Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-15-05059/USCOURTS-ca13-15-05059-0/pdf.json

Parties Involved:
United States
Appellant
Wells Fargo & Company
Appellee

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________ 

WELLS FARGO & COMPANY,

Plaintiff-Appellee

v.

UNITED STATES,

Defendant-Appellant

______________________ 

2015-5059

______________________ 

Appeal from the United States Court of Federal 

Claims in No. 1:11-cv-00808-NBF, Senior Judge Nancy B. 

Firestone. 

______________________ 

Decided: June 29, 2016

______________________ 

GERALD KAFKA, Latham & Watkins LLP, Washington 

DC, argued for plaintiff-appellee. Also represented by 

GREGORY G. GARRE, BENJAMIN SNYDER, NICOLLE NONKEN 

GIBBS.

ELLEN PAGE DELSOLE, Tax Division, United States 

Department of Justice, Washington, DC, argued for 

defendant-appellant. Also represented by JONATHAN S.

COHEN, GILBERT STEVEN ROTHENBERG, CAROLINE D.

CIRAOLO, DIANA L. ERBSEN.

______________________ 

Case: 15-5059 Document: 38-2 Page: 1 Filed: 06/29/2016
2 WELLS FARGO & COMPANY v. US

Before LOURIE, HUGHES, and STOLL, Circuit Judges.

STOLL, Circuit Judge.

The United States appeals from the Court of Federal 

Claims’ order granting Wells Fargo & Company’s motion 

for partial summary judgment and denying the government’s motion for partial summary judgment. The court

held that Wells Fargo’s interest-netting claims under 

§ 6621(d) of the Internal Revenue Code (“I.R.C.”)1 satisfy 

the statute’s “same taxpayer” requirement. The court

certified its interpretation of I.R.C. § 6621(d) for interlocutory review, and the government petitioned for permission to appeal. We granted the government’s petition 

under 28 U.S.C. § 1292(d)(2). For the reasons below, we 

affirm-in-part, reverse-in-part, and remand for proceedings consistent with this opinion. 

BACKGROUND

Wells Fargo originally filed three administrative 

claims with the Internal Revenue Service seeking, among 

other things, refunds based on interest netting under 

§ 6621(d) between interest on tax underpayments and 

interest on tax overpayments. The IRS denied the interest netting claims at issue here. Wells Fargo then filed a 

complaint in the Court of Federal Claims, requesting tax 

refunds based on the application of interest netting under 

§ 6621(d). 

 

1 References to the I.R.C. are to Title 26 of the 

United States Code.

Case: 15-5059 Document: 38-2 Page: 2 Filed: 06/29/2016
WELLS FARGO & COMPANY v. US 3

I. 

Congress enacted I.R.C. § 6621(d) to permit a taxpayer to cancel out, or “net,” interest on equivalent overpayments and underpayments. Section § 6621(d) reads: 

To the extent that, for any period, interest is payable under subchapter A and allowable under 

subchapter B on equivalent underpayments and 

overpayments by the same taxpayer of tax imposed by this title, the net rate of interest under 

this section on such amounts shall be zero for 

such period.

I.R.C. § 6621(d) (emphasis added). 

Absent an interest-netting provision like § 6621(d), a 

taxpayer might make equivalent underpayments and 

overpayments yet owe the IRS interest. This is because 

corporate taxpayers pay underpayment interest to the 

IRS at a higher rate than the IRS pays overpayment 

interest to corporations. See Tax Reform Act of 1986, 

Pub. L. No. 99-514, § 1511(a), 100 Stat. 2085, 2744. 

Section 6621(d) corrects this inequity by permitting

taxpayers to net interest on “equivalent underpayments 

and overpayments by the same taxpayer.” 

II. 

In the decades before and after the turn of the century, Wells Fargo underwent seven mergers, resulting in 

the current embodiment of the company. The companies 

involved in these mergers made tax underpayments and 

overpayments. Wells Fargo seeks to net these payments 

under § 6621(d). In particular, Wells Fargo filed 64 

separate claims for a refund in the Court of Federal 

Claims relating to these mergers and tax payments. 

Because of the complexity of the facts at issue, Wells 

Fargo and the government distilled Wells Fargo’s claims 

into three “situations” that served as test claims for the

Case: 15-5059 Document: 38-2 Page: 3 Filed: 06/29/2016
4 WELLS FARGO & COMPANY v. US

factual and legal issues presented in the case. Wells 

Fargo & Co. v. United States, 117 Fed. Cl. 30, 34 (Fed. Cl. 

2014). 

Situation One: In 1993, Old Wachovia had an overpayment. In 1999, First Union had an underpayment. 

Old Wachovia and First Union merged in 2001 through a 

statutory merger under I.R.C. § 368(a)(1)(A). Situation 

One is represented graphically below:

J.A. 1549 (annotated). 

Situation Two: In 1993, First Union had an overpayment. Between 1993 and 1999, First Union underwent 

four mergers under I.R.C. § 368(a)(1)(A), (2)(D); First 

Union was the surviving corporation in each merger. 

Then, in 1999, First Union made an underpayment. 

Situation Two is represented graphically below:2

 

2 We recognize that Situation Two also includes the 

1998 merger of FCNJ and First Union carried out under 

I.R.C. § 368(a)(1)(A). Wells Fargo, 119 Fed. Cl. at 30.

Case: 15-5059 Document: 38-2 Page: 4 Filed: 06/29/2016
WELLS FARGO & COMPANY v. US 5

J.A. 1549 (annotated). 

Situation Three: In 1992, CoreStates had an overpayment. In 1998, CoreStates merged with First Union 

under I.R.C. § 368(a)(1)(A). In 1999, survivingcorporation First Union made an underpayment. Situation Three is represented graphically below:

J.A. 1549 (annotated). 

Case: 15-5059 Document: 38-2 Page: 5 Filed: 06/29/2016
6 WELLS FARGO & COMPANY v. US

III. 

