An Antarctican writes

Following up on the discussion here a couple of months ago about the status of Antarctica I received an email from someone working in Antarctica (who has asked to remain anonymous) and obtained his permission to reprint it below:

I recently stumbled across your exchange regarding the issue of US income taxes and the Antarctic, and although I’m a little late to the party and you’ve probably moved on to thinking about other things, I thought I’d toss in my two
cents on the topic.

Ciaran comments that the term “foreign country” is defined
in the tax code. This is actually not the case: in the tax
code itself, which is the statute passed by the US Congress,
the term foreign country is undefined, just as it is in the
FLSA and the FTCA, the two other statutes in which the
question of whether Antarctica is a foreign country has
reached the courts (and in both cases the courts have ruled
that Antarctica IS a foreign country for the purposes of
those statutes). The definition of foreign country that
Ciaran references, the one that talks about the sovereignty
of a foreign government, is contained not in the tax code,
but in regulations issued by the Internal Revenue Service
(IRS). While the tax code does specifically authorize the
IRS to issue regulations to implement the code, there’s a
precedent in US law called “Chevron” (because it’s based on
a case involving the oil giant) that says that if a
statute’s language speaks directly to a topic, no agency may
issue a regulation on said topic. As a broad “for
instance”, if Congress passes a law that says that those who
wear red hats must pay double taxes, the IRS cannot issue a
regulation that says that for the purposes of implementing
the statute, the term “red” shall include red, blue, green,
and yellow. Red is red, and the IRS may not redefine it.
The basic argument in the Antarctic tax case is that the
court opinions in the FLSA and FTCA case include language
that defines the statutory term “foreign country” in such a
way that Antarctic is included, regardless of sovereignty
issues (in case you’re curious, the Supreme Court opinion,
written by Rehnquist, arrived at this conclusion by using
the first definition of “country” in Webster’s Dictionary:
“a broad tract of land”), and that the IRS, by issuing a
contradictory regulation, is redefining a plain language
term, contrary to the Chevron principle.

The IRS’s argument, of course, which was accepted by the
Tax Court, is that the term “foreign country” is NOT so
plain and can be open to a number of different definitions.
Since the FLSA and FTCA have no regulation backing them up
which defines the term, the courts needed to step in and do
so, but since the tax code DOES have such a backing
regulation (the issuance of which was specifically
authorized in the code), deference must be paid to the
definition in that regulation.

The second piece of the argument presented to the Tax
Court was that since the text of the regulation says,
basically, that the term foreign country INCLUDES (emphasis
mine) territory under the sovereignty of a foreign
government, it does not necessarily EXCLUDE other
territories, such as Antarctica. Just because Great Britain
INCLUDES England and Scotland doesn’t mean it EXCLUDES
Wales. This may seem to be a weak argument until you learn
that, in fact, the regulation that defines foreign country
was changed in 1985; prior to that date it used the more
restrictive word “means” instead of “includes”. The fact
that the restrictive definition was actively changed to the
more open-ended definition has to mean something; you can’t
simply argue that, well, the authors of the (current)
regulation really meant the word “includes” to be exclusive;
if they’d meant that, they’d simply have held on to the
older definition’s use of “means”.

The Tax Court refused to even address this line of

As for the whole value-laden “should” issue, there are
arguments on both sides. The statute sets up an income
exclusion, and the exclusion is just as good for those
working in countries that have no income tax (Bermuda,
Bahamas, etc) as for those who must pay foreign taxes; had
the concern been strictly one of double-taxation, a regimen
of credit allowances for foreign taxes paid would have been
more logical. The exclusion is also just as good for, say,
Halliburton employees in Iraq (even during the period when
Iraq arguably had no sovereign government!), whose salaries
derive exclusively from government funding and whose lives
are heavily and directly subsidized by the government, as it
is for citizens working entirely in the private sector. So
while it’s true that workers in Antarctica are receiving
(redirected) government money and while it’s true that every
aspect of life in Antarctica is subsidized by government
spending, neither of those is necessarily a disqualification
from the “should” aspect of the exclusion.

From the perspective of the Antarctic worker, it simply
feels unfair for the courts to say that the protections of
the FTCA and FLSA do not apply because the work is being
performed in a foreign country, while taxes must be paid
because the work is NOT being performed in a foreign
country. As an aside, US workers in Antarctica officially
work a 54-hour week, and in practice frequently put in more
like 70-80 hours, so it actually would have been preferably
for the courts to rule uniformly that Antarctica is NOT a
foreign country: pay your taxes, sure, but here’s your
time-and-a-half-for-overtime pay.

And finally, from the good ol’ capitalist standpoint, the
real problem here is the lack of transparency. For years
and year, Antarctic workers were able to file for and
receive the exclusion, and then suddenly, with no warning,
the IRS began to deny the filings. And for the last six
(tax) years, the matter has been in limbo. What’s really
needed is a conclusive up or down opinion so that Antarctic
workers know to what they’re agreeing and can thus make
their own decisions and negotiations with full information.
If the tax exclusion really and truly goes away, it’s likely
that the contractor will either have to raise salaries or
accept that many workers decide not to return because they
find better deals elsewhere.

And indeed, the matter is not yet fully closed, as Arnett
(et al) have appealed the case to the US Court of Appeals
for the Seventh Circuit. No trial date has been set, but it
seems likely that it will be at least another year, quite
possible longer, before a decision is rendered.

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