Consolidated Edison Company of New York, Inc. v. United States

Judge STRAUB dissents in a separate opinion.

JACOBS, Circuit Judge:

Under the Internal Revenue Code (“I.R.C.”), certain chemically similar fuels are taxed when used for highway use, but untaxed when used for heating. To facilitate this disparate taxation of interchangeable substances, the I.R.C. provides that untaxed fuel be dyed red and provides for imposition of penalties when “any dyed fuel is held for use or used by any person for a use other than a nontaxable use and such person knew, or had reason to know, that such fuel was so dyed.” 26 U.S.C. (I.R.C.) § 6715(a)(2). Red-dyed (untaxed)…