Because § 6621(d) allows interest netting only by the 

“same taxpayer,” the dispute below centered on the meaning of “same taxpayer.” Wells Fargo contended that 

principles of merger law made all merged corporations the 

“same taxpayer” under the statute, regardless of the 

timing of the payments or the prior identities of the 

corporations making them. The government countered 

that the taxpayers are the “same taxpayer” only if the 

taxpayers making the underpayments and overpayments 

have the same Taxpayer Identification Number (“TIN”) at 

the time of the payments. The government conceded that, 

under this definition of “same taxpayer,” the acquiring 

corporation and surviving corporation in Situation Two

were the “same taxpayer” because the corporation making 

the overpayment and the corporation making the underpayment had the same TIN. The government alternatively argued that the court should decide the “same 

taxpayer” question on the basis of whether the corporations were the same in all relevant essentials at the time 

of the payments. 

In a partial summary judgment order, the Court of 

Federal Claims held that Wells Fargo could net interest 

in all three situations. After considering myriad sources 

of authority, the court largely adopted Wells Fargo’s 

position, holding that, under principles of merger law, 

merged entities are the “same taxpayer” for the purposes 

of § 6621(d). It first looked to the text of the statute to 

determine whether the meaning of “same taxpayer” is 

defined and concluded that it is not. The court explained 

that neither the statute nor Treasury regulations define 

the term “same taxpayer.” Wells Fargo, 117 Fed. Cl. at 

36. 

The court turned next to § 6621(d)’s legislative history

to see if it defines “same taxpayer,” but concluded it does 

Case: 15-5059 Document: 38-2 Page: 6 Filed: 06/29/2016
WELLS FARGO & COMPANY v. US 7

not. Nevertheless, the court found that “the legislative 

history reveals that Congress intended for § 6621(d) to be 

remedial in nature” and so “the statute must be construed 

broadly.” Id. (citing Tcherepnin v. Knight, 389 U.S. 332, 

336 (1967)). The court explained that the legislative 

history offered two insights into Congress’s intent in 

enacting the statute. First, the legislative history revealed that Congress intended § 6621(d) “to provide 

fairness for taxpayers.” Id. (citing H.R. Rep. No. 105-364,

pt. 1, at 63–64 (1997) (“[T]axpayers should be charged 

interest only on the amount they actually owe, taking into 

account overpayments and underpayments from all open 

years.”); S. Rep. No. 105-174, at 61 (1998)). Second, the 

history “ma[de] clear that Congress was aware that large 

corporations, like plaintiff, would be the primary beneficiaries of the provision, because only large corporations 

such as plaintiff would likely have multiple open years 

with the IRS.” Id.

The court also examined the sole Federal Circuit case 

interpreting § 6621(d)’s “same taxpayer” provision, Energy East Corp. v. United States, 645 F.3d 1358 

(Fed. Cir. 2011). The government had argued that Energy 

East established that whether payments were made by 

the “same taxpayer” must be measured at the time of the 

overpayments and underpayments. But the court distinguished Energy East on the ground that it concerned a 

group of corporations affiliated for filing consolidated 

income tax returns, while Wells Fargo’s netting claims 

implicated merged corporations. Wells Fargo, 117 Fed. 

Cl. at 37–39. 

Because the definition of “same taxpayer” remained 

unclear after reviewing the text of the statute, the legislative history, and precedent, the court next turned to

principles of merger law. The court explained that merger law operates to take two separate entities and merge 

them into one surviving corporation: 

Case: 15-5059 Document: 38-2 Page: 7 Filed: 06/29/2016
8 WELLS FARGO & COMPANY v. US

In a merger, the acquired and acquiring corporations have no post-merger existence beyond the 

surviving corporation; instead, they become one 

and the same by operation of law, and thereafter 

the surviving corporation is liable for the premerger tax payments of both the acquired and acquiring corporations. Because the surviving corporation steps into the shoes of the acquired 

entity and the surviving corporation is liable retroactively for the tax payments of its predecessors, it does not matter when the initial payments 

were made.

Id. at 38 (citing John Wiley & Sons, Inc. v. Livingston, 376 

U.S. 543, 550 n.3 (1964); Treas. Reg. § 1.368-2(b)(1)(ii)). 

The Court of Federal Claims also examined Treasury 

regulations and guidance from the IRS predating this 

case. It found that these sources authorized merged 

corporations to net interest. Id. at 41. The court explained that while the guidance was not precedential, it 

was helpful evidence in determining the position of the 

IRS. Id. (citing Rowan Cos. v. United States, 452 U.S. 

247, 261 n.17 (1981) (“Although these rulings have no 

precedential force, . . . they are evidence . . . .”); Magma 

Power Co. v. United States, 101 Fed. Cl. 562, 571–72 (Fed. 

Cl. 2011)). The court found this guidance consistent with 

Wells Fargo’s view that merged entities are the “same 

taxpayer” for the purposes of the statute. 

The court “conclude[d] that merged corporations are 

the ‘same taxpayer’ for purposes of § 6621(d) based on the 

undisputed principles of corporate law, as well as IRS 

rules governing statutory mergers and IRS guidance.” 

Wells Fargo, 117 Fed. Cl. at 42. The court reasoned that 

an acquired corporation is the “same” as a surviving 

corporation under the operation of merger law. The 

surviving corporation takes on all of the assets and liabilities of both the acquired corporation and the acquiring 

Case: 15-5059 Document: 38-2 Page: 8 Filed: 06/29/2016
WELLS FARGO & COMPANY v. US 9

corporation—the surviving corporation steps into the 

shoes of the predecessor corporations. The court concluded that “where a statutory merger has occurred, the 

surviving corporation is the ‘same taxpayer’ as the acquired corporation for purposes of § 6621(d).” Id. at 38. 

Applying that definition to the three situations described above, the Court of Federal Claims granted Wells 

Fargo’s motion for partial summary judgment, agreeing 

that it could net interest under § 6621(d) in all three 

situations. The government moved for the court to certify 

its opinion for immediate appeal. The court granted the 

motion and issued an amended opinion reflecting the 

certification. The government then petitioned our court 

for review under 28 U.S.C. § 1292(d)(2). We granted the 

petition, and the government submitted its appeal.

