* * * *

(C) Any termination of an election under subparagraph (A) by reason of the affirmative refusal of any person to consent to such election shall be effective for the taxable year of the corporation in which such person becomes a shareholder in the corporation and for all succeeding taxable years of the corporation.

[Emphasis supplied. ⁶]

1987 U.S. Tax Ct. LEXIS 122">*131 Respondent contends that the Refusal to Consent that was filed with Sierra by the new Sierra shareholders was not an effective "affirmative refusal" under section 1372(e)(1) because the Refusal to Consent was not filed with the Service. Petitioners contend that the plain meaning of the statutory language contained in section 1372(e)(1) did not require the new Sierra shareholders to file the Refusal to Consent with the Service in order to terminate Sierra's subchapter S election. Petitioners further contend that the legislative history of section 1372(e)(1) does not clearly indicate that Congress intended to require by statute that new shareholders file a document with the Service that manifests an affirmative refusal to consent in order to terminate a subchapter S election. We agree with petitioners.

The Supreme Court has set out the following canons of statutory construction, which are a fitting framework for the analysis of section 1372(e)(1):

There is, of course, no more persuasive evidence of the purpose of a statute than the words by which the legislature undertook to give expression to its wishes. Often these words are sufficient in and of themselves to determine the purpose1987 U.S. Tax Ct. LEXIS 122">*132 of the legislation. In such cases we have followed their plain meaning. * * * Frequently, however, * * * when the plain meaning * * * [produced an unreasonable result] "plainly at variance with the policy of the legislation as a whole" this Court has followed that purpose, rather than the literal words. * * * [United States 89 T.C. 357">*363 , 310 U.S. 534">310 U.S. 534, 310 U.S. 534">543 (1940). Fn. refs. omitted.]

Section 1372(e)(1) essentially provides that a subchapter S election that was made by a corporation shall terminate if any person becomes one of the corporation's shareholders within the period of time set forth in the statute and affirmatively refuses to consent to the corporation's election "in such manner as the Secretary shall by regulations prescribe." The word "affirmative" is generally defined as an "assertion." Webster's Third International Dictionary (1981). The plain meaning of the statutory language "affirmatively refuse" therefore requires that a new shareholder in a subchapter S corporation assert a refusal to the continuation of the corporation's subchapter S election in order 1987 U.S. Tax Ct. LEXIS 122">*133 to revoke the election. Section 1372(e)(1) gives the Secretary ⁷1987 U.S. Tax Ct. LEXIS 122">*134 broad power to prescribe the manner in which new shareholders must assert their refusals, and does not set forth specific procedural requirements (other than the 60-day time requirement). Congress, in adopting the words contained in section 1372(e)(1), did not preclude the Secretary from prescribing a method other than one which requires new shareholders to file an affirmative refusal to consent with the Service. ⁸ Therefore, we hold that the plain meaning of the relevant language under section 1372(e)(1) does not require a new shareholder to file an affirmative refusal to consent with the Service.

When, in the past, we have had to determine whether the purpose for legislation was plainly at odds with the meaning 89 T.C. 357">*364 of the relevant statutory language, we have required "unequivocal evidence of legislative purpose before construing the statute so as to override the plain meaning of the words used therein." Huntsberry v. Commissioner, 83 T.C. 742">83 T.C. 742, 83 T.C. 742">747-748 (1984)1987 U.S. Tax Ct. LEXIS 122">*135 (emphasis supplied). See also Estate of Sachs v. Commissioner, 88 T.C. 769">88 T.C. 769, 88 T.C. 769">773 (1987). In the present case, the relevant inquiry is whether there is unequivocal evidence that Congress intended that section 1372(e)(1) would, by that section's own terms, and without any regulatory requirement, require the filing of an affirmative refusal to consent with the Service.

