thank you i'd like to reserve three minutes for a bottle may it please the court i'm tom sykes i'm affirming for detroit medical center and incorporated not for profit tax exempt institution we are here to seek the standard rate of interest on agreed prior refunds of employer portion of fica tax this large dollar issue before this court is precisely the same one faced by scores if not one hundred other similarly situated teaching hospitals i expect the iris tempus size for its part but this court should just put its stamp of approval on the second circuit's opinion rendered last december in the my monitor this case i am pleased to take up that that opinion has perhaps been glaring fundamental flaws depending on how one counts during this argument i won't make it all through through all seven but perhaps i can make it through about four of those flaws perhaps i did refer to these flaws in the rule twenty eight jail letter that i filed last december and i would invite the court to keep that letter in mind after the court retires to chambers by far the most interesting flaw is that the opinion concludes that there is some core meaning of corporation that emanates from the plainly supplemental seventy seven or one eighty three now that statute is found at the back of the internal revenue code it's a definition al statute it's rather strangely written it says that corporation includes this is how we know it's plainly supplemental it's not a comprehensive definition in any sense but includes joint stock companies insurance companies and associations just to begin with it's a very odd proposition that a core meaning could emanate from a supplemental  the it ought to run exactly the other way the core meaning is found in the main statute and there's a supplement taishan that occurs by way of seventy seven zero one eight three one cannot possibly tease out of seventy seven all when a three some core meaning but more important more glaring is the fact that none of the joint stock company cannot possibly be a five a one c three a joint stock company as a for profit  list shareholders that can't be a five a one c three counts i have this question so let's let's say that your your background principles argument is that when they refer to a corporation they're referring to see corporation yes i mean that's what i take to be one of your argue that that as my fundamental argument is so so if that's true isn't it strange that in thirty three a you suddenly see this reference to see corp in other words if you if you if the if the idea is that when they talk about corporations they're referring to see corporations and they have lots of references just a corporation corporate but then suddenly in c three you see a reference to a c corporation well i would you show that it corporation normally mean c corporation well corporation and i'll get to this can have a variety of meanings ranging from narrowed abroad and that's a point i want to  a minute but let me address the court's question the provision the the interested just meant provision let's call it the deals with under payments was an act of nine hundred ninety and as a baseline that interested just meant provision concerned see corporations in a gloss that's provided down below the front line term is large corporate underpayment then we've got this gloss ok so nine hundred ninety four or right i'm what but i'm not sure i understand the distinction that the court is after i figure out why they use the phrase the corporation it corporation already needs the corporation that's what i well i i think we have that and we've got at and i view it as helpful to view this in terms of concentric circles reaching out from a narrow definition perhaps a corp being the narrowest perhaps escort being the n signature which one and then at the outer limits in compass a c corpse s corpse joint stock companies because of the definition insurance companies because of the definition and finally of course incorporated not for profit tax exempt enmities that's that's the broadest and here's the fundamental logical or the makes it in argues that corporation over on the overpayment side the provision or dealing with an act of one thousand and four doesn't mean see corp let's assume they're right about that they aren't but let's assume the they are they make the logical leap that jumps from the idea that the if a doesn't mean c corp that it has to be the broadest nonono there are a whole bunch of intermediate landing zones so if you will intermediate concentric circles where you could land in the exxon mobil rule prevents jumping directly to the outer limit so what's the answer in this case if we look at just a one b that's the first reference to corp right so that's in general rule over in your concentric so it's enough to stop it's enough for me to prove that it doesn't jump automatically because of the exxon mobile i need to emphasize that our scores aren't is that include s corporations in the first i wouldn't find that to be a ridiculous result but i think for it to include not for profit entities those that happen to be that subset that happens to be incorporated that is ridiculous escorts wouldn't be ridiculous because at least those are for profit entities so that's you know i don't think it's necessary for me to tell you exactly how far that term corporation extends its enough for me to say that it does not reach my client and the reason it doesn't reach my client is because of exxon mobile two thousand and twelve second circuit opinion which