tuition-funded public schools attended sectarian schools. 630 F.2d at 859. The Norberg court distinguished the Roemer decision on the grounds that the exact nature of the benefited class in Roemer never became known since the parents had stipulated that only "some" students whose parents were eligible for the tax benefit attended sectarian schools.11 The First Circuit concluded that the evidence in Norberg showed that the overwhelming majority of the parents eligible for the tuition deduction send their children to sectarian schools. 630 F.2d at 861.
Nevertheless, our analysis places us in apparent disagreement with Norberg. We find the issue before us significant not only to the State of Minnesota but to the nation. Eventually, if not within the parameters of this case, the Supreme Court must decide whether statutes such as those in Rhode Island and Minnesota can survive constitutional scrutiny.
No one seriously challenges the transportation deduction. If state financed transportation is permissible under Everson v. Board of Education, 330 U.S. 1, 67 S. Ct. 504, 91 L. Ed. 711 (1947), surely an indirect tax deduction to all Minnesota parents is constitutional. In Everson the statute was upheld not because the financial benefit was directed at parents but because the benefits were directed to all parents in the community at large. See 330 U.S. at 16, 67 S. Ct. at 511-512. Clearly the primary effect of the transportation deduction of the Minnesota statute is not to aid the establishment of religion. See also Minn.Stat.Ann. §§ 123.76-123.80 (West Supp.1982) (authorizes state to provide public transportation to parochial school students).
Similarly, we find the tax deduction for secular textbooks and "instructional materials and equipment" to all parents to be constitutional. The deduction for secular textbooks for all parents falls within the constitutional protection of Board of Education v. Allen, 392 U.S. 236, 88 S. Ct. 1923, 20 L. Ed. 2d 1060 (1968). See Minn.Stat.Ann. §§ 123.931-123.947 (West Supp.1982) (authorizes state to provide educational aids such as textbooks, standardized tests and pupil support services for nonpublic school children). We acknowledge that the fact that the statute also permits a deduction for "instructional material and equipment" is troublesome. Relying upon Meek v. Pittenger, 421 U.S. 349, 95 S. Ct. 1753, 44 L. Ed. 2d 217 (1975), and Wolman v. Walter, 433 U.S. 229, 97 S. Ct. 2593, 53 L. Ed. 2d 714 (1977), the First Circuit in Norberg found these deductions objectionable. See also Public Funds for Public Schools v. Marburger, 358 F. Supp. 29 (D.N.J. 1973), aff'd mem., 417 U.S. 961, 94 S. Ct. 3163, 41 L. Ed. 2d 1134 (1974).
For the 1972-1973 school year the Commonwealth authorized just under $12 million of direct aid to the predominantly church-related nonpublic schools of Pennsylvania through the loan of instructional material and equipment pursuant to Act 195. To be sure, the material and equipment that are the subjects of the loan-maps, charts, and laboratory equipment, for example-are "self-polic(ing), in that starting as secular, nonideological and neutral, they will not change in use." (Meek v. Pittenger,) 374 F. Supp. (639), at 660. But faced with the substantial amounts of direct support authorized by Act 195, it would simply ignore reality to attempt to separate secular educational functions from the predominantly religious role performed by many of Pennsylvania's church-related elementary and secondary schools and to then characterize Act 195 as channeling aid to the secular without providing direct aid to the sectarian. Even though earmarked for secular purposes, "when it flows to an institution in which religion is so pervasive that a substantial portion of its functions are subsumed in the religious mission," state aid has the impermissible primary effect of advancing religion. Hunt v. McNair, 413 U.S. 734, 743 (93 S. Ct. 2868, 2874, 37 L. Ed. 2d 923).
421 U.S. at 365-66, 95 S. Ct. at 1763.
In the present case the tax benefit is directed to the parent and the student and not to the school. Although Nyquist finds that this fact alone does not immunize tax benefits to a parent from constitutional attack, we think it is a significant factor as it relates to the type of material and equipment which a student will purchase. The needs of the institution from the standpoint of instructional materials and equipment are distinct from the needs of the student. Instructional equipment equally useful in both secular and religious training by the institution presents a different concern than do supplies which a student might purchase for classroom use.14 The difficulties regarding the Establishment Clause evident in Meek and Marburger which involved massive loan programs are much different than those in the instant case where the effect of a possible tax deduction for the purchase of defined secular school materials is much more indirect.
