[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
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
[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
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