DISCUSSION

We review a grant of summary judgment by the Court 

of Federal Claims de novo. Salman Ranch Ltd v. United 

States, 573 F.3d 1362, 1370 (Fed. Cir. 2009). We also 

review statutory interpretation de novo. Energy E., 645 

F.3d at 1361. Neither party disputes the facts as recited 

by the Court of Federal Claims. 

Adopting the Court of Federal Claims’ holding as its 

position, Wells Fargo argues that whenever two companies merge, any payments they made—whether before or 

after the merger—were made by the “same taxpayer.” 

Specifically, Wells Fargo argues that because it “has 

subsumed in one corporate form the corporate identities of 

the several corporations that have been merged into it—

becoming by operation of law liable for their underpayments (and interest thereon) and entitled to refunds of 

their overpayments (and interest thereon)—the ‘same 

taxpayer’ made each of the overpayments and underpayments at issue in the case.” Appellee Br. 56. Wells Fargo 

essentially argues that two merging entities are the 

Case: 15-5059 Document: 38-2 Page: 9 Filed: 06/29/2016
10 WELLS FARGO & COMPANY v. US

“same taxpayer” because the surviving corporation acquires and assumes the legal identity of the acquired 

corporation, so a merger effectively makes two corporations into one. In other words, because the current Wells 

Fargo incorporated all of the corporate entities that made 

the underpayments and overpayments through mergers, 

Wells Fargo is the “same taxpayer” as all of those entities.

In contrast to Wells Fargo’s singular approach, the 

government argues each situation separately. It does, 

however, propose two alternative general-purpose tests 

that would apply across all three situations. For its first 

test, the government proposes that “same taxpayer” be 

decided by an entity’s TIN. Alternatively, the government 

proposes that we adopt a dictionary definition of the word 

“same.” In particular, the government proposes that we 

determine whether two taxpayers are the “same taxpayer” by looking to whether they have “an identity of ‘relevant essentials.’” Appellant Br. 49 (quoting Webster’s 

Third New Int’l Dictionary 2007 (1969)).

The government’s TIN test would read § 6621’s netting provisions to require that a corporation have the 

same TIN at the time of both the underpayment and the 

overpayment. The government uses a TIN to identify 

each taxpaying entity, and a corporation’s TIN will remain the same even if it experiences substantial change 

to its corporate structure. But under the government’s 

proposed definition, an acquired corporation’s ability to 

net interest ends with a merger. After an acquired corporation merges, it loses its TIN. So under the government’s test, pre-merger overpayments and 

underpayments by an acquired corporation cannot be 

netted with payments by a post-merger entity under 

§ 6621(d). 

Moreover, the government’s TIN test had been adopted by the Court of Federal Claims in an earlier case, 

Magma Power, 101 Fed. Cl. at 569. In that case, the court

Case: 15-5059 Document: 38-2 Page: 10 Filed: 06/29/2016
WELLS FARGO & COMPANY v. US 11

considered whether a group of affiliated corporations 

could net interest under § 6621(d). The affiliated corporations formed a consolidated group where a common parent 

filed a single unified income tax return under one TIN

and received any refunds on behalf of the group. The 

court found the TIN to be determinative of same-taxpayer 

status. Id. (“[T]here seems no better plain meaning of the 

term ‘same taxpayer’ than ‘same taxpayer identification 

number.’”). Thus, in that case, the consolidated group or 

corporations met the “same taxpayer” requirement because they shared a single TIN. 

In both situations, the government would have us look 

to the identity of the payer at the time of the payments, as 

it argues Energy East requires. In the government’s view,

Energy East “held that I.R.C. § 6621(d) imposes a temporal requirement, under which a court must look to the 

time the overpayment and underpayment were made to 

evaluate whether they were made by the same taxpayer.” 

Appellant Br. 27. So under the government’s understanding of Energy East, the relevant inquiry focuses on the 

timing of the payments. 

Applied to Situation One, the government’s approach 

would find that different taxpayers made the underpayment and overpayment, because the two payments were 

made by then-unaffiliated corporations. 

As noted above, the government concedes that Wells 

Fargo may net interest in Situation Two, where the 

surviving corporation in a merger (First Union) made an 

overpayment before a series of mergers and an underpayment afterward. Before, during, and after the mergers in Situation Two, the underpaying and overpaying 

company retained the same TIN because it was the surviving corporation in the mergers. The government 

contends that this fact is dispositive: because the TIN 

remains the same, the taxpayers are the “same taxpayer” 

under the statute. At the same time, the government 

Case: 15-5059 Document: 38-2 Page: 11 Filed: 06/29/2016
12 WELLS FARGO & COMPANY v. US

acknowledges that the pre- and post-merger corporations 

in this situation are not identical because the taxpayer 

(First Union) absorbed four separate corporate entities in 

the time between its overpayment (pre-mergers) and 

underpayment (post-mergers).

Turning to Situation Three, where the acquired nonsurviving corporation (CoreStates) had an overpayment 

before merger and the surviving corporation (First Union) 

had an underpayment after merger, the government 

asserts that Wells Fargo cannot net interest because the 

surviving corporation has a different TIN and thus is not 

the same “taxpayer” as the acquired corporation that 

made the overpayment. Notably, Situation Three differs 

from Situation Two only in the choice of who is the named 

surviving corporation. 

The government further contends that netting should 

not be allowed in Situation Three even under its more 

lenient “same in relevant essentials” test. The government acknowledges that “same taxpayer” cannot mean 

the corporations are identical in all respects, as the statute is designed to aid large corporate taxpayers and “[t]he 

reality is that the make-up of large corporations . . . 

undergo[es] regular changes.” Appellant Br. 49 (quoting 

Magma Power, 101 Fed. Cl. at 571) (alterations in original). Indeed, the government points out that its concession of netting in Situation Two allows for a corporation to 

undergo a large amount of change—i.e. four mergers—yet 

remain the “same taxpayer.” Id. Thus, the relevant 

question under this broader test would be whether in 

Situation Three the taxpayers had the same relevant 

essentials. The government argues that the overpaying 

and underpaying corporate entities in Situation Three did 

not have the same relevant essentials: the two entities 

were incorporated under different names, held principle 

offices in different states, filed different tax returns, and 

operated with significant geographic differences. AppelCase: 15-5059 Document: 38-2 Page: 12 Filed: 06/29/2016
WELLS FARGO & COMPANY v. US 13

lant Br. 51–53. Thus, the government argues that the 

entities in Situation Three failed to meet § 6621(d)’s 

“same taxpayer” requirement. 

