Fleetboston Financial Corp. v. United States

68 Fed. Cl. 177, 96 A.F.T.R.2d (RIA) 6591, 2005 U.S. Claims LEXIS 300, 2005 WL 2671494
CourtUnited States Court of Federal Claims
DecidedOctober 19, 2005
DocketNo. 02-879T
StatusPublished
Cited by9 cases

This text of 68 Fed. Cl. 177 (Fleetboston Financial Corp. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fleetboston Financial Corp. v. United States, 68 Fed. Cl. 177, 96 A.F.T.R.2d (RIA) 6591, 2005 U.S. Claims LEXIS 300, 2005 WL 2671494 (uscfc 2005).

Opinion

OPINION

ALLEGRA, Judge.

[178]*178“Neither a borrower nor lender be ...”1

Under the Internal Revenue Code, it is difficult for a large corporate taxpayer to follow the sage advice given by Polonius to his son, Laertes. That is, in part, because, although the income tax system is often identified with its annual accounting principle, various statutory exceptions thereto allow certain deductions and tax payments to be shifted from one tax year to another, causing the tax accounts of many taxpayers to vacillate between debit and credit status.

One such provision, section 6402(b) of the Internal Revenue Code, permits a corporate taxpayer to credit overpayments of tax for one year against its tax liability for the succeeding year. See 26 U.S.C. § 6402(b); Avon Products Inc. v. United States, 588 F.2d 342 (2d Cir.1978). Fleetboston Financial Corporation (Fleetboston), the plaintiff herein, elected to apply certain overpayments in this fashion, but a subsequent audit revealed that it had taken credits for years in which it actually had underpaid its taxes. Nonetheless, these deficiencies were erased by application of yet another provision of the Code, section 172(b)(1), which allowed net operating losses to be carried back to the years sub judice. If things were not complicated enough, in the same period, plaintiff had overpaid its estimated taxes, so that for at least parts of these years, the Internal Revenue Service (IRS) held more funds from plaintiff than to which it was eventually entitled. Out of this shifting labyrinth of mutual indebtedness comes, in the fashion of cross-motions for summary judgment, a question regarding plaintiff’s liability for interest on the aforementioned deficiencies.

I. FACTS

Neither party disputes the essential facts, which have been stipulated as follows:

In September of 1985, plaintiff, FleetBoston Financial Corporation (operating as its predecessor, BankBoston), filed its corporate income tax return for tax year 1984, reporting a tax liability of $14,434,055 and payments of $15,100,000, resulting in a claimed overpayment of $665,945. On its 1984 tax return, plaintiff elected under section 6402(b) of the Code2 to apply its overpayments to its estimated tax liabilities for tax year 1985 (“1984 credit elect”). In choosing to apply its overpayment in this fashion, plaintiff surrendered its claim to interest on the overpaid taxes. Treas.Reg. § 301.6611-l(h)(2)(vii). On September 15, 1986, plaintiff filed its corporate tax return for tax year 1985, reporting a liability of $31,469,082 and payments of $33,765,945 (including its 1984 credit elect of $665,945), resulting in a claimed overpayment of $2,296,863. On its 1985 tax return, plaintiff elected to apply its claimed overpayments to its estimated tax liabilities for tax year 1986 (“1985 credit elect”). On September 11, 1987, plaintiff filed a return for tax year 1986, reporting a liability of $21,120,858 and payments of $42,600,000 (including its 1985 credit elect of $2,296,863), resulting in a claimed overpayment of $21,479,142. Of the $21,479,142 in claimed overpayments, plaintiff elected to take a refund of $18,067,818 and to apply $3,411,324 to its 1987 tax liabilities (“1986 credit elect”).

The IRS later audited plaintiff and assessed deficiencies for several years in which plaintiff had claimed overpayments and refunds, including tax years 1984 and 1985. It determined that, for tax year 1984, plaintiff’s correct tax liability was not the reported $14,400,000, but $48,800,000, and that for tax year 1985, plaintiffs correct tax liability was not the reported $31,500,000, but $62,400,000. These adjustments resulted in substantial deficiencies for those and other tax years. Nonetheless, those deficiencies were later [179]*179wiped out by net operating loss carrybacks from 1990 (for the 1984 deficiency) and from 1987 and 1990 (for the 1985 deficiency). Plaintiff disputed the assessment of the deficiencies and filed a petition for redetermination in the United States Tax Court.

On October 24, 1997, the parties filed a stipulation in Tax Court in which they disposed of all the years involved in the Tax Court litigation, including the years at issue here — 1984 and 1985. On October 27, 1997, the Tax Court entered a decision ruling, inter alia, that plaintiff had overpayments for its tax years 1984 and 1985, in the amounts of $2,561,831 and $1,842,052, respectively.

On January 5, 1998, the IRS assessed plaintiff deficiency interest with respect to the underpayments of tax for tax years 1984 and 1985, calculating the interest for the period ending with the elimination of the deficiencies by the net operating loss carry-backs in 1990. In originally calculating the deficiency interest on $665,945 of the deficiency for tax year 1984 — the amount of the 1984 credit elect — the IRS used a start date of March 15, 1985. In originally calculating the deficiency interest on $2,296,863 of the deficiency for tax year 1985 — the amount of the 1985 credit elect — the IRS used a start date of March 15, 1986. Plaintiff disputed these interest calculations, which were then abated, in part — among the adjustments made was postponing the commencement of underpayment interest to March 15, 1986 and March 15,1987, as to the amounts of the 1984 and 1985 credit elects, respectively. Refunds of resulting overpayments of deficiency interest were paid to plaintiff in November, 2001. Plaintiffs claims for the amounts at issue in this litigation, however, were denied by the IRS in a letter dated February 26, 2002. Plaintiff filed this tax refund action on July 23, 2002, seeking redress for the alleged overpayments of interest of $24,973,157 for its tax year 1984 and of $1,089,013 for its tax year 1985. On December 15, 2004, this case was reassigned to the undersigned judge.

I. DISCUSSION

Summary judgment is appropriate when there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. RCFC 56; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). As noted, the facts material to the motions are essentially undisputed. Based on those facts, the court concludes, as a matter of law, that defendant is entitled to summary judgment.

A. Statutory and Regulatory Framework

By way of prologue, as with any issue involving a question of statutory construction, the starting point in determining the interest owed here must be the language and structure of the relevant statutes. United States v. Ron Pair Enter., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989); see also Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U.S. 827, 835, 110 S.Ct. 1570, 108 L.Ed.2d 842 (1990); Reese v. United States, 24 F.3d 228, 230 (Fed.Cir.1994). In fact, determining the interest owed to or by a given taxpayer, relating to payments made with respect to its federal tax obligations, is governed by a set of several interrelated Code provisions.

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68 Fed. Cl. 177, 96 A.F.T.R.2d (RIA) 6591, 2005 U.S. Claims LEXIS 300, 2005 WL 2671494, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fleetboston-financial-corp-v-united-states-uscfc-2005.