92 T.C. 1151">*1152 OPINION

The Commissioner determined deficiencies in petitioner's Federal income tax in the amounts and for petitioner's fiscal years as follows:

After concessions, the following issues in these consolidated cases are presented for decision:

(1) Whether petitioner is entitled to an investment tax credit under section 38¹ with respect to certain property placed in service.

1989 U.S. Tax Ct. LEXIS 79">*81 (2) Whether petitioner is entitled to claim an income tax credit under section 40 with respect to wages paid certain of its employees.

The parties submitted this case fully stipulated. The stipulated facts and attached exhibits are incorporated herein by reference. For convenience and because of the diversity of the issues presented, we have separated the specific findings of fact and opinion with respect to the investment tax credit issue and the wage credit issue.

Petitioner, Lucky Stores, Inc., was a California corporation with its principal place of business in Dublin, California, at the time the petitions herein were filed. Petitioner is the common parent of an affiliated group of corporations. For each of the taxable years at issue, petitioner and its subsidiary corporations (hereinafter collectively referred to as petitioner) filed consolidated Federal corporate income tax returns.

During the years at issue, petitioner was a high volume retailer operating a chain of over 428 retail food stores in 29 States. Petitioner sold, among other things, produce, dry groceries, frozen foods, meats, dairy products, tobacco products, and health and beauty aids.

92 T.C. 1151">*1153 INVESTMENT1989 U.S. Tax Ct. LEXIS 79">*82 TAX CREDIT ISSUES

Petitioner purchased its retail food store goods from a variety of wholesale vendors. These goods were then delivered to one of petitioner's distribution centers. Petitioner owned and operated distribution centers during the years at issue. These distribution centers were located in Westville, Indiana; Irvine, California; Vacaville, California; and Houston, Texas. Petitioner placed in service various items of property at all four of these centers during the years at issue herein and claimed investment tax credits (ITCs) with respect to those items. The items of property placed in service at the four distribution centers for which petitioner's entitlement to an ITC is at issue have been stipulated by the parties.

The items of property have been categorized by the parties into three different groups of property. The parties have stipulated that the Court will consider the parties' arguments with respect to only one item of property chosen by the parties from each group and that our determination as to whether petitioner is entitled to an ITC with respect to that item will control for all items in the group.

The three items of property selected from the three 1989 U.S. Tax Ct. LEXIS 79">*83 groups are as follows: (a) Paved areas surrounding buildings at petitioner's distribution centers (paving group); (b) cooler room insulated wall, ceiling, and door panels (cooler room group); and (c) railroad spur tracks (railroad spur group).

The paved areas surrounding buildings at petitioner's distribution centers permit access to these buildings for petitioner's and third parties' trucks. The cooler room insulated wall, ceiling, and door panels were used to fabricate cooler rooms for the temporary storage of perishable food products by petitioner before such products were transported from petitioner's distribution centers to petitioner's stores. The railroad spur tracks consisted of two sets of tracks which allowed railroad cars to enter and exit one of petitioner's buildings at its distribution centers. During the years at issue, some wholesale vendors supplied grocery items in quantities large enough to fill railroad cars. These wholesale vendors arranged for rail shipment of these goods to the distribution centers. The railroad spur tracks were used to receive and unload railroad cars.

Grocery store goods were purchased by1989 U.S. Tax Ct. LEXIS 79">*84 petitioner in larger quantities than all its stores were able to use at any given time. Those goods were typically delivered to petitioner's distribution centers in truckload quantities. Each of petitioner's retail food stores would order goods from the nearest distribution center as the need for goods arose. The items so ordered were trucked from the distribution center.

Deliveries of goods to the distribution centers from wholesale vendors were made on trucks belonging to the wholesale vendors, on petitioner's trucks, and on carriers hired by wholesale vendors or petitioner. Deliveries from petitioner's distribution centers to petitioner's retail food stores were all done on petitioner's trucks.

The trucks owned by petitioner were all driven by petitioner's employees. Many of these drivers were members of the International Brotherhood of Teamsters. For all the years at issue, petitioner's trucks, nationwide, logged millions of miles per year. For example, its trucks logged nearly 30 million miles during each of 1980 and 1981.

During the taxable years at issue, petitioner's trucking activities related entirely to its retail operations. Petitioner's trucks were only1989 U.S. Tax Ct. LEXIS 79">*85 used to deliver goods to its retail stores or from wholesale vendors to its distribution centers. At all times, petitioner's trucks carried only items owned by petitioner.