At the outset, we agree with the government’s approach in two respects. First, we agree that each situation requires individual treatment, so we decline Wells 

Fargo’s invitation to decide this case in one fell swoop. 

Second, we agree with the government that Energy East 

applies to this case. The Court of Federal Claims erred in 

holding otherwise. This court decided Energy East as a 

matter of statutory interpretation. We explained that in 

§ 6621(d), the term “by the same taxpayer” immediately 

follows and therefore refers to “equivalent underpayments

and overpayments.” Energy E., 645 F.3d at 1361. We 

applied the last antecedent rule, which requires that “a 

limiting clause or phrase ‘should ordinarily be read as 

modifying only the noun or phrase that it immediately 

follows.’” Id. (quoting Barnhart v. Thomas, 540 U.S. 20, 

26 (2003)). We thus held that “the statute provides an 

identified point in time at which the taxpayer must be the 

same, i.e., when the overpayments and underpayments 

are made.” Id. (emphasis omitted). 

Energy East did not rely on the nature of the corporations at issue. Indeed, the parties did not dispute the 

meaning of “same taxpayer” in that case because they 

disagreed only on “the point in time at which the party 

requesting the refund must be the ‘same taxpayer’ to avail 

itself of interest netting under § 6621(d).” Id. As such, we 

conclude that the statutory framework announced in 

Energy East applies regardless of the corporate structures 

at issue. We examine Situations One and Three below 

under Energy East’s framework. 

I. 

We hold that Wells Fargo may not net interest in Situation One. Energy East requires us to ask this question: 

is the entity that made the underpayment at the time of 

Case: 15-5059 Document: 38-2 Page: 13 Filed: 06/29/2016
14 WELLS FARGO & COMPANY v. US

the underpayment the “same taxpayer” as the entity who 

made the overpayment at the time of the overpayment? 

Id. Applying this framework here, the taxpayer that 

made the underpayment in Situation One was not the 

“same taxpayer” as the one that made the overpayment. 

In Situation One, First Union made the underpayment and Old Wachovia made the overpayment. The two 

companies later merged. Thus, at the respective times of 

the overpayment and underpayment, there were two 

distinct taxpayers: First Union and Old Wachovia. Indeed, the situation is markedly similar to the one this 

court examined in Energy East. There, two separate 

corporate entities made separate over- and underpayments, after which a common parent corporation consolidated the two entities as subsidiary siblings. Id. at 1359. 

We held that those payments could not be netted under 

§ 6621(d) because both the underpayment and overpayment “occurred prior to [the parent’s] acquisition” of the

underpaying and overpaying entities. Id. at 1363. Similarly here, the payments were both made before the 

merger, and thus the payments were made by two separate corporations. They do not meet the “same taxpayer” 

requirement under § 6621(d). 

That the two entities later merged does not change 

the fact that they were separate at the time of the original 

payments. Wells Fargo asserts that merger law operates 

to retroactively make the two separate corporations the 

same under the statute. But Wells Fargo points to no 

controlling authority in the statute or case law to support 

its position. Energy East makes clear that it is the identity of the corporation at the time of the payments that 

matters. See id. Nothing in Energy East suggests that 

later changes in corporate structure can retroactively 

change a taxpayer’s status as to earlier payments. We 

thus decline Wells Fargo’s invitation to extend the statute 

Case: 15-5059 Document: 38-2 Page: 14 Filed: 06/29/2016
WELLS FARGO & COMPANY v. US 15

to retroactively view merged entities as the “same taxpayer.” 

II. 

Turning to Situation Three, we again ask whether the 

entity at the time of the overpayment, CoreStates, is the 

“same taxpayer” as the entity at the time of the underpayment, the post-merger surviving corporation, First 

Union. See id. at 1361. The answer to that question 

depends on whether post-merger First Union, an entity 

that has merged with CoreStates, is the “same taxpayer” 

as the pre-merger CoreStates. To answer this question, 

we must further clarify the meaning of “same taxpayer” 

under § 6621(d). Specifically, we must determine whether 

a post-merger entity is the “same taxpayer” as a premerger acquired entity. For the reasons below, we find 

that the corporations in Situation Three meet the “same 

taxpayer” requirement. 

A. 

We begin with the text of the statute. See Duncan v. 

Walker, 533 U.S. 167, 172 (2001). I.R.C. § 6621(d) provides the conditions that permit interest netting:

To the extent that, for any period, interest is payable under subchapter A and allowable under 

subchapter B on equivalent underpayments and 

overpayments by the same taxpayer of tax imposed by this title, the net rate of interest under 

this section on such amounts shall be zero for 

such period.

I.R.C. § 6621(d) (emphasis added). The definition of 

“same taxpayer” is not plain from the face of the statute. 

Neither § 6621(d) nor the rest of the Internal Revenue 

Code defines the term “same taxpayer.” 

Further, the term “same taxpayer” is not self-defining. 

Both parties agree that the term “same taxpayer” does not 

Case: 15-5059 Document: 38-2 Page: 15 Filed: 06/29/2016
16 WELLS FARGO & COMPANY v. US

require the taxpayer corporation to be completely identical. Indeed, in conceding Situation Two, which is very 

similar to Situation Three, the government necessarily 

concedes that the statute’s “same taxpayer” requirement 

does not require that the corporations making the payments be identical. The government explains that “to 

require absolute identity would make interest netting 

generally inapplicable to ‘the companies that are most 

likely to take advantage of interest netting,’ because ‘[t]he 

reality is that the make-up of large corporations . . . 

undergo[es] regular changes.” Appellant Br. 49 (quoting 

Magma Power, 101 Fed. Cl. at 571) (alterations in original). Thus, both parties agree that the context of 

§ 6621(d) mandates that “same taxpayer” cannot require

corporations to remain largely unchanged. But the parties dispute the extent of corporate change that “same 

taxpayer” allows. 

B. 