We start our inquiry by examining section 1372(e)(1), prior to its amendment by section 902(c)(3), Tax Reform Act of 1976, 90 Stat. 1609. For taxable years beginning before January 1, 1977, section 1372(e)(1)⁹ required new shareholders in a corporation to consent to a corporation's subchapter S election under section 1372(a) within the period of time prescribed by the Secretary in order to avoid a termination of the corporation's election. Sec. 1.1372-3(b), Income Tax Regs., ¹⁰1987 U.S. Tax Ct. LEXIS 122">*137 required that the consent "be made in a statement filed (with the internal revenue officer with whom the election is filed) within the period of 30 days 89 T.C. 357">*365 beginning with the day on which such person becomes a new shareholder." The Commissioner granted extensions of time for filing consents if "there was1987 U.S. Tax Ct. LEXIS 122">*136 reasonable cause for the failure to file" the consents, and certain other conditions were satisfied. Sec. 1.1372-3(c), Income Tax Regs.¹¹

1987 U.S. Tax Ct. LEXIS 122">*138 As part of the Tax Reform Act of 1976, Congress changed the statutory consent requirement to a statutory affirmative refusal to consent requirement and changed the 30-day regulatory period for filing the consent with the Service to a 60-day statutory period for making an affirmative refusal. Sec. 902(c)(3), Tax Reform Act of 1976, 90 Stat. 1609.

The origin for the adoption of the changes by the Conference Committee was a Senate floor amendment. See S. Rept. 94-1236 (Conf.) (1976), 1976-3 C.B. (Vol. 3) 807, 953 (Senate amendment numbered 62); UP Amendment 338, 122 Cong. Rec. 26148 (1976). There are no committee reports with respect to the Tax Reform Act of 1976 that provide guidance concerning the issue whether Congress intended that section 1372(e)(1) would require new shareholders in a corporation that had made a subchapter S election to file an affirmative refusal to consent with the Service in order to terminate the election.

The relevant portion of the General Explanation of the Tax Reform Act of 1976 (hereinafter referred to as the General Explanation, but also commonly referred to as the Blue Book) provides as follows:

Statutory1987 U.S. Tax Ct. LEXIS 122">*139 rules provide generally that all shareholders of a corporation must consent to either an election of subchapter S status or to a voluntary revocation of this election. However, prior law provided that an election of subchapter S status would be involuntarily terminated if any new shareholder of the corporation did not affirmatively consent to the election, generally within a period of 30 days from the day he became a new shareholder. A consent for this purpose involved a formal filing with the Internal Revenue Service.

The requirement of a new shareholder's affirmative consent to a subchapter S election within a limited period of time could result in an inadvertent termination of the election if the new shareholder failed to file a timely consent or was not aware of the necessity of filing a consent. Congress was concerned that a termination of subchapter S status in these circumstances would cause a severe hardship not only to the new shareholder but to all shareholders of the corporation. It therefore decided to require that a new shareholder must affirmatively refuse to consent to a subchapter S election in order to terminate such an election.

Explanation1987 U.S. Tax Ct. LEXIS 122">*140 of provision

Under the Act, in order for a subchapter S election to be terminated, a new shareholder must affirmatively refuse to consent to the election within 60 days from the time he acquired his stock in the corporation. In the case where a decedent's estate is the new shareholder, the 60 day period for filing an affirmative refusal will begin upon the earlier of either the day on which the executor or administrator of the estate qualifies or the last day of the corporation's taxable year during which the decedent's death occurred. The Secretary is authorized to issue regulations prescribing the manner in which an affirmative refusal is to be filed.

[Staff of the Joint Comm. on Taxation, General Explanation of the Tax Reform Act of 1976, 1976-3 C.B. (Vol. 2) 1, 223. Emphasis supplied.]