The ITC issue relates to whether petitioner is entitled to an ITC under section 38 with respect to petitioner's paved areas surrounding buildings at petitioner's distribution centers, its cooler room insulated wall, ceiling, and door panels; and its railroad spur tracks, all of which were located at petitioner's distribution centers. Section 38 allows a credit in tax as determined under sections 46 and 48. Under section 46, a specified percentage of the taxpayer's investment in section 38 property is allowed as a credit. Section 38 property is defined by section 48(a)(1), as is here relevant, as follows:

the term "section 38 property" means --

(A) tangible personal property (other than an air conditioning or heating unit), or

92 T.C. 1151">*1155 (B) other tangible property (not including a building and its structural components) but only if such property --

(i) is used as an integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electrical energy, gas, water, or sewage1989 U.S. Tax Ct. LEXIS 79">*86 disposal services, * * *

* * * *

Such term includes only recovery property (within the meaning of section 168 without regard to any useful life) and any other property with respect to which depreciation (or amortization in lieu of depreciation) is allowable and having a useful life (determined as of the time such property is placed in service) of 3 years or more.

Petitioner argues that the property in dispute is entitled to the ITC under section 48(a)(1)(B)(i) because such property is other tangible property used as an integral part of furnishing transportation. The Income Tax Regulations provide that "any other tangible property * * * used as an integral part of furnishing transportation * * * by a person engaged in the trade or business of furnishing any such service * * * may qualify as section 38 property." Sec. 1.48-1(d)(1), Income Tax Regs. Respondent argues, first, that petitioner is not in the trade or business of furnishing transportation services. Second, if we find that petitioner was engaged in such business, respondent argues that the properties in dispute were not used as an integral part of furnishing transportation services.

We first decide whether petitioner 1989 U.S. Tax Ct. LEXIS 79">*87 was in the trade or business of furnishing transportation for the years at issue. Petitioner acknowledges that the facts of this case are not meaningfully distinguishable from those of the recently decided case of Hub City Foods, Inc. v. Commissioner, 90 T.C. 297">90 T.C. 297 (1988), on appeal (7th Cir., April 26, 1988), where we held that the taxpayer was not entitled to an ITC. 90 T.C. 297">Hub City Food, Inc. v. Commissioner, supra, involved the issue of whether Hub City Food, Inc.'s trucking activities associated with operating a wholesale grocery distribution center which sold and transported items to third-party retail outlets constituted a trade or business of furnishing transportation for purposes of section 48(a)(1)(B)(i). In that case, we held that the taxpayer's activity of transporting its own goods to retailers does not constitute a separate trade or business of furnishing transportation. The Court noted that the transportation businesses which are used as examples in 92 T.C. 1151">*1156 section 1.48-1(d)(3), Income Tax Regulations, (railroads, airlines, bus companies, shipping or trucking companies, and oil pipeline companies) all involve1989 U.S. Tax Ct. LEXIS 79">*88 the provision of transportation services to third parties for hire. Without providing transportation services to third parties for hire, the Court held that Hub City Foods, Inc., could not be in the trade or business of furnishing transportation services.

Petitioner argues that the Court in 90 T.C. 297">Hub City Foods, Inc. v. Commissioner, supra, applied an erroneous interpretation of the trade or business requirement for furnishing transportation under section 48. Petitioner contends that one can be in the trade or business of furnishing transportation services without furnishing transportation services to third parties for hire. Petitioner relies on the recently decided Supreme Court case of Commissioner v. Groetzinger, 480 U.S. 23">480 U.S. 23 (1987), which involved the issue of whether a full-time gambler could be considered to be engaged in a trade or business for purposes of the "trade or business" requirement of sections 55, 62, and 162. The Supreme Court held, under the facts of that case, that a full-time gambler was in the trade or business of gambling and formally rejected the test that to be engaged in a trade or business under1989 U.S. Tax Ct. LEXIS 79">*89 sections 55, 62, and 162, one must hold oneself out to others as offering goods or services.

However, contrary to petitioner's position herein, the Supreme Court in 480 U.S. 23">Commissioner v. Groetzinger, supra, did not provide a sole test for determining whether a taxpayer is involved in a trade or business under all Code sections where a trade or business requirement appears. In fact, the Supreme Court explained why it could not adopt an all-encompassing trade or business test as follows:

the difficulty rests in the Code's wide utilization in various contexts of the term "trade or business," in the absence of an all-purpose definition by statute or regulation, and in our concern that an attempt judicially to formulate and impose a test for all situations would be counterproductive, unhelpful, and even somewhat precarious for the overall integrity of the Code. * * * [480 U.S. 23">480 U.S. at 36.]

Petitioner is essentially requesting that we reconsider our holding in 90 T.C. 297">Hub City Foods, Inc. v. Commissioner, supra, and argues that it has met the trade or business requirement of section 48. We decline petitioner's request1989 U.S. Tax Ct. LEXIS 79">*90 to 92 T.C. 1151">*1157 reconsider our holding in 90 T.C. 297">Hub City Foods, Inc. v. Commissioner, supra, and we continue to hold that transporting one's own goods to retailers does not constitute the trade or business of furnishing transportation services. One must be engaged in providing transportation services for third parties for hire rather than for one's own account to be engaged in the trade or business of furnishing transportation under section 48. 90 T.C. 297">Hub City Foods, Inc. v. Commissioner, supra at 302.