Because the text of the statute does not define “same 

taxpayer,” we look next to the legislative history. Like 

the statute, it does not define “same taxpayer,” but it does 

offer important context for understanding the statute. It 

reveals that the statute is remedial in nature, and thus 

should be read broadly. See Tcherepnin, 389 U.S. at 336 

(“In addition, we are guided by the familiar canon of 

statutory construction that remedial legislation should be 

construed broadly to effectuate its purposes.”). Both the 

statute’s legislative history and its historical context 

suggest that Congress enacted § 6621(d) to remedy what 

it saw as inequity in the tax code. 

In the legislative history accompanying the enactment 

of § 6621(d), Congress identified an inequity in the tax 

code that it sought to fix. Congress explained that it had 

not intended for a corporation to owe interest on an 

underpayment when the corporation had an equivalent 

Case: 15-5059 Document: 38-2 Page: 16 Filed: 06/29/2016
WELLS FARGO & COMPANY v. US 17

overpayment that it could be credited against. H.R. Rep. 

No. 105-364, at 63–64 (“The Committee believes that 

taxpayers should be charged interest only on the amount 

they actually owe, taking into account overpayments and 

underpayments from all open years. The Committee does 

not believe that the different interest rates provided for 

overpayments and underpayments were ever intended to 

result in the charging of the differential on periods of 

mutual indebtedness.”). Congress introduced § 6621(d) to 

fix this unintended consequence by permitting taxpayers 

to “net” interest on equivalent overpayments and underpayments. Id. at 64 (“The bill establishes a net interest 

rate of zero on equivalent amounts of overpayment and 

underpayment that exist for any period.”). The bill thus 

remedied an unintended consequence caused by unequal 

interest rates by ensuring that a taxpayer with equal 

underpayments and overpayments would owe no interest 

on those payments. 

The history of interest netting provides further support for the contention that § 6621(d) was remedial legislation. Ever since Congress set interest at different rates 

on tax overpayments and underpayments, see Tax Reform 

Act § 1511(a), Congress has repeatedly attempted to enact 

broad interest-netting provisions. See Office of Tax Policy, Dep’t of the Treasury, Report to the Congress on Netting of Interest on Tax Overpayments and Underpayments 

21–24 (1997), available at https://www.treasury.gov/

resource-center/tax-policy/Documents/Report-NettingInterest-1997.pdf (hereinafter “Treasury Report”). For 

instance, Congress enacted predecessors to § 6621(d)—

§ 6402(a) and § 6601—to permit the IRS to net overpayment and underpayment interest. Id. Section 6402

allows for the satisfaction of “an underpayment . . . by the 

application of an overpayment by the same taxpayer, . . .

then section 6601(f) permits the IRS to avoid computing 

interest on the underpayment for the amount and period 

Case: 15-5059 Document: 38-2 Page: 17 Filed: 06/29/2016
18 WELLS FARGO & COMPANY v. US

of mutual indebtedness.” Id. at 9–10; I.R.C. §§ 6402(a), 

6601(f). And Congress repeatedly instructed the IRS to 

implement “the most comprehensive netting procedures 

under section 6402 that are consistent with sound administrative practice.” Treasury Report at 22 (collecting 

legislative history). 

Despite these efforts of Congress, the IRS interpreted 

its power to net interest narrowly. In order to find out 

why the IRS had failed to implement broad interest 

netting procedures, Congress directed the Treasury

Secretary to conduct a study, to hold hearings and receive 

public comments, and to publish a report identifying any 

limitations to its interest netting procedures. See

H.R. Rep. No. 104-506, at 49 (1996); see also Magma 

Power, 101 Fed. Cl. at 563 (discussing the history of the 

enactment of § 6621(d)). In its request, Congress expressed that it was concerned by the Secretary’s inaction: 

Congress has never adopted differential interest 

rates, or increased the amount of such differential, without at the same time also encouraging 

the IRS to implement comprehensive interest netting procedures. The Committee is concerned that 

the IRS has failed to implement comprehensive 

interest netting procedures and is interested in 

learning whether the delay stems from technical 

difficulties or substantive questions about the 

scope of such interest netting procedures.

H.R. Rep. No. 104-506, at 50 (1996). 

The Treasury study reported to Congress that “the 

IRS currently does not perform global interest netting 

because of its position that it lacks the legal authority to 

do so.” Treasury Report at 40. The Treasury explained 

that the IRS interpreted the law as granting it limited 

netting powers, restricted to “offsetting.” Offsetting is the 

power to credit an overpayment against outstanding 

Case: 15-5059 Document: 38-2 Page: 18 Filed: 06/29/2016
WELLS FARGO & COMPANY v. US 19

liabilities. The IRS’s interpretation derived from the text 

of section 6402(a).3 It permits offsetting overpayment 

interest against any liability, which the Secretary interpreted as permitting the crediting of overpayment and 

accrued interest against only “outstanding” liabilities. 

Treas. Reg. § 301.6402–1. Acting under this interpretation, the Secretary did not apply § 6402(a) and § 6601(f) to 

net interest globally, as Congress had instructed. Treasury Report at 40–41. 

We presume that Congress is familiar with existing 

Federal law when it enacts a new statute. See, e.g., Miles 

v. Apex Marine Corp., 498 U.S. 19, 32 (1990). In this case, 

the presumption rings strong. The predecessor sections, 

§§ 6601 and 6402(a), were the very statutes that Congress 

had asked the Treasury to study. And these two sections 

had been interpreted by the IRS as providing insufficient 

legal authority to enact global netting procedures. So 

when Congress enacted § 6621(d), it understood that 

statute as expanding the IRS’s authority to net interest

against a statutory background consisting of §§ 6601 and 

6402(a). Indeed, Congress even narrowed those existing 

provisions so that they did not interfere with the scope of 

the new § 6621(d). See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105-206, 

 

3 26 U.S.C § 6402(a) reads:

In the case of any overpayment, the Secretary, 

within the applicable period of limitations, may 

credit the amount of such overpayment, including 

any interest allowed thereon, against any liability 

in respect of an internal revenue tax on the part of 

the person who made the overpayment and shall, 

subject to subsections (c), (d), (e), and (f) refund 

any balance to such person.

