from the United States Court of Federal Claims in No.
1:14-cv-00458-CFL, Judge Charles F. Lettow.
Jessica Lynn Ellsworth, Hogan Lovells U.S. LLP, Washington,
DC, argued for plaintiff-appellant. Also represented by
Eugene Alexis Sokoloff, Katherine Booth Wellington; Robert E.
Kolek, Schiff Hardin LLP, Chicago, IL.
Richard Caldarone, Tax Division, United States Department of
Justice, Washington, DC, argued for defendant-appellee. Also
represented by David A. Hubbert, Francesca Ugolini.
Moore, Wallach, and Hughes, Circuit Judges.
Hughes, Circuit Judge.
Motor Co. sued the United States in the Court of Federal
Claims to recover interest payments that it alleges the
government owes on Ford's past tax overpayments. Ford can
only recover this interest if it and its Foreign Sales
Corporation subsidiary were the "same taxpayer"
under 26 U.S.C. § 6621(d) when Ford made its overpayment
and the subsidiary made equal tax underpayments. The Court of
Federal Claims granted summary judgment for the government
after concluding that Ford and its subsidiary were not the
same taxpayer. For the reasons below, we affirm.
case concerns the interplay between two statutory tax
schemes, the "interest netting" provision of 26
U.S.C. (I.R.C.) § 6621(d) and the Foreign Sales
Corporation statute that incentivized U.S. company exports
between 1984 and 2000. We begin with a brief explanation of
the purposes and structures of these schemes.
general, a taxpayer who fails to fully pay taxes it owes to
the government before the last date prescribed for payment
will owe the government interest based on the duration and
amount of the underpayment. I.R.C. § 6601(a). Relatedly,
taxpayers who overpay their taxes are often entitled to
receive interest payments from the government based on the
duration and amount of their overpayment. Id. at
§ 6611. In both cases, the interest rates used to
calculate the amount of interest owed are set by I.R.C.
1986, most corporate taxpayers have faced different interest
rates for overpayments and underpayments. Interest accrues at
a higher rate on corporate taxpayers' underpayments than
on their overpayments. Id. This rate discrepancy
meant that a corporate taxpayer with equal underpayments and
overpayments could be liable to the Internal Revenue Service
for owed interest, even though, overall, it had paid the IRS
the full amount of tax owed. Because the taxpayer's
underpayment would accrue more interest than its overpayment
during the same period, the taxpayer would be liable to the
IRS for the difference in interest that accrued on the two
1996, Congress addressed this scenario by enacting I.R.C.
§ 6621(d) as part of the Internal Revenue Service
Restructuring and Reform Act of 1998, Pub. L. No. 105-206,
§ 3301(a), 112 Stat. 741. Section 6621(d) provides:
To the extent that, for any period, interest is payable under
subchapter A and allowable under subchapter B on equivalent
underpayments and overpayments by the same taxpayer of tax
imposed by this title, the net rate of interest under this
section on such amounts shall be zero for such period.
simply, this "interest netting" provision cancels
out any interest accrual on overlapping underpayments and
overpayments. By either decreasing the interest rate for an
underpayment or increasing the interest rate for an
overpayment, the IRS "nets" the two rates to ensure
that the taxpayer's interest liability is zero. But this
interest netting option is available only if the ...