While the General Explanation contains several references to "filing," those references are not unequivocal evidence of legislative intent to require by statute that new shareholders file affirmative refusals to consent with the Service. The General Explanation was prepared by the staff of the Joint Committee, and was issued aftersection 1372(e)(1)1987 U.S. Tax Ct. LEXIS 122">*141 was drafted. The General Explanation therefore "does not directly represent the views of the legislators or an explanation available to them when acting on the bill" ( McDonald v. Commissioner, 764 F.2d 322">764 F.2d 322, 764 F.2d 322">336-337 n. 25 (5th Cir. 1985), affg. a Memorandum Opinion of this Court), and is technically not part of the legislative history of the Tax Reform Act of 1976 ( Estate of Hutchinson v. Commissioner, 89 T.C. 357">*367 765 F.2d 665">765 F.2d 665, 765 F.2d 665">669-670 (7th Cir. 1985), affg. a Memorandum Opinion of this Court; Estate of Sachs v. Commissioner, 88 T.C. 769">88 T.C. 775 n. 3). For these reasons, the portion of the General Explanation noted above, standing alone, without any direct evidence of legislative intent, is not unequivocal evidence of legislative intent to require that new shareholders in a corporation that has made a subchapter S election file an affirmative refusal to consent with the Service in order to terminate the corporation's election.¹²

1987 U.S. Tax Ct. LEXIS 122">*142 Based upon the sparse legislative history underlying section 1372(e)(1) and the General Explanation, we are not prepared to find that Congress was attempting to require by statute that new shareholders file affirmative refusals to consent with the Service, and thereby preclude the Secretary from prescribing some other manner for new shareholders to affirmatively refuse to consent under section 1372(e)(1). We therefore hold that the plain meaning of the statutory language contained in section 1372(e)(1) is not "plainly at variance with the policy of the legislation as a whole." Thus, we follow the statute's literal words, which do not require that an affirmative refusal to consent be filed with the Service in order to terminate a subchapter S election.

As noted in our analysis of section 1372(e)(1), that section states that a corporation's subchapter S election terminates when a new shareholder "affirmatively refuses (in such manner as the Secretary shall prescribe) to consent to such election." (Emphasis supplied.) No regulations had been issued under section 1372(e)(1) prior to the time petitioners 89 T.C. 357">*368 attempted to revoke Sierra's subchapter1987 U.S. Tax Ct. LEXIS 122">*143 S election. ¹³1987 U.S. Tax Ct. LEXIS 122">*146 Finally, on April 17, 1980, after the taxable years in issue, proposed regulations under section 1372(e)(1) were published. ¹⁴ See 45 Fed. Reg. 26092, 26097 (Apr. 17, 1980); secs. 1.1372-3(b)(1), 1.1372-3(b)(2), 1.1372-3(b)(3), Proposed Income Tax Regs. These proposed regulatory sections provide, in relevant part, as follows:

(b) New shareholders -- (1) General rule. (i) If a person becomes a shareholder of an electing small business corporation after the day on which the [corporation's subchapter S] election is made, the new shareholder must affirmatively refuse to consent to the election in order to terminate the election. The affirmative refusal to consent must be made in a statement filed (with the service center with which the election is filed) within the period of 60 days beginning with the day after the day on which the person becomes a new shareholder. A copy of the refusal to consent should be furnished to the corporation by the new shareholder. * * * The statement of affirmative refusal to consent must set forth the name and address of the corporation and of the new shareholder, the taxpayer identification number1987 U.S. Tax Ct. LEXIS 122">*144 of the corporation, the number of shares of stock owned by the new shareholder, the date on which the shares were acquired, and the name and address of each person from whom the shares were acquired. A copy of the affirmative refusal to consent of the new shareholder must be filed with the return required to be filed by the electing small business corporation under section 6037 for the taxable year to which the affirmative refusal to consent applies.

* * * *

(2) Years beginning after 1976 and before 1979. For taxable years beginning after 1976 and before 1979, if a person becomes a shareholder of an electing small business corporation after the first day of the first taxable year for which the election is effective, or after the day on which the election is made (if that day is later than the first day of the taxable year), the new shareholder must affirmatively refuse to consent to the election in order to terminate the election. The affirmative refusal to consent is made in the same manner as for taxable years beginning after 1978 under paragraph (b)(1)(i) of this section.