Case: 15-5059 Document: 38-2 Page: 19 Filed: 06/29/2016
20 WELLS FARGO & COMPANY v. US

§ 3301(b), 112 Stat. 685, 741 (amending § 6601(f) to 

provide that the section “shall not apply to the extent that 

section 6621(d) applies.”). 

Moreover, Congress expressed specific concerns arising out of the Secretary’s current interpretation of § 6402. 

In the committee report discussed above, Congress noted 

that current law encouraged taxpayers to delay their 

payment of underpayments to ensure that they could be 

available to offset later overpayments. H.R. Rep. No. 105-

364, at 64 (“The Committee is also concerned that current 

practices provide an incentive to taxpayers to delay the 

payment of underpayments they do not contest, so that 

the underpayments will be available to offset any overpayments that are later determined.”). Congress enacted 

§ 6621 to correct this improper incentive. It explained 

that “[t]he Committee believes that this is contrary to 

sound tax administrative practice and that taxpayers 

should not be disadvantaged solely because they promptly 

pay their tax bills.” H.R. Rep. No. 105-364, at 63–64. 

So when Congress enacted § 6621(d), it did so knowing that it was expanding on the IRS’s pre-existing authority to implement interest netting. Section 6621(d) 

remedied inequities caused by different overpayment and 

underpayment interest rates. And it expanded the IRS’s 

authority under prior statutory sections permitting interest netting, namely §§ 6601 and 6402(a). Indeed, a nonbinding Field Service Advice Memorandum published 

shortly after § 6621(d)’s passage echoed this sentiment. 

See F.S.A. Mem. 200017003, 2000 WL 1873995 (Oct. 19, 

1999). It explained that, “[i]n eliminating the interest 

rate differentials without regard to whether overpayments and underpayments are currently outstanding, 

Code section 6621(d) should be available in those situations where the Service would be entitled to offset.” Id. 

Thus, both Congress and the IRS expressed a contempoCase: 15-5059 Document: 38-2 Page: 20 Filed: 06/29/2016
WELLS FARGO & COMPANY v. US 21

raneous understanding that § 6621(d) expanded on preexisting interest-netting authority. 

The history of § 6621(d) therefore reveals that Congress intended the section to be remedial, so we construe 

the statute “broadly to effectuate its purposes.” See 

Tcherepnin, 389 U.S. at 336.

C. 

While Congress did not explicitly define the term 

“same taxpayer” in the statute or legislative history, it did 

not choose the term in a legal vacuum. Rather, Congress 

chose this term against a background of merger law that 

sheds some light on the meaning of “same taxpayer” in 

the statute. While these sources do not control the outcome of our inquiry, they nevertheless provide important 

context to understand the meaning of § 6621. Goodyear 

Atomic Corp. v. Miller, 486 U.S. 174, 184–85 (1988) (“We 

generally presume that Congress is knowledgeable about 

existing law pertinent to the legislation it enacts.”). 

Wells Fargo asserts that courts have recognized as a 

central principle of merger law that two companies effectively become one after a merger. To an extent, we agree. 

Although courts employ different terms to describe Wells 

Fargo’s alleged principle, courts often reference a principle that mergers automatically effect the joining or absorption of the acquired entity into the survivor. See, e.g.,

John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 550 

n.3 (1964). 

The Supreme Court, for example, has described mergers as adhering to “the principle that the corporate 

personality of the transferor is drowned in that of the 

transferee.” Helvering v. Metro. Edison Co., 306 U.S. 522, 

529 (1939). Circuit courts have described an acquired 

corporation as “absorbed” rather than “drowned”: “A 

merger of two corporations contemplates that one corpoCase: 15-5059 Document: 38-2 Page: 21 Filed: 06/29/2016
22 WELLS FARGO & COMPANY v. US

ration will be absorbed by the other and will cease to exist 

while the absorbing corporation remains.” Bowers v. 

Andrew Weir Shipping, Ltd., 27 F.3d 800, 806 (2d Cir. 

1994) (quoting Engel v. Teleprompter Corp., 703 F.2d 127, 

131 (5th Cir. 1983)). And commentators imagine the 

process as the survivor “stepping into the shoes” of the 

acquired entity. Boris I. Bittker & James S. Eustice, 

Federal Income Taxation of Corporations and Shareholders ¶ 12.22 (online ed. 2015) (“In a merger, one corporation absorbs the corporate enterprise of another 

corporation, with the result that the acquiring company 

steps into the shoes of the disappearing corporation as to 

its assets and liabilities.”). Regardless of the words used 

to describe the process, a merger of two corporate entities 

mixes and combines the personalities of the predecessor 

corporations into the survivor. 

These merger principles have also guided the Supreme Court on related questions of law. In Metropolitan 

Edison, for example, the Court used these principles to 

resolve the dilemma of whether a corporation could deduct certain expenses relating to bonds issued by its 

subsidiaries. 306 U.S. at 523. Between the time the 

bonds were issued and redeemed, the subsidiaries had 

merged into the parent corporation. Id. at 523–24. The 

Court decided the case on “the principle that the corporate 

personality of the transferor is drowned in that of the 

transferee. It results that the continuing corporation may 

deduct unamortized bond discount and expense in respect 

of the obligations of the transferring affiliate.” Id. at 529. 

As the Court explained, in cases of a “true merger or 

consolidation whereby the identity of the corporation 

issuing the bonds continues in the successor and the 

latter becomes liable for the debts of the former by operation of law, the successor may deduct amortization of 

discount and expense in respect of bonds issued by its 

predecessor as well as unamortized discount and expense 

Case: 15-5059 Document: 38-2 Page: 22 Filed: 06/29/2016
WELLS FARGO & COMPANY v. US 23

on any of such bonds retired prior to maturity.” Id. at 

526. In other words, if the bonds had changed hands in 

that case, the corporation would not have been able to 

access the deduction, but because the Court understood 

the merger to be a continuation of the identity of the 

acquired corporation in the successor corporation, the 

successor corporation could deduct the assets. 

These sources suggest that the post-merger surviving 

corporation in Situation Three is the “same taxpayer” as 

the pre-merger acquired corporation under § 6621(d). 