The Supreme Court has implicitly recognized that church-state contacts occasioned by normal tax administration procedures do not give rise to excessive and unconstitutional government and religion entanglements. See Walz, 397 U.S. at 674-76, 90 S. Ct. at 1414-15. Possible entanglement here is lessened by the fact that eligibility of schools is not determined by an in-depth case-by-case analysis of the genuineness of the schools' religious functions. Eligibility is clearly established if a school meets certain entirely secular requirements: nonprofit status, compliance with compulsory attendance laws, and adherence to state and federal civil rights statutes. While there may be times that certain deductions for textbooks or other specific expenses may call for an examination of impermissible purpose, the amount of entanglement will be minimal. Further, the primary enforcement tool will be an individual audit, which would not necessarily entangle the state impermissibly in church affairs. Plaintiffs fail to establish the reasonable likelihood that this section and any accompanying government regulation will involve intrusion into religious matters. Catholic Bishop of Chicago v. NLRB, 559 F.2d 1112, 1116 (7th Cir. 1977), aff'd, 440 U.S. 490, 99 S. Ct. 1313, 59 L. Ed. 2d 533 (1979).
Mueller v. Allen, 514 F. Supp. 998, 1003 (D. Minn. 1981).
We now turn to the more difficult issue of whether the tuition deduction has the primary effect of advancing religion.
The district court emphasizes that the statute is neutral on its face in that it provides a tax deduction for all parents of both public and nonpublic school children. This fact did not deter the Norberg courts from finding that the primary effect of the statute was to aid religion since Rhode Island's public school children attended schools tuition free. In so finding Judge Pettine of the District of Rhode Island observed, "93.4% of the children attending school in Rhode Island whose parents are eligible for the challenged tuition deductions attend sectarian schools." Rhode Island Federation of Teachers v. Norberg, 479 F. Supp. 1364, 1366 (D.R.I. 1979).
Whether the Minnesota statute can withstand constitutional scrutiny turns on whether Nyquist can be distinguished. The Norberg court opined that it could not. We disagree.
In practical terms there would appear to be little difference, for purposes of determining whether such aid has the effect of advancing religion, between the tax benefit allowed here and the tuition grant allowed under § 2. The qualifying parent under either program receives the same form of encouragement and reward for sending his children to nonpublic schools. The only difference is that one parent receives an actual cash payment while the other is allowed to reduce by an arbitrary amount the sum he would otherwise be obliged to pay over to the State. We see no answer to Judge Hays' dissenting statement below that "(i)n both instances the money involved represents a charge made upon the state for the purpose of religious education." 350 F. Supp., at 675.
413 U.S. at 790-91, 93 S. Ct. at 2974-2975.
However, the Court specifically excepted from its ruling any decision as to whether a "genuine tax deduction" is constitutionally acceptable under the "neutrality" test in Walz v. Tax Commission, 397 U.S. 664, 90 S. Ct. 1409, 25 L. Ed. 2d 697 (1970). 413 U.S. at 790 n.49, 93 S. Ct. at 2974 n.49. It is, of course, under that cloak of neutrality that defendants now argue.
These two factors did not deter the court in Norberg from invalidating the Rhode Island law. The district court in Norberg found that the tuition deduction was still a charge upon the state. As the court said, it is "the economic equivalent of the state helping to provide for those expenses" and not "an abstention from taxation." The court viewed it more as a subsidy than as the exemption designed in Walz to minimize the involvement and entanglement between church and state. Norberg, 479 F. Supp. at 1371.
Second, the district court in Norberg found that the fact that in Rhode Island the statute was applicable to parents of public as well as nonpublic school students was "mere window dressing." 479 F. Supp. at 1371. In Rhode Island, the court observed, the overwhelming majority of the taxpayers eligible for the tuition deduction sent their children to sectarian schools. Id.