(3) Prior defective affirmative refusals to consent. A timely defective affirmative refusal to 1987 U.S. Tax Ct. LEXIS 122">*145 consent filed by a shareholder with the Internal 89 T.C. 357">*369 Revenue Serve prior to [the date which is 30 days after the day on which these regulations are published in the Federal Register as a Treasury decision] will be considered effective by the Internal Revenue Service if the names of both the shareholder and the corporation are set forth in the statement of affirmative refusal to consent. For this purpose, a defective affirmative refusal to consent is one that was not properly filed or did not contain all the information required by paragraph (b)(1)(i) or (2) (as the case may be) of this section.

Both respondent and petitioners have made numerous arguments concerning the applicability of these proposed regulations to this case. ¹⁵ Nevertheless, proposed regulations are merely suggestions made for comment. See LeCroy Research Systems Corp. v. Commissioner, 751 F.2d 123">751 F.2d 123, 751 F.2d 123">127 (2d Cir. 1984), revg. on other grounds a Memorandum Opinion of this Court; F.W. Woolworth v. Commissioner, 54 T.C. 1233">54 T.C. 1233, 54 T.C. 1233">1265-1266 (1970). Proposed regulations "carry no more weight than a position advanced on brief by the respondent." 54 T.C. 1233">F.W. Woolworth v. Commissioner, supra.If respondent wanted these sections of the regulations to carry more weight than a position advanced on brief, he could have issued them as temporary regulations. 751 F.2d 123">LeCroy Research Systems Corp. v. Commissioner, supra.Thus, we hold that the proposed regulations cited by the parties1987 U.S. Tax Ct. LEXIS 122">*147 do not have the force of law, and therefore are not determinative of the issue whether an affirmative refusal to consent under section 1372(e)(1) must be filed with the Service.

This Court recognizes that the process for issuing Treasury regulations is often slow, due to the many levels of review and the procedures for notice and comment to which regulations are usually subject. ¹⁶ Nevertheless, we fail to understand how the Secretary could fail to issue any temporary or final regulations prescribing the procedures for new shareholders to affirmatively refuse to consent1987 U.S. Tax Ct. LEXIS 122">*148 to subchapter S elections when there was a statutory direction 89 T.C. 357">*370 to issue such regulations (the statute required that new shareholders affirmatively refuse to consent "in such manner as the Secretary shall by regulations prescribe"). ¹⁷ (Emphasis supplied.) Furthermore, in light of the prior regulatory requirement under section 1.1372-3, Income Tax Regs., that new shareholders file consents to the continuation of subchapter S elections with the Service, it does not appear that it would have been difficult to issue temporary regulations prescribing similar filing requirements for new shareholders to affirmatively refuse to consent. Finally, if the Commissioner and the Secretary deemed a filing requirement to be crucial to their ability to administer section 1372(e)(1), they should have issued temporary or final regulations prescribing the requirement. It is obvious that the amendment of section 1372(e)(1) was an attempt by Congress to remove a trap for the unwary, i.e., an inadvertent termination of a subchapter S election. The failure to issue temporary or final regulations under the new statutory section frustrated that purpose by creating a new trap, i.e., an inadvertent1987 U.S. Tax Ct. LEXIS 122">*149 failure to terminate a subchapter S election.

The parties have stipulated that the Refusal to Consent in the instant case was 1987 U.S. Tax Ct. LEXIS 122">*150 filed with Sierra by the new Sierra shareholders within the 60-day statutory period for filing an affirmative refusal to consent. Pursuant to the foregoing statutory and regulatory analyses, we hold that the filing of the Refusal to Consent with Sierra by the new Sierra shareholders constituted an affirmative refusal to consent for purposes of section 1372(e)(1), and that Sierra's subchapter S election was terminated for the taxable years in issue.

Petitioners made several additional arguments in the instant case. Our analysis in this case, however, makes it unnecessary for us to consider those arguments.

To reflect the foregoing,

Decisions will be entered for the petitioners.