Merger law effects the automatic acquisition by the 

surviving corporation of the assets and liabilities of the 

acquired corporation. Indeed, the personality of the 

acquired corporation is “drowned” in the survivor. Id. at

529. 

Citing Newmarket Manufacturing Co. v. United 

States, 233 F.2d 493, 499 (1st Cir. 1956) and E. & J. Gallo 

Winery v. C.I.R., 227 F.2d 699, 705 (9th Cir. 1955), the 

government argues that Metropolitan Edison’s language 

is merely a “‘metaphorical expression[],’ reflecting the 

concept that attributes of the corporation that ceases to 

exist are transferred to another corporation.” Appellant 

Reply Br. 20. But the cases cited by the government do 

not support its position. 

In Newmarket, the First Circuit called Metropolitan 

Edison’s language a “metaphorical expression,” but nevertheless relied on this very “metaphorical expression” as 

central to the court’s holding. See Newmarket Mfg., 233 

F.2d at 499. Indeed, the First Circuit explained that an 

acquired corporation’s “drowning” made it the “same 

taxpayer” as the surviving corporation: 

What the Court was saying, of course, was that 

the transferee in a statutory merger should be 

deemed to be continuing in itself the corporate life 

of the now-defunct component, and that it folCase: 15-5059 Document: 38-2 Page: 23 Filed: 06/29/2016
24 WELLS FARGO & COMPANY v. US

lowed from this conceptual identity that the two 

corporate entities were to be treated for a substantive purpose in the income tax as the same taxpayer.

Id. (emphasis added). The First Circuit applied this logic 

to find that a merged corporation was entitled to carry 

back a net operating loss as a deduction against income 

earned by an acquired corporation. Id.

The second case cited by the government, E. & J. Gallo Winery, 227 F.2d at 705, simply noted that Metropolitan Edison’s language is “possibly . . . a fiction,” but 

nevertheless relied on that same language to support its 

holding:

Possibly the concept that the former corporation 

continues its identity and is an integral part of the 

successor is a fiction. (The so-called major premise in Helvering v. Metropolitan Edison Co., supra.) Possibly, the concept that the earlier 

corporation is ‘drowned’ in the successor is a fiction. But the successor corporation was allowed 

the deduction of the ‘drowned’ corporation. If the 

fiction can support a bond expense deduction, it 

can bear the weight of an unused excess profits 

tax credit.

Id. (citing Metro. Edison, 306 U.S. at 529). While the 

court acknowledged that these principles may be a “fiction,” the court believed this “fiction” “bear[s] . . . weight.” 

Id. In fact, with particular relevance to the question 

before us, the Ninth Circuit explained that the “major 

premise” of Metropolitan Edison was “the concept that the 

former corporation continues its identity and is an integral part of the successor.” Id. So, despite the government’s contention otherwise, these two cases actually 

suggest that Metropolitan Edison stands for a rule that 

Case: 15-5059 Document: 38-2 Page: 24 Filed: 06/29/2016
WELLS FARGO & COMPANY v. US 25

the acquired entity in a merger continues its identity and 

is an integral part of the successor. 

Federal tax law and the IRS’s treatment of the predecessor statutes to § 6621(d) also both suggest that Wells 

Fargo meets the statute’s “same taxpayer” requirement in 

Situation Three. First, federal tax law recognizes statutory mergers under I.R.C. § 368(a)(1)(A) as a form of corporate reorganization where the pre-merger entities’ assets 

and liabilities automatically become the assets and liabilities of the post-merger surviving corporation. Indeed, 

Treasury regulations recognize that a central, distinguishing feature of mergers from other forms of acquisition is that mergers affect a continuation of identity from 

the pre-merger corporations to the post-merger surviving 

corporation and pre-merger companies’ assets and liabilities are automatically assumed by the post-merger entity.4 Treas. Reg. § 1.368-2(b)(1)(ii); see also John Wiley, 

 

4 Treas. Reg. § 1.368-2(b)(1)(ii) reads: 

For purposes of section 368(a)(1)(A), a statutory 

merger or consolidation is a transaction effected 

pursuant to the statute or statutes necessary to 

effect the merger or consolidation, in which transaction, as a result of the operation of such statute 

or statutes, the following events occur simultaneously at the effective time of the transaction— 

(A) All of the assets (other than those distributed 

in the transaction) and liabilities (except to the 

extent such liabilities are satisfied or discharged 

in the transaction or are nonrecourse liabilities to 

which assets distributed in the transaction are 

subject) of each member of one or more combining 

units (each a transferor unit) become the assets 

Case: 15-5059 Document: 38-2 Page: 25 Filed: 06/29/2016
26 WELLS FARGO & COMPANY v. US

376 U.S. at 550 n.3 (noting “the general rule that in the 

case of a merger the corporation which survives is liable 

for the debts and contracts of the one which disappears”). 

Regarding overpayments and underpayments, the 

IRS treats merged entities consistently with these background principles. After a merger, the surviving corporation is automatically liable for the underpayments and 

entitled to the overpayments of its predecessors. The 

government acknowledges as much: “The IRS allows the 

surviving corporation in a merger, as the ‘successor corporation’ to make a claim for refund or credit ‘in the name 

of, and on behalf of, the [predecessor] corporation, which 

paid such taxes.’” Appellant Br. 36 n.13 (quoting Rev. 

Rul. 54–17, 1954–1 C.B. 160) (alteration in original). 

 

and liabilities of one or more members of one other combining unit (the transferee unit); and

(B) The combining entity of each transferor unit 

ceases its separate legal existence for all purposes; 

provided, however, that this requirement will be 

satisfied even if, under applicable law, after the 

effective time of the transaction, the combining 

entity of the transferor unit (or its officers, directors, or agents) may act or be acted against, or a 

member of the transferee unit (or its officers, directors, or agents) may act or be acted against in 

the name of the combining entity of the transferor 

unit, provided that such actions relate to assets or 

obligations of the combining entity of the transferor unit that arose, or relate to activities engaged in by such entity, prior to the effective time 

of the transaction, and such actions are not inconsistent with the requirements of paragraph 

(b)(1)(ii)(A) of this section.

