ExxonMobil Victory in Interest Netting Case Is Final

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June 18, 2013

[Note:  Miller and Chevalier represented the taxpayer Exxon Mobil Corp. in this case.]

We previously reported on the Second Circuit’s consideration of the interest netting issue that had been resolved against the taxpayer by the Federal Circuit in FNMA v. United States, 379 F.3d 1303 (2004).  Although we did not follow up with a timely report on the Second Circuit’s decision in that case in favor of the taxpayer, the decision is now final, with the government having allowed the time to seek certiorari to expire.  To close the loop, we provide here a summary of the decision and … Read More

Briefing Underway in Ninth Circuit on Question of Mortgage Interest Deduction for Non-married Couples

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February 6, 2013

Last spring, the Tax Court held in Sophy v. Commissioner, that the limitations on indebtedness for the mortgage interest deduction are applied on a per residence rather than per taxpayer basis.  The taxpayers appealed to the Ninth Circuit (Nos. 12-73257 and 12-73261), and filed their opening brief on January 30.  The government’s response is due in March.

Under I.R.C. § 163(h)(3), taxpayers are allowed to deduct “qualified residence interest,” which includes interest paid or accrued on acquisition indebtedness with respect to any qualified residence of the taxpayer, or home equity indebtedness with respect to any qualified residence of the … Read More

Government Dismisses Appeal in Magma Power

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January 3, 2013

We previously reported on the Court of Federal Claims’ decision in Magma Power that allowed an interest netting claim when the taxpayer was a member of a consolidated group for one leg of the overlap period but not during the other leg.  The government had argued that such a claim did not fall within the statutory language requiring that the overlapping interest payments involve the “same taxpayer.”  The government filed a protective notice of appeal from the decision, but it has now voluntarily dismissed the appeal in the Federal Circuit.  The Court of Federal Claims’ decision therefore will stand, and … Read More

Second Circuit to Resolve Disagreement Between Tax Court and Federal Circuit Over Availability of Interest Netting for Pre-1998 Tax Periods

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April 24, 2012

[Note:  Miller & Chevalier represents the taxpayer Exxon Mobil Corp. in this case.]

The government has appealed the Tax Court’s decision on interest netting in Exxon Mobil Corp. v. Commissioner, 136 T.C. No. 5 (Feb. 3, 2011).  The briefing is now complete, and the Second Circuit (Judges Cabranes, Walker, and Winter) is scheduled to hear oral argument on April 25.

Congress expressly required global interest netting by enacting Code section 6621(d) in 1998.  Before then, the IRS had sometimes taken advantage of the differential interest rates established in 1986 to collect net interest when no net tax was due.  … Read More

Court of Federal Claims Construes “Same Taxpayer” Requirement for Interest Netting

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December 9, 2011

In Magma Power v. United States, Case No. 09-419T, the Court of Federal Claims tackled the arcane topic of interest netting.  The issue in Magma Power was a narrow question of statutory interpretation, but the broader topic of interest netting warrants a word of explanation. 

The government charges interest on tax underpayments at a higher rate (under section 6601) than it pays on tax overpayments.  Because it often takes several years or more to determine whether a taxpayer has an overpayment or underpayment for a particular tax year and the amount of that overpayment or underpayment, there are sometimes … Read More

Third Circuit Reverses Tax Court on Jurisdictional Issue in Sunoco

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October 10, 2011

In our report on the oral argument in Sunoco, which took place back in January, we remarked that the Third Circuit panel seemed skeptical of the Tax Court’s decision, even if the panel had not yet mastered the complexities of the case.  It took more than eight months, but the Third Circuit has now issued a comprehensive opinion reversing the Tax Court and holding that it lacked jurisdiction to consider Sunoco’s claims for additional overpayment interest.  The court’s opinion tracks the government’s position fairly closely, and it accepts the government’s view that Estate of Baumgardner v. Commissioner, 85 … Read More

Third Circuit Debates Tax Court Jurisdiction Puzzle

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March 18, 2011

As we have previously reported, the Third Circuit is considering a tricky issue relating to the Tax Court’s jurisdiction to resolve disputes concerning overpayment interest.  At the oral argument, the court explored different facets of the issue, even while joking about its complexity.  At one point, one of the judges appeared to question whether the Tax Court’s Estate of Baumgardner case was correctly decided, even though the IRS had acqueisced in it.  Government counsel declined that offer, instead adhering to the view that Baumgardner is different because it involved deficiency interest rather than overpayment interest.  Taxpayer’s counsel invoked Code … Read More

Sunoco Oral Argument Rescheduled for January 25

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January 12, 2011

The Third Circuit has revised its January oral argument calendar and rescheduled the oral argument in Sunoco for the morning of Tuesday, January 25.  The case had been scheduled for argument on the previous day.  The panel that will hear the case is Chief Judge Theodore McKee, Judge D. Brooks Smith, and Judge Richard Stearns, a district judge from the District of Massachusetts who is sitting by designation.… Read More

Oral Argument Scheduled in Sunoco

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November 3, 2010

The Third Circuit has scheduled the oral argument in Sunoco for January 24, 2011.  The briefing was completed back in March, and the briefs can be found at the bottom of our previous post.… Read More

Third Circuit Briefing Completed in Sunoco

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June 30, 2010

On March 5, 2010, the government filed its reply brief in its appeal from the Tax Court’s decision in Sunoco Inc. v. Commissioner, 122 T.C. 88 (2004), thus completing the appellate briefing.  The case raises a novel issue concerning the Tax Court’s jurisdiction to determine overpayment interest.  Sunoco filed a petition seeking redetermination of deficiencies for its 1979, 1981, and 1983 tax years.  In an amended petition, Sunoco reported that certain issues had settled but argued that the IRS had committed errors in calculating the interest on underpayments and overpayments arising out of those issues because it used incorrect … Read More