Support for the holding in 90 T.C. 297">Hub City Foods, Inc. v. Commissioner, supra, can be found in the legislative history to section 48 and in the language of section 48 itself. The Senate report accompanying the legislation which enacted section 48, in describing "other tangible property" of section 48(a)(1)(B)(i), states as follows:

In addition to tangible personal property, other tangible property (not including a building and its structural components) used * * * as an integral part of a system of furnishing transportation * * * may qualify for the credit. Property is to be considered as being used as an integral1989 U.S. Tax Ct. LEXIS 79">*91 part of a system of furnishing transportation, * * * only if such property is used by one engaged in the trade or business of furnishing such services. * * * [S. Rept. 1881, 87th Cong., 2d Sess. 155 (1962), 1962-3 C.B. 707, 859.]

From the second sentence of the above-quoted paragraph and from section 48(a)(1)(B)(i), it is clear that in order for a taxpayer to be entitled to an ITC with respect to other tangible property used as an integral part of furnishing transportation, the taxpayer must be "engaged in the trade or business of furnishing such services." See Vail Associates v. Commissioner, 88 T.C. 1391">88 T.C. 1391, 88 T.C. 1391">1400-1401 (1987). It is a reasonable interpretation of section 48 to conclude that to "furnish" transportation services as a trade or business, one must hold oneself out to others as offering such services. Here, petitioner does not offer transportation services to third parties. Furnishing transportation services to oneself is not within the contemplation of section 48(a)(1)(B)(i).

We hold that petitioner was not engaged in the trade or business of furnishing transportation services for the years at issue within1989 U.S. Tax Ct. LEXIS 79">*92 the meaning of section 48. Having so found, it is not necessary to consider petitioner's argument that the property at issue was used as an integral part of 92 T.C. 1151">*1158 furnishing transportation. Consequently, petitioner is not entitled to an ITC with respect to any of the disputed property stipulated by the parties.

WIN CREDIT ISSUES

On August 11, 1985, petitioner entered into a contract with C.I.C., Inc. (CIC) whereby CIC agreed to (a) identify employees previously hired by petitioner with respect to which tax credits under sections 40, 50A, and 50B (WIN credit) could have been claimed in prior taxable years for wages paid to such individuals, and (b) obtain certifications from appropriate State agencies with respect to such employees that the prerequisites for claiming the WIN credits were established. In accordance with this contract, CIC formally requested certification for petitioner's employees from the State of California on September 25, 1985. On December 18, 1985, CIC submitted a list to the State of California identifying petitioner's employees in California. That list was matched against the State's records to determine which employees had, for 90 days prior to hire, 1989 U.S. Tax Ct. LEXIS 79">*93 been eligible for financial assistance under Part A of title IV of the Social Security Act (welfare assistance).

The State of California, Department of Social Services, identified each individual for whom petitioner ultimately claimed a WIN credit as an individual who was eligible for welfare assistance (hereinafter referred to collectively as WIN employees). Each WIN employee was employed by petitioner for a period in excess of 30 consecutive days. No employee of petitioner was displaced by any WIN employee, and no WIN employee was a migrant worker as defined in section 50B(h)(2).

The average number of hours worked per week by nonsupervisory hourly employees in the United States in retail food stores in the years at issue was as follows:

92 T.C. 1151">*1159 The average number of hours worked per week for all of petitioner's nonsupervisory hourly employees (including WIN employees) in the years at issue was as follows:

Listed below are the job categories in which petitioner's WIN employees were employed, the1989 U.S. Tax Ct. LEXIS 79">*94 approximate number of WIN employees in each category, and their average hours worked per week for the years at issue:

The petitions filed with the Court affirmatively asserted the WIN tax credit for its WIN employees for petitioner's fiscal years at issue. Respondent, in his answer to each petition, alleged that petitioner is not entitled to any WIN tax credits.

The issue is whether petitioner is entitled to claim a WIN credit with respect to wages paid by petitioner to its WIN employees for the years at issue pursuant to sections 40, 50A, and 50B. Section 40 allows a WIN credit as determined under sections 50A and 50B. Under section 50A(a), a specified percentage of first and second year "work incentive program expenses" are allowed as a credit. Section 50B defines "work incentive program expenses" as "the amount of wages paid or incurred by the taxpayer for services performed by eligible employees." An "eligible employee" is defined in section 50B(h)(1) as follows:

(h) Eligible Employee. --

(1) Eligible employee. -- For purposes of1989 U.S. Tax Ct. LEXIS 79">*95 this subpart the term "eligible employee" means an individual --