Case: 15-5059 Document: 38-2 Page: 26 Filed: 06/29/2016
WELLS FARGO & COMPANY v. US 27

Similarly, the IRS recognizes that the successor corporation can agree to extend statutes of limitations “on behalf 

of an absorbed constituent.” Rev. Rul. 59–399, 1959–2 

C.B. 488; Appellant Br. 36 n.13. Thus, the IRS itself has 

treated parties to a statutory merger as the same taxpayer in other contexts following a merger.

The IRS’s treatment of interest netting under § 6402 

further supports our conclusion that interest netting 

under § 6621 should extend to merged corporations. As 

discussed above, because § 6402 predates § 6621, it is part 

of the legislative history with which Congress is presumed

to be familiar. Miles, 498 U.S. at 32 (“We assume that 

Congress is aware of existing law when it passes legislation.”). This presumption has particular force here, where 

Congress enacted § 6621(d) after repeatedly informing the 

Secretary of its desire for broad interest netting under 

§ 6402(a) and the Secretary nonetheless remained reticent to apply its powers broadly. 

At the Court of Federal Claims, the government conceded that Wells Fargo could offset overpayments and 

underpayments under § 6402(a). See J.A. 677 (offsetting

overpayment of $2,060,843.32 from Fidelity’s 1993 income 

tax account against underpayment from First Union’s 

2003 income tax account). The IRS therefore allowed 

offsetting of overpayments and underpayments between 

Wells Fargo and its predecessors that directly parallel the 

overpayments and underpayments on appeal before us. 

The government justifies this difference in treatment 

under the two sections by arguing that § 6402(a)’s language is broader than § 6621(d). The government asserts 

that Congress’s use of “same” before taxpayer makes all 

the difference: whereas § 6402(a) merely requires “such 

person” must have made the overpayment, § 6621(d)

requires the “same taxpayer.” While the government’s 

argument might have force without context, the history of 

Case: 15-5059 Document: 38-2 Page: 27 Filed: 06/29/2016
28 WELLS FARGO & COMPANY v. US

§ 6621(d)’s enactment belies the government’s position. 

Before enacting § 6621(d), Congress repeatedly directed 

the Secretary to implement “comprehensive crediting

procedures under section 6402.” H.R. Rep. No. 104–506, 

at 50. When the Secretary failed to act because it believed its legal authority was too narrow under § 6402(a), 

Congress broadened the Secretary’s power to net interest 

by enacting § 6621(d). Thus, the government’s assertion 

that § 6402(a) permits offsetting by merged entities, but

not interest netting under § 6621(d), goes directly against 

this statutory history. Moreover, there is no clear indication in the text of the statute that Congress intended to 

exclude merged entities by using the term “same taxpayer” rather than “such person.” Put simply, Congress’s 

invocation of the word “same” does not suggest it intended

to carve merged corporations out of the scope of interest 

netting under § 6621(d). 

Finally, the government argues that I.R.C. § 381 

mandates a finding that a surviving corporation cannot 

net interest from a payment made by an acquired corporation. Section 381 enumerates the tax attributes that 

transfer from an acquired corporation to a surviving 

corporation in a merger. The list of transferred tax attributes does not include interest netting. The government thus argues that § 381 “makes clear that a merger 

does not make all the participants in a merger the same 

taxpayer,” because it excludes interest netting from the 

list of tax attributes that transfer automatically. Appellant Br. 22. Wells Fargo responds that § 381 reflects 

Congress’s express authorization for some tax attributes

to transfer automatically, but it does not mandate against 

interest netting here because it does not foreclose additional tax attributes from transferring in a merger. Wells 

Fargo draws support from the section’s legislative history 

and relevant Treasury regulations, which explain that “no 

inference is to be drawn” from § 381 as to whether any tax 

attribute may transfer from an acquired corporation to a 

Case: 15-5059 Document: 38-2 Page: 28 Filed: 06/29/2016
WELLS FARGO & COMPANY v. US 29

successor. See S. Rep. No. 83-1622, at 4915 (1954) (“No 

inference is to be drawn from the enactment of this section whether any item or tax attribute may be utilized by 

a successor or a predecessor corporation under existing 

law.”); Treas. Reg. § 1.381(a)-1(b)(3) (directing that “no 

inference is to be drawn from the provisions of section 381 

as to whether any item or tax attribute shall be taken into 

account by the successor corporation”). The Court of 

Federal Claims agreed with Wells Fargo, explaining that 

“the fact that interest netting is not included on the § 381 

list is not determinative because the legislative history on 

that provision makes clear that the list was not intended 

to be exhaustive.” Wells Fargo, 117 Fed. Cl. at 40 n.11. 

The Court of Federal Claims thus concluded that § 381 

does not mandate a particular interpretation of § 6621(d) 

or foreclose merged corporations from netting interest 

here. We agree with the Court of Federal Claims’ conclusion on this point. 

D. 

For the reasons above, we find that Wells Fargo may 

net interest in Situation Three. As noted above, § 6621(d) 

is a remedial statute, which we read broadly. Moreover, 

Congress promulgated § 6621 against the legal background detailed above, including principles of merger law

and the IRS’s treatment of mergers in the statutory 

precursor to § 6621(d). Also, general IRS treatment of 

mergers suggests that § 6621(d)’s “same taxpayer” requirement, read broadly, permits netting in Situation 

Three. Thus we hold that an acquired corporation that 

makes an overpayment before a merger is the “same 

taxpayer” for the purposes of § 6621(d) as the post-merger 

surviving entity that has absorbed the acquired corporation. 

Case: 15-5059 Document: 38-2 Page: 29 Filed: 06/29/2016
30 WELLS FARGO & COMPANY v. US

CONCLUSION

For the foregoing reasons, we hold that Wells Fargo 

may net interest under § 6621(d) in Situation Three, but 

that it may not net interest in Situation One. We affirmin-part, reverse-in-part, and remand for proceedings 

consistent with this opinion. 

AFFIRMED IN PART, REVERSED IN PART, AND 

REMANDED

COSTS

No costs.

Case: 15-5059 Document: 38-2 Page: 30 Filed: 06/29/2016