The U.S. Court of Appeals for the Seventh Circuit today held that the rate of interest that applies on a refund of a tax overpayment made to a nonprofit corporation is the lower interest rate that applies for corporations under section 6621(a)(1).
The case is: Medical College of Wisconsin Affiliated Hospitals, Inc. v. United States, No. 16-3863 (7th Cir. April 25, 2017). Read the Seventh Circuit’s decision [PDF 139 KB]
The medical college, a nonprofit corporation, received a refund of FICA taxes after the IRS determined that medical residents were exempt from FICA until April 1, 2005. (A regulation governing later periods requires hospitals to pay FICA taxes on residents’ salaries.) The IRS included with the refund approximately $13 million in interest, but later demanded that the medical college return $6.7 million of the interest because the IRS had used too high a rate of interest. The medical college returned the money and filed suit asking to have the disputed amount of interest restored to it. The federal district court rejected this request, and an appeal was filed to the Seventh Circuit.
In today's decision, the Seventh Circuit stated that it agreed with other courts of appeals and cited prior decisions of the Second Circuit in Maimonides Medical Center v. United States, 809 F.3d 85 (2d Cir. 2015), and the Sixth Circuit in United States v. Detroit Medical Center, 833 F.3d 671 (6th Cir. 2016), that the rate of interest made to a nonprofit corporation was the lower interest rate for corporations.
For more information, contact a tax professional with KPMG’s Washington National Tax practice:
Alexandra Mitchell | +1 202 533 6078 | email@example.com
Randall Thomas | +1 202 533 3786 | firstname.lastname@example.org
© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.