It is not without difficulty that we reach our decision to sustain the Minnesota law. First, we are concerned with the fact that we are dealing with an indirect state subsidy of tuition which can be viewed "as an incentive to parents to send their children to sectarian schools, or as a reward for having done so.... to preserve and support religion-oriented institutions." Sloan v. Lemon, 413 U.S. 825, 832, 93 S. Ct. 2982, 2986, 37 L. Ed. 2d 939 (1973). We are well aware that we are not dealing with secular textbooks or bus rides17 but with tax benefits for tuition payments to elementary and secondary institutions, some of which provide religious training along with secular education. Nonetheless, contrary to plaintiffs' argument, the Minnesota statute has not singled out a class of citizens for a special economic benefit. It is neutral on its face; and, under the facts presented here, we cannot reject this facial neutrality as mere window dressing. In Nyquist and Marburger the only eligible parents were those who send their children to nonpublic schools. In the present case Minnesota has recognized tuition deductions for parents of public school attendees who pay tuition in various forms, i.e., tuition paid by public school students who attend outside their residence districts; summer school tuition; tutoring services; tuition for instruction provided the physically handicapped; and tuition for driver education. Plaintiffs concede that some 14-18% of Minnesota taxpayers qualifying for tuition deductions under the statute do so for expenses related to private nonsectarian schooling. This figure however does not reflect the number of parents with dependents in public schools who collectively paid in 1978-79 in excess of two million dollars in tuition expenses.
In Nyquist each eligible taxpayer received an arbitrary deduction resulting in a definite tax benefit. In Norberg Rhode Island taxpayers' state income tax was directly related to a percentage of federal income tax and the amount of tax benefit from the challenged deduction depended upon the amount of the deduction and the federal income tax bracket. The court concluded that a tax benefit would result for any parent who owed federal income tax and paid tuition of dependents attending qualifying schools. It was estimated that eligible taxpayers in Rhode Island would receive an average tax benefit of $33 from the deduction. Such is not the case in Minnesota. Under the Minnesota statute the state tax is not related to federal income tax, and whether a parent obtains a tax benefit depends upon whether the deduction is sufficient to move the taxpayer from a higher tax bracket to a lower one. Thus, in this sense, the indirect tax benefit to the school is more diffused and less certain. Unlike the statute in Nyquist, there is within the Minnesota statute no "legislative attempt to assure that each family would receive a carefully estimated net benefit." Nyquist, 413 U.S. at 790, 93 S. Ct. at 2974.
Contrary to the Norberg reasoning, we find that the Minnesota deduction available to all citizens should be viewed much the same as a charitable deduction. See I.R.C. § 170. A statistical breakdown of beneficiaries is not necessary to conclude that the tax "foregiveness" provided in federal and state tax deductions for charitable contributions substantially benefits sectarian institutions. This creates a much greater, although indirect, subsidy of state and federal tax dollars to religious institutions than does a deduction for tuition payments to sectarian schools. Although the Supreme Court has never decided whether charitable deductions made available to all citizens are constitutional, we use the comparison merely to identify the imponderable problem presented if one is allowed to challenge a neutral statute made applicable to all citizens by a purely de facto analysis utilizing statistical proofs. The fundamental issue is not whether some or even a substantial benefit accrues to a religious institution, but whether the principal or primary effect of the statute is to advance religion. Tilton v. Richardson, 403 U.S. 672, 679, 91 S. Ct. 2091, 2096, 29 L. Ed. 2d 790 (1971).
In Nyquist the statute limited the class benefited to the parents of children in nonpublic schools. The Court emphasized that "it should be apparent that in terms of the potential divisiveness of any legislative measure the narrowness of the benefited class would be an important factor." Nyquist, 413 U.S. at 794, 93 S. Ct. at 2976. Here, as in Everson and Allen, all citizens are made eligible for the tax benefits. One of the problems, however, in giving blind adherence to Everson and Allen is the fact that in both cases transportation and textbooks were not already furnished free by the statute to public school children. But what if they were? Would the amendment of the statute to include parochial students have been struck down as having been passed for religious purposes or having a primary effect of aiding religious schooling? We think not-at least under the Supreme Court's reasoning. State transportation in Everson was viewed as having a public purpose and fulfilling a public need. The mere fact that it coincided with individual desires to send children to a parochial school was deemed an inadequate reason to strike down the law.