says that this statute sixty six twenty windy is to be construed in favor of the taxpayer we've got all kinds of pivot points in this case and the the you've got this construe in favor of the taxpayer rule and all of those pivot points it comes into play and the my monitor is a piece completely skip over exxon mobil doesn't mention exxon mobil which is just kind of breathtaking to me exxon mobil isn't even mentioned it deals with the same state shoot how can that be so you know i think that in terms of the concentric circles there's no basis for jumping to the outer circle when you have the word corporation over on the large corporate overpayments side but i rely also said it's kind of hard to figure out which concentric circle is the place to stop that would suggest there's some ambiguity is there any role there there is a and i mean any role for administrative deference here you know the because because from nine hundred sixty to nine hundred ninety six the ki regulations so called killer regulations named after case one in effect and those did not encompass they defined corporation under seventy seven a one a one bad provision at the back of the code and they defined that provision as not encompassing tax exempt entities so it you know that's one possible lending point and in fact when congress in one thousand and four and i have to the major piece of this legislation by the way you referred to the there was an acted in one nine hundred ninety eight i think that it's proper really to look at the sequence of an accident because that kind of tells you what congress was thinking and this is not a perfectly drafted statute but the exxon mobil rule kicks in and is really required to go in favor of that of the taxpayer in this case and i think in perry materia is fully applicable and i want to also add that kind the throws the kitchen sink at us and to an extent the second circuit bought into that and i have answers for the kitchen sink propositions that are thrown at us there in my reply brief and particular  part three paragraphs g h and i and i don't want to go into those in detail you mentioned deference i want to circle back to that there's the one nine hundred ninety seven reg now if that were a valid right there would be a dealing with as they admit on brief we're just dealing with a statute they don't really defend the regulate go through the motions it's on brief it's a very kind of pro forma defense and i've got twelve pages in my opening brief dealing with why the reg is invalid under step one step two and also just as important step zero so  again i'd emphasize the asymmetrical and illogical effects of you know treating a subset of tax exempt as subject to the harsh rate while the other subs the other portion of texans i'm sorry i would emphasize that a tax and something happens to be incorporated gets the favorable rate on under payments are there any absurdities i mean i get your absurdity about doing this at all with respect to tax exempt corporations i understand that i share the reaction but are there any other absurdities about when you look at the parent that occur and what you call the last thing i see and can or not just forget that but the key point is you only look to see three to define taxable period in other words you just go to the three b is there anything odd or upset about that actually my position is that the parents had a comprehensive taxable period plus corporation but it doesn't extend to overpayment and i understand i know what your position is i'm asking you if we rule for the government in say it only incorporates the taxable period point does that create absurdities yes that is the absurdity because congress twice use the practical ones like it just wouldn't work with nonprofits to do this well the the policies make of you know a favorable rate on one side unfavorable but that makes no sense to me so the sub sub thing makes no sense to me the interest hit that the non profits member this is the most favored category of tax payers the interest hit that are nonprofit because they can't deduct you know they their interest is please the court deborah snyder for the united states of america the district court's judgment is correct because detroit medical center is a corporation within the meaning of the overpayment interest at section sixty six twenty one a one it's therefore not entitled to the higher rate of interest that the statute provides for non corporations this case is indistinguishable from the my monotheists case and the taxpayer has presented no reason for this court to  reach to decide this case differently from now on the fundamental problem with detroit medical center its position in this case is that sixty six twenty one does not contain spent a special definition of the term corporation why it makes why would the government want to treat warren bet buffett better than the red cross walt makes no sense it's not a question of what we want or don't want to do it's a question of the statute but i wrote up to our aspirant policy explanation that makes sense of the language what's the policy explanation for treating this very rich individuals way better than the red cross i just can't imagine it well i have to answer so that i mean first when congress legislates in the tax area they often do so for revenue reasons not policy reasons and you can see that in the ninety four get rate provision they put it in as tariff concessions and so that's why congress does what it does but the second response that i would have to that