The opinion of the court was delivered by: GRIM
These are actions for refund of corporate income tax for the years 1951 through 1955. Taxpayer manufactures cement. After a long trial, focused largely on other questions, the issues have been winnowed until only one remains: whether the stone taken from most of the taxpayer's quarries is chemical grade limestone or whether it is calcium carbonates.
Section 114(b)(4)(A) of the Internal Revenue Code of 1939, as amended by Section 319(a) of the Revenue Act of 1951, 26 U.S.C.A. 114(b)(4)(A), fixes the percentage depletion rate for chemical grade limestone at 15% And that for calcium carbonates at 10%. The taxpayer contends that its limestone is chemical grade and that the 15% Rate applies. The government takes issue with this contention.
The crux of the issue is the meaning of the statutory phrase 'chemical grade limestone.' The statute does not define it. Two successive Treasury Regulations construed the phrase.
The first of these was 39.23(m)-5(b), published asT.D. 6031, 1953-2 Cum.Bull. 120, 123-124, which stated:
'(b) For the purposes of this section, the minerals indicated below shall have the following meanings: 'Limestone, chemical
grade..........Limestone used or sold for use in the chemical trades.'
This regulation also contained the following:
'Calcium carbonates.....Miscellaneous limestones and other calcium carbonate rocks (not specifically provided for at a 5 per cent or 15 per cent rate of percentage allowance) such as cememt rock and limestone used or sold for use in soil treatment. This classification does not include rock or minerals used or sold for use as ballast, road making, concrete aggregates, or other purposes for which chemical composition is not a major requirement.'
This first regulation, determining the classification of chemical grade limestone by the use to which it was to be put, had hard going in the Tax Court, which refused to follow it in Iowa Limestone Company v. Commissioner, 28 T.C. 881, saying, p. 884:
'We have heretofore refused to sustain the validity of the 'end use' test adopted by the respondent. Virginian Limestone Corporation, 26 T.C. 553; ...