There is no doubt that Minnesota could limit its tax deduction for tuition expenses to those parents in the public school system required to pay tuition. This could easily be deemed a public need-even though it would affect only a minority of taxpayers with dependents in the public school system. On the other hand, if a state wishes to extend such tax benefits "to all its citizens without regard to their religious belief," it should be allowed to do so. Everson, 330 U.S. at 16, 67 S. Ct. at 512. As the Supreme Court surmised in Roemer v. Board of Public Works, 426 U.S. 736, 746, 96 S. Ct. 2337, 2344, 49 L. Ed. 2d 179 (1976), parents who send their children to sectarian schools "need not be quarantined from public benefits that are neutrally available to all."
Notwithstanding plaintiffs' statistical arguments, which arguably indicate that the greater number of the class benefited are parents of church school children, we find that there are substantial benefits flowing to all members of the public. By way of deduction we conclude, as defendants urge, that the State, in effect, abstains from taxing that income which has been denoted by a broad class of Minnesota citizens to their children's education. In so doing, the State has adopted a policy which is neutral toward religion by providing a tax benefit to those parents who qualify for a deduction for expenses incurred in sending their child to school.
Our decisions in this troubling area draw lines that often must seem arbitrary. No doubt we could achieve greater analytical tidiness if we were to accept the broadest implications of the observation in Meek v. Pittenger, 421 U.S. 349, 366 (95 S. Ct. 1753, 1763, 44 L. Ed. 2d 217) (1975), that "(s) ubstantial aid to the educational function of (sectarian) schools ... necessarily results in aid to the sectarian enterprise as a whole." If we took that course, it would become impossible to sustain state aid of any kind-even if the aid is wholly secular in character and is supplied to the pupils rather than the institutions. Meek itself would have to be overruled, along with Board of Education v. Allen, 392 U.S. 236 (88 S. Ct. 1923, 20 L. Ed. 2d 1060) (1968), and even perhaps Everson v. Board of Education, 330 U.S. 1 (67 S. Ct. 504, 91 L. Ed. 711) (1947). The persistent desire of a number of States to find proper means of helping sectarian education to survive would be doomed. This Court has not yet thought that such a harsh result is required by the Establishment Clause. Certainly few would consider it in the public interest. Parochial schools, quite apart from their sectarian purpose, have provided an educational alternative for millions of young Americans; they often afford wholesome competition with our public schools; and in some States they relieve substantially the tax burden incident to the operation of public schools. The State has, moreover, a legitimate interest in facilitating education of the highest quality for all children within its boundaries, whatever school their parents have chosen for them.
Wolman v. Walter, 433 U.S. 229, 262, 97 S. Ct. 2593, 2613, 53 L. Ed. 2d 714 (Powell, J., concurring in part, concurring in judgment in part, and dissenting in part).
Minn.Stat.Ann. § 290.09, subd. 22 (West Supp.1982).
The law providing deductions for tuition and transportation expenses was originally enacted in 1955 and later revised in 1976 and 1978.
(T)he cost of transporting students in school districts that do not provide free transportation, the cost of transporting students who live in one district but attend school in another, and the cost of transporting students who attend school in their residence district but who do not qualify for free transportation because of proximity to their schools of attendance.
(S)ince the state can provide textbooks, Board of Education v. Allen, 392 U.S. 236, 88 S. Ct. 1923, 20 L. Ed. 2d 1060 (1968), and transportation, Everson v. Board of Education, 330 U.S. 1, 67 S. Ct. 504, 91 L. Ed. 711 (1947), for parochial school students without offending the Establishment Clause, the statutory deduction for parental expenditures to purchase these items is constitutionally proper.
Defendants submit that, although the textbook and transportation components are constitutional, their effects are substantial with regard to the statistical evidence involving breadth of affected class.
(T)he stipulation of facts recites only that some taxpayers who claim the deduction have dependents who attend parochial schools. Stipulation, P 8. Thus, the facts presented do not indicate that this facially neutral statute is being employed to primarily benefit parochial school students. Unlike the enactment challenged in Marburger, this statute "... merely makes available to all children the benefits of a general program ..." Board of Education v. Allen, 88 S. Ct. at 1926. Of course, this analysis only extends to plaintiffs' concessions with respect to textbooks and transportation. Facial neutrality is not controlling with respect to the forbidden forms of aid.
M. C. L. U. v. Roemer, 452 F. Supp. 1316, 1319 n.2 (D. Minn. 1978).
The difficulty with this provision is not that the secular nature of the textbooks and instructional material for which deductions might be taken could not be guaranteed; it is that the involvement of church and state necessary to guarantee that result would excessively entangle church and state. See generally Surinach v. Pesquera de Busquets, 604 F.2d 73 (1st Cir. 1979). The district court correctly distinguished this case from those in which the state determines in advance of the purchase the secular nature of texts and instructional materials. We agree that continuing surveillance would be necessary to ensure that equipment which can be used for both secular and sectarian purposes, such as tape recorders and projectors, are used only for secular purposes.
Rhode Island Fed'n of Teachers v. Norberg, 630 F.2d 855, 862 (1st Cir. 1980).
(P)laintiffs project that at its theoretically broadest scope 14-18% of the taxpayers qualifying for a tuition deduction under the challenged statute do so by reason of expenses related to nonsectarian schooling. Defendants contend, however, that plaintiffs have incorrectly assumed that only full-time tuition payments are relevant and have ignored such items as tuition for summer school and for certain other courses such as driver's education that are also tax deductible. Thus, defendants argue, the number of students for whom tuition tax deductions are available is not limited to the 3,360 full-time nonsectarian students as suggested by plaintiffs. Further, the affidavit of Ronald Moir states that over two million dollars were paid in tuition expenses to public schools. Plaintiffs' failure to include these types of tuition deductions as well as a variety of other charges depreciates the significance of their figures and calculations. The defendants further contend the allowable deductions for textbooks and transportation are not de minimus (sic) and must be considered. That thus, on a factual basis, the statute in application satisfies even a broad constitutional test of neutrality.
Mueller v. Allen, 514 F. Supp. 998, 1002 (D. Minn. 1981).
If a strict de jure analysis were advocated, one would be inviting legislatures to enact facially neutral statutes which could operate as mere sham. If a pure de facto approach were taken, a statute's constitutionality might turn on local annual statistics. That is, the same statute might be constitutional one year, and not the next, or in one state and not in another, depending upon the current statistical breakdown of sectarian and nonsectarian schools. Nothing so rigid or so arbitrary can be gleaned from precedent in this area.


2. Licensed activity. The holder of a Class I, Class II, Class III, apprentice or student lobster and crab fishing license may fish for, take, possess, ship or transport within the State lobsters or crabs and sell lobsters or crabs the license holder has taken. The license does not authorize the license holder to remove lobster meat from the shell or to take, possess, transport or ship lobster parts or meat. The holder of a Class II or Class III license is liable for the licensed activities under this subsection of all unlicensed crew members assisting that licensee.
2-A. Licensed activity; noncommercial license. The holder of a noncommercial lobster and crab fishing license may fish for, take, possess, ship or transport within the State lobsters or crabs the license holder has taken. The license does not authorize the license holder to sell lobsters or to remove lobster meat from the shell or to take, possess, transport or ship lobster parts or meat.
2-B. Licensed activity; nonresident lobster and crab landing permit. The holder of a nonresident lobster and crab landing permit may possess, transport and sell within the State lobsters or crabs the license holder has taken from outside Maine's territorial waters. The permit does not authorize the permit holder to remove lobster meat from the shell or to take, possess, transport or ship lobster parts or meat.
3-A. License limitation. A license authorizes activities by individuals as follows.
(3) One hundred and fifty lobster traps in the coastal waters of the State if the person is 14 years of age or older and under 23 years of age.
Notwithstanding the age requirements of this subsection, a person who holds a Class I, Class II or Class III license on December 31, 2007 may continue to be issued a Class I, Class II or Class III license provided that person continues to meet the requirements of paragraph A.
A person may not be considered to have ceased to be a student during any interim between school years if the interim does not exceed 6 months and if it is shown that the person has a bona fide intention of continuing to pursue a half-time course of study during the semester or other enrollment period immediately following the interim period. For purposes of this subsection, "half-time course of study" means at least 50% of the usual course load for the program in which the person is enrolled.
The commissioner may revoke a student lobster and crab fishing license of an individual who has ceased to meet the requirements of this subsection.
Once a person successfully completes the examination, that person need not repeat the examination to renew the license.
5-C. Apprentice lobster and crab fishing license eligibility. An apprentice lobster and crab fishing license may be issued only to a person who, at the time of application, is 8 years of age or older.
5-E. Exception; nonresident lobster and crab landing permit with an established base of operations in State. An individual may be excepted from subsection 5-D, paragraph C as long as the individual submits documentation to the commissioner by December 31, 2011 that the individual operated a lobster and crab fishing vessel with an established base of operations in the State as a nonresident in calendar years 2010 and 2011. Documentation must include at a minimum proof of lobster landings at a Maine dealer, proof of utilization of a mooring or dock in a Maine harbor for a sufficient time to meet the requirements to be an established base of operations in this State pursuant to section 6001, subsection 13-I, proof that the individual possessed a valid federal lobster permit or a valid lobster fishing license from a state other than this State and proof that the individual did not meet the resident provisions under section 6301, subsection 1.
6. Buoy colors. Each license applicant must describe, on the application, a single color design of the applicant's buoys.
The surcharge fees collected under this subsection must be deposited in the Lobster Fund established under section 6451.
9. Violation. A person who violates this section commits a civil violation for which a forfeiture of not less than $100 nor more than $500 may be adjudged.
1977, c. 661, §5 (NEW). 1977, c. 713, §4 (AMD). 1979, c. 205, (AMD). 1981, c. 480, §§1,15,16 (AMD). 1983, c. 824, §K3 (AMD). 1985, c. 243, (AMD). 1985, c. 379, §1 (AMD). 1989, c. 455, §2 (AMD). 1991, c. 528, §T1 (AMD). 1991, c. 528, §RRR (AFF). 1991, c. 591, §T1 (AMD). 1991, c. 617, §§1,2 (AMD). 1993, c. 499, §§2,3 (AMD). 1995, c. 468, §3 (AMD). 1995, c. 568, §1 (AMD). 1997, c. 250, §§1-6 (AMD). 1997, c. 250, §10 (AFF). 1997, c. 574, §1 (AMD). RR 1999, c. 1, §16 (COR). 1999, c. 330, §§1,2 (AMD). 1999, c. 397, §§1-3 (AMD). 1999, c. 490, §1 (AMD). 1999, c. 643, §3 (AMD). 1999, c. 658, §1 (AMD). 1999, c. 790, §B1 (AMD). RR 2001, c. 2, §§A14,15 (COR). 2001, c. 421, §§B19-21 (AMD). 2001, c. 421, §C1 (AFF). 2001, c. 581, §1 (AMD). 2003, c. 20, §WW2 (AMD). 2003, c. 452, §F8 (AMD). 2003, c. 452, §X2 (AFF). 2003, c. 466, §1 (AMD). 2003, c. 466, §5 (AFF). 2003, c. 468, §§1-4 (AMD). 2005, c. 239, §1 (AMD). 2005, c. 354, §§1,2 (AMD). 2007, c. 138, §1 (AMD). 2007, c. 201, §§4-11 (AMD). 2007, c. 219, §1 (AMD). 2007, c. 615, §9 (AMD). 2009, c. 78, §1 (AMD). 2009, c. 188, §2 (AMD). 2009, c. 188, §3 (AFF). 2009, c. 213, Pt. G, §§2,3 (AMD). 2011, c. 5, §1 (AMD). 2011, c. 266, Pt. A, §§5-8 (AMD). 2011, c. 486, §1 (AMD). 2013, c. 282, §3 (AMD). 2015, c. 68, §3 (AMD). 2015, c. 428, §1 (AMD). 2017, c. 284, Pt. EEEEE, §§2-4 (AMD). 2017, c. 320, §§1, 2 (AMD).


Rev. Proc. 2018-60 was released by the IRS to allow taxpayers to obtain consent to change from their current method of accounting to take into account the requirements of IRC §451(b)(1)(A), added by the Tax Cuts and Jobs Act, effective for tax years beginning in 2018. But is that automatic change still available if the method the taxpayer had previously been using was one not allowed for tax purposes?
In CCA 201852019 the IRS Chief Counsel’s office decided the answer was yes.
(ii) such other financial statement as the Secretary may specify for purposes of this subsection.
Taxpayer is an accrual method taxpayer with an applicable financial statement that files its tax return on a calendar year basis. Taxpayer proposes to adopt a method under Rev. Proc. 2018-60 to comply with § 451(b), as amended by section 13221 of the Tax Cuts and Jobs Act, Pub. L. No. 115-97 (December 22, 2017)(TCJA). Taxpayer’s present method of accounting is an impermissible method that does not comply with either the all events test of § 451, as amended by the TCJA or with § 451, prior to being amended by the TCJA.
Rev. Proc. 2018-60 provides automatic consent for method changes to comply with § 451(b)(1)(A), as amended by the TCJA. The operative rule set forth in § 451(b)(1)(A) includes the requirements of the all events test under § 451(b)(1)(C). Thus, to satisfy § 451(b)(1)(A), a taxpayer must also comply with the all events test as defined in § 451(b)(1)(C).
Accordingly, a taxpayer that complies with all the terms and conditions set forth in Rev. Proc. 2018-60, may obtain automatic consent of the Commissioner to change from a method that is impermissible under § 451(b)(1)(C) to a permissible method that complies with § 451(b)(1)(A), as amended by TCJA.
Note that the taxpayer in this case will not be allowed to use its prior inappropriate tax method for cases where the AFS may still use that old method to slow recognition of revenue for tax purposes. Rather, for tax purposes the taxpayer will need to move to a correct application of the all events test in those cases.
It seems possible, based on this analysis, that this result would be available even if the taxpayer’s AFS never creates a situation where a more rapid recognition would be required—thus creating an opportunity for a taxpayer to obtain automatic permission to change from an otherwise impermissible method of recognizing revenue in cases where the all events test would normally apply.


text:
Jeff Joseph is a graduate of the University of Denver, College of Law. He is a past Chapter Chair of the Colorado Chapter of the American Immigration Lawyers Association (AILA) and a past elected director on the AILA National Board of Governors. Mr. Joseph currently serves on the national liaison committee between US Immigration and Customs Enforcement and AILA and as Chair of the AILA Federal Court Litigation Section. He has formerly served in numerous leadership positions in AILA including as Chair of the AILA National 2011 Annual Conference, the AILA National Liaison Committee with the headquarters of the Executive Office for Immigration Review for two years, two terms as chair of the AILA Amicus Committee, for three years as a member of the National US Citizenship and Immigration Services Liaison Committee and for three years as a member of the National Immigration and Customs Enforcement Liaison Committee. Mr. Joseph was on the Board of Trustees of the American Immigration Council from 2006-2012 and served as Chair of the Litigation Action Committee.
In 2004, he received the Joseph Minsky Young Lawyer Award from AILA. In 2005, he was named a finalist in the Denver Bar Association/Denver Business Journal Best of the Bar Awards. In 2008, Mr. Joseph was nominated by the Denver Business Journal as one of Denver’s “Forty under 40” which recognizes forty young entrepreneurs for their business skills, leadership and community service. In 2009-2015, Mr. Joseph was selected by his peers for inclusion into the Best Lawyers in America in the field of immigration. And, in 2015 was named Best Immigration Lawyer of the Year in Denver by Best Lawyers. In 2006 through 2015, Mr. Joseph was named a Colorado Superlawyer by Colorado Superlawyer Magazine. 5280 Magazine also named Mr. Joseph a “Top Lawyer” in the area of immigration law for 2006 through 2015. Joseph Law Firm, P.C. has also been ranked as a Top Tier law firm in the field of Immigration Law by U.S. News and World Reports. In 2008, Mr. Joseph was appointed by Governor Bill Ritter to the Colorado Nonimmigrant Agricultural Seasonal Worker Pilot Program Advisory Council.
He has been qualified as an expert witness before the state and federal courts on employment-related and criminal-related immigration issues, and is a frequent local and national lecturer on various immigration topics. Mr. Joseph has been a speaker at the annual AILA conferences every year since 2001, and he has also addressed numerous other regional and state immigration conferences.
In addition to his immigration experience, Mr. Joseph also serves as Secretary of the Board of the Mexican Cultural Center, as founder and co-chair of Urban Nights Denver to benefit Urban Peak and as Secretary of the Joseph Family Foundation. Mr. Joseph is a member of the Hispanic Bar Association, the Hispanic Chamber of Commerce, the Colorado Criminal Defense Bar, and the Colorado GLBT Bar Association.
Mr. Joseph has represented clients before the United States Citizenship and Immigration Service, the Executive Office for Immigration Review, the Board of Immigration Appeals, the U.S. District Courts, and the Circuit Courts of Appeals, and has published several opinions in those courts.
University of Denver, College of Law - J.D.
