In the United States Court of Federal Claims

No. 13-1021 T

(Filed July 16, 2015)

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EAGLEHAWK CARBON, INC.,

TWIN STAR MINING, INC.,

WHITE FLAME ENERGY, INC.,

RED RIVER COAL COMPANY,

INC., and USIBELLI COAL

MINE, INC., 

 Plaintiffs,

 v.

THE UNITED STATES,

 Defendant.

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Tax; Interest Rate on

Overpayment, 26 U.S.C.

§ 6621(a)(1) (2012); Subchapter

S Corporations Treated as

Corporations.

* * * * * * * * * * * * * * *

John Yates Merrell, Jr., McLean, VA, for plaintiffs Eaglehawk Carbon,

Inc., Twin Star Mining, Inc., White Flame Energy, Inc., and Red River Coal

Company, Inc. Steven H. Becker, New York, NY, for plaintiff Usibelli Coal Mine,

Inc.

Miranda Bureau, United States Department of Justice Tax Division, with

whom were Caroline D. Ciraolo, Acting Assistant Attorney General, David I.

Pincus, Chief, Court of Federal Claims Section, Mary M. Abate, Assistant Chief,

Washington, DC, for defendant.

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OPINION

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Bush, Senior Judge.

This case is before the court on cross-motions for summary judgment filed

under Rule 56 of the Rules of the United States Court of Federal Claims (RCFC). 

The motions have been fully briefed, and oral argument was held on April 21,

2015. For the reasons stated below, defendant’s motion for summary judgment is

granted and plaintiffs’ motion for summary judgment is denied.

BACKGROUND

Plaintiffs are five coal mining companies which are organized as “‘small

business corporation[s]’ under Subchapter S of the Internal Revenue

Code.” Compl. ¶¶ 2-6 (citing 26 U.S.C. §§ 1361-1379 (2012)). It is undisputed

that these coal companies overpaid certain coal sales excise taxes and were owed

refunds, plus interest, of their overpayments. The tax years in question span from

1990 through 1996. The overpayment refunds were all made in April of 2009, and

the amounts of those refunds are not in dispute. Plaintiffs’ claims focus instead on

the interest they received on their overpayments, which, according to plaintiffs,

was calculated according to a lower formula than was appropriate. 

The governing statute for computing the interest owed taxpayers on their

overpayments is 26 U.S.C. § 6621 (2012). If plaintiffs’ interpretation of

§ 6621(a)(1) is correct, they should have been paid the interest rate paid to

individuals, not the interest rate paid to corporations. The difference is not

insignificant because plaintiffs’ claims identify additional interest allegedly owed

to them through 2009, which totals approximately $6 million dollars, and

reference further interest which has allegedly accrued since that date. 

DISCUSSION

I. Standard of Review

“[S]ummary judgment is a salutary method of disposition designed to secure

the just, speedy and inexpensive determination of every action.” Sweats Fashions,

Inc. v. Pannill Knitting Co., 833 F.2d 1560, 1562 (Fed. Cir. 1987) (internal

quotations and citations omitted). The moving party is entitled to summary

judgment “if the movant shows that there is no genuine dispute as to any material

2
fact and the movant is entitled to judgment as a matter of law.” RCFC 56(a). A

genuine issue of material fact is one that could change the outcome of the

litigation. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).

 

Tax controversies are well-suited to disposition on cross-motions for

summary judgment when the outcome turns on the proper interpretation of the

Internal Revenue Code (IRC or Code), rather than on disputes of fact. See Dana

Corp. v. United States, 174 F.3d 1344, 1347 (Fed. Cir. 1999) (stating that

summary judgment was appropriate in that tax refund suit because issues of law

were the only disputed issues before the trial court). Here, there are no material

facts in dispute. To prevail on their motion for summary judgment, plaintiffs bear

the burden to show that they are entitled, as a matter of law, to receive the

additional interest requested in the complaint. See, e.g., Transamerica Corp. v.

United States, 902 F.2d 1540, 1543 (Fed. Cir. 1990) (“The ruling of the

Commissioner of Internal Revenue enjoys a presumption of correctness and a

taxpayer bears the burden of proving it to be wrong.” (citing Welch v. Helvering,

290 U.S. 111, 115 (1933))).

II. Analysis

As a threshold matter, both parties assert that the meaning of § 6621(a)(1) is

clear, although their interpretations of this statutory provision are at odds and

conflicting. See Pls.’ Reply at 1 (“[I]f anyone, it is plaintiffs who are best able to

argue that a plain reading of the statute favors them.”); Def.’s Mot. at 7 (“The

language of § 6621(a)(1) is not ambiguous.”). To determine whether a statute has

a clear meaning and is unambiguous, this court examines the plain text and

employs traditional tools of statutory construction. See, e.g., Cathedral Candle

Co. v. U.S. Int’l Trade Comm’n, 400 F.3d 1352, 1362 (Fed. Cir. 2005) (citations

omitted). In this analysis, the plain text of the statute is of paramount importance. 

See, e.g., Timex V.I., Inc. v. United States, 157 F.3d 879, 882 (Fed. Cir. 1998)

(“Because a statute’s text is Congress’s final expression of its intent, if the text

answers the question, that is the end of the matter.”) (citations omitted).

To assist in deciphering the meaning of a statute, various tools of statutory

construction may be employed. Beyond the plain text of the statute, the court may

consider the structure of the statute, applicable canons of statutory construction,

and legislative history. Id. (citations omitted). If the plain text and structure of the

3
statute do not decide the issue, courts often turn to canons of construction to

interpret the statute. E.g., Cooper Techs. Co. v. Dudas, 536 F.3d 1330, 1340 (Fed.

Cir. 2008). Legislative history may also be considered in appropriate instances,

even where the statutory text is plain and unambiguous. See, e.g., In re City of

Houston, 731 F.3d 1326, 1333 (Fed. Cir. 2013) (noting that even when a statute

“is quite plain on its face [this] conclusion does not preclude an examination of

legislative context”). To overcome the plain text of a statute, however, legislative

history must clearly evidence legislative intent. See, e.g., Gardner v. Brown, 5

F.3d 1456, 1459-60 (Fed. Cir. 1993) (“The [party relying on legislative history]

must make an extraordinarily strong showing of clear legislative intent in order to

convince us that Congress meant other than what it ultimately said.” (citing Glaxo

Operations UK Ltd. v. Quigg, 894 F.2d 392, 395 (Fed. Cir. 1990))). 

A statute is ambiguous if its terms permit two conflicting but reasonable

constructions. See, e.g., Rosete v. Office of Pers. Mgmt., 48 F.3d 514, 518-19

(Fed. Cir. 1995) (finding a statute to be ambiguous because a key term was

“capable of two reasonable interpretations”). Here, however, as explained below,

only the government has a reasonable interpretation of § 6621(a)(1). The court

begins, as it must, with an analysis of the plain text of the statute.