is that tax exempt corporations they're exempt from income tax but they're not exempt from employment tax and there's no reason to assume that congress wanted to treat corporations that are exempt from income tax more favorably with respect to the rate of interest they get on over payments of employment tax so that's the policy explanation and in terms of being hit harder i mean we responded to that in our brief the only reason that there's a larger dollar amount hit for tax exempt corporation is because they get to keep more of the interest in the first place i mean keep in mind they already receive a benefit because they don't pay tax on the interest that they receive so they already receive a benefit in that way but you know fundamentally any asymmetry comes from the words of the statute that congress wrote so you know if the taxpayers would have wanted a different result i guess the complaints probably better put to congress than to the courts you know the statute is very clear you know it doesn't contain the special definition of the term corporation and the medical center argues that well it essentially imports a special definition by means of that cross reference to section subsection c three but the problem with that is subsection c three doesn't to find corporation it's a finds large corporate underpayment it defines taxable period and the most natural way to read the statute and as the second circuit held the only possible way to read the statute is that it imports the definition of taxable period and say see three b it didn't say c three b and that level that kind of imprecision is actually common in the internal revenue code i think the second circuit explained that it actually pervades the internal revenue code and there are some examples on page ninety one of the my mommy is opinion where the code will say subsection blank for a definition but the definition is actually contained in subset of section and you know that it's just not that unusual for that to happen in the internal revenue code and because there isn't a special definition of the word corporation in section sixty six twenty one we use the general definition of the term that's contained in section seventy seven zero one eight three which applies for purposes of the internal revenue code and as this court held in the o'neil case a corporation under state law is a corporation under section seventy seven zero one three and the tenth circuit said the same thing in the m p case and i think the phrase that this court used was definitional definitional lodestar to explain that a state law corporation is a corporation under section seventy seven zero one three and in fact i don't think the taxpayer disputes that a for profit corporation under state law is a corporation under section seventy seven zero one they argue only that a charitable corporation is not within that definition but the historical structure of the taxing statute makes clear that they are the code everyone agree that six six to one whatever chapter subchapter it's in applies not just to income taxes but to fica taxes seventy seven zero one yes on i'm talking about six six two one zero and asking whether that whole scheme is everyone agree that design i mean clearly that's designed for income over income tax overpayment number of payment tax or fica tax i don't think the tax payers ever argued that this rate doesn't that these provisions don't apply to employment taxes there's no special interest rate provision well the interest rate provisions are actually in chapter sixty seven i don't know chapter one is normal taxes and surtaxes so chapter sixty seven i guess it's toward the back of the code it's sort of special provision for that and in fact i mean this is the second appeal in this case in the first appeal when we were talking about the merits of the overpayment i mean it was evidence that a nonprofit corporation is a corporation generally it comes from the structure of the taxing statute itself which is always imposed a tax on every corporation and that's in section eleven and then it's had to carve out not for profit corporations and that's in section five hundred one c three and that carve out would not be necessary if a not for profit corporation were not a corporation and i  think the taxpayer was referring to m b q it is a section sixty six twenty one it is not ambiguous so it's not a question of whether it be construed in favor of the government or in favor of the taxpayer even if it were ambiguous the supreme court decided a case called white versus united states in one nine hundred thirty eight that said that texan statute is the same as other statutes it's the role of the court to resolve doubts we don't construe a taxing statute against a government necessarily but we don't think you need to get there because we think the language of section sixty six twenty one is clear i would also no that even if it were true as the taxpayer argues that the word corporation in sixty six twenty one men see corporation the judgment should still be affirmed because they are a c corporation within the plain meaning of that language called f corporations and there is nothing called f corporation and the corporation well they can call own selves that but i don't think that that has a particular implications statute pertaining to the facets where they carved out tax exempt corporations from the definition of c corporation and that's on pages thirty nine to forty one of our brief but they basically  an eligible corporation as a domestic