The U.S. Supreme Court has denied certiorari in a taxpayer’s appeal from the Sixth Circuit, holding that the IRS had properly denied a claim for interest on funds that were originally remitted to the government as cash-bond deposits.
The case is: Ford Motor Co. v. United States, No. 14-1085 (cert denied, S. Ct. June 22, 2015)
The following is based on information from the Sixth Circuit’s 2014 decision [PDF 113 KB].
The taxpayer paid approximately $875 million after an IRS audit preliminarily determined that the taxpayer had underpaid its taxes by almost $2 billion during the 1980s.
The taxpayer initially remitted the funds pursuant to the provisions of Rev. Proc. 84-58 and designated the funds as “deposits in the nature of a cash bond,” thereby stopping the accrual of underpayment interest.
Subsequently, the taxpayer asked the IRS to treat the remittances as advance tax payments (i.e., bearing interest in the event of an overpayment). The IRS complied and converted the deposits into advance tax payments.
Later, the IRS reversed its findings of tax deficiencies and concluded that the funds that had been remitted by the taxpayer actually resulted in an overpayment of tax for the years at issue. The government refunded the remittances plus overpayment interest, measured from the dates when the taxpayer had requested that its deposits be converted into advance tax payments.
However, the taxpayer asserted that the interest started to accrue on the deposit dates.
The taxpayer filed a complaint in federal district court, seeking $445 million in interest. The court granted the government’s motion for summary judgment, finding that the IRS interpretation was reasonable.
On appeal, the Sixth Circuit affirmed, although the government had abandoned its position regarding regulatory deference. The appeals court rejected the taxpayer’s attempt to interpret the term “overpayment” in section 6611 to include both deposits and advance tax payments.
The taxpayer petitioned the U.S. Supreme Court for a writ of certiorari, which the Supreme Court granted. In early December 2013, the Supreme Court vacated the Sixth Circuit’s decision and remanded the case based on a jurisdictional question.
In 2014, the case was again before the Sixth Circuit on remand from the Supreme Court. After resolving the jurisdictional question, the Sixth Circuit concluded that the taxpayer’s cash-bond deposits were not payments, and thus were not overpayments—because the taxpayer did not remit the deposits to discharge a tax deficiency. Rather, the Sixth Circuit found that the taxpayer’s decision to designate its remittances as deposits (not as advance tax payments) showed that the sole purpose of the remittances was to stop the accrual of underpayment interest.
The Sixth Circuit concluded that the IRS had properly refused to award any interest for the period during which the government held the remittances as cash-bond deposits.
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