2004 Joseph Minsky Young Lawyer of the Year Award (Given at the annual awards ceremony of the American Immigration Lawyers Association to one young lawyer who has made outstanding contributions to the advancement of the field of immigration law).
2008 nominated by the Denver Business Journal as one of Denver’s “Forty under 40’ for business skills, leadership and community service.
In re: ______________, (Colorado Supreme Court, Attorney Regulation Counsel), Provided expert opinion memo regarding claims of ineffective assistance of counsel and attorney malfeasance on behalf of Colorado Supreme Court Attorney Regulations Counsel.
In re Marriage of Ahmed, (District Court, Adams County), Qualified as an expert in immigration law for contested divorce case.
In re: ______________, (Colorado Supreme Court, Attorney Regulation Counsel), Appointed as an expert on a claim of ineffective assistance of counsel in case that went to formal proceedings.
U.S. v. Dien Thanh Ngo, 13-cr-00181-REB (U.S. Distrrict Court) (appointed as an immigration expert by the U.S. District Court).
In re: ______________. (Colorado Supreme Court, Attorney Regulation Counsel), Appointed as an expert on a claim of ineffective assistance of counsel in a case that went to formal proceedings. Later appointed as practice monitor after the case settled.
Riley v. INS, 310 F.3d 1253 (10th Cir. 2002) which expanded on the Supreme Court’s decision in INS v. St. Cyr, and in the 10th circuit established the right to habeas review in non-criminal as well as criminal cases. Riley also established in the 10th circuit the right to invoke equitable tolling to the 90 day statute of limitation on motions to reopen based on ineffective assistance of counsel.
Vo v. Greene, 109 F. Supp. 2d 1281 (D. Colo. 2000) declared 236(c) unconstitutional, but would later be overturned by the Supreme Court.
Yuk v. Ashcroft, 355 F.2d 1222 (10th Cir. 2004) is cited for the proposition that it does not offend due process for the BIA to affirm the decision of the immigration judge without opinion.
Al-Karim v. Mukasey, Docket No. 08-00671, 2009 U.S. Dist. LEXIS 28815 (D. Colo., March 25, 2009) found jurisdiction over mandamus suit in delayed residency application based on alleged terrorism related inadmissibility and ordered the government to adjudicate the case in 60 days.
USCIS Does an About Face on the Definition of “Temporary.” Did We Stand-By and Take it? No Way.
Immigrant Entrepreneurs Are Creating Jobs in the U.S.
Contributing Editor, Immigration Edition of the COLORADO LAWYER, October 2006.
Florida Bar Association, South Florida AILA Chapter, Annual Immigration Update, Waivers of Relief from Removal, March 2006 (contributing author and invited speaker and panelist).
American Immigration Lawyers Association, Annual Convention, Detention Issues and Strategies—Advanced Track, San Antonio Texas, June 2006 (discussion leader and contributing author).
American Immigration Lawyers Association, Fall Conference, Maintaining Status for Business Clients—New York City, September 2006 (invited speaker and panelist).
Colorado Public Defender’s Office, Annual Conference, September 2006, Immigration Consequences of Criminal Pleas and Convictions (invited speaker and panelist).
American Immigration Lawyers Association, Web Teleconference, Federal Court Mandamus Actions to Challenge Naturalization Denials, November 2006, (invited speaker and panelist).
Colorado Organization of Victims Advocates, Annual Conference, Protecting Immigrant Victims of Domestic Violence, November 2006 (invited speaker).
American Immigration Lawyers Association, Teleconference, Criminal Immigration Primer for the Business Immigration Attorney, February 2007.
Florida Bar Association, South Florida AILA Chapter, Annual Immigration Update, Waivers of Relief from Removal, February 2007 (contributing author and invited speaker and panelist).
Florida Bar Association, South Florida AILA Chapter, Annual Immigration Update, Relief before USCIS, DHS and the Courts, BIA and Federal Court update, Immigration Consequences of Pleas and Convictions (contributing author and invited speaker and moderator), February 2008.
American Immigration Lawyers Association, 2008 Annual Conference, Getting Out of Custody: Mandatory detention, bond and parole, (contributing author and moderator).
American Immigration Lawyers Association, Central Florida Chapter, Annual Conference (contributing author and panelist), Advanced Removal Defense Strategies, October 2010.

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