c corporation other than a corporation that's exempt from tax congress would not have had to do that if tax exempt corporations were not already seeing corporations within the meaning of the code of the medical center's response to that on brief was that congress was simply acting in an over abundance of caution when they did that but congress would not have had to draft around section thirteen sixty one if congress had really thought that tax exempt corporations were not seeing corporations they could have amended section thirteen sixty one to say that and there are also examples of regulations that have done the same thing and those are also in our briefs carved out a tax exempt corporation from the definition of c corporation and i know that the medical center points to cases and treatises we're seeing corporations are described as corporations that pay income tax and none of those authorities were actually addressing this question which is whether the definition of a c corporation includes a tax exempt corporation and that's because the issue almost never arises it just doesn't come up so it's not surprising really that courts and commentators would use some amount of imprecision when discussing that as is the case with the word corporation the only usage of the term c corporation that that matters for this case is the definition that's in the statute and under the statutory definitions a tax exempt corporation is a corporation and if the court reaches the issue it's also a c corporation this last  and doesn't apply well you know normally what last ant to see can and is used in the context of a series of a few words separated by a comma and then you'd say same cross reference argument is making here the court in eaglehawk carbon found that to be helpful you know i think really what we're talking about is the most natural reading of statue regardless of canon that applies and were guarding the regulations we just don't think that this case implicates the regulations that always think that the answer is clear from the language of the statute but to the extent that the taxpayer is suggesting that there has been a regulation at some point that said a state law a corporation is not a corporation that's not the case state law corporations have always been corporations and you know to the extent that there may have been any question about how to classify a tax exempt  that referred to energies that were not state law corporations they were organized in some other way and that's always been the focus of the regulations whether it be the can't know regulations or the check the box regulations the question was how you classify entities that are kind of they're not state law corporations they're not corporations per se they are organized in some other way and the question is how to classify them there hasn't been any lack of clarity regarding organizations that have been organized as corporations under state law and i see that my time is running out of the core ha any further questions for me we do not we ask for a firm and thank you you thank  i made some notes here i i want to start with the in perry materia canon of scituate construction because that really is very difficult for the government to get around we've got a pervasive interlocking statute here the overpayment provisions refer over the underpayment provisions the underpayment provisions for over the overpayment provisions it's pervasive linna locking it's kind of the classic case for imposing impairing materia imperium materia can be imposed in cases where there's a much less direct relationship than than we've got here and it's our view just to be clear that the c corporation limitation over on the underpayment large corporate underpayment side is applicable as well to the statute dealing with large corporate overpayments and acted a mere four years later these nachman stealing with the adjustments need to be interpreted in in light of each other the government emphasizes the only olympique cases out of the six are those are for profit cases they they didn't or they have all partnership actually addresses on the opposite side in those cases arguing for something entirely different that it is the the argument was over whether a personal service corporation as i recall was a was per se a corporation this is up for profit dispute having nothing to do now and that dealt with the regs under seventy seven to one but i've already shown that seventy seven to one cannot possibly apply to tax exemption the kitten or regulations said that they don't apply to tax exempt so this effort to somehow apply seventy seven zero on the tax exempt contradicts thirty six years of their own regulation it makes no sense to me the i'm very much amused by the argument that a tax exempt corporation can review to see corporation if this court would hold that it would explode upon the tax corporations are for profit entities that are getting our attention there isn't one there isn't one tax lawyer in this city who would agree with the proposition that a tax exempt is a c corporation not one it's just fundamental and it's a very strange argument i'm i'm actually externally surprised that they even make it you know i'm not sure why they're there making it i know it gets some to the women that they want to win but in terms of tax internal revenue code but at the same time they try to be hyper technical in terms of construing corporation over here as not being able to partake so anyway i've heard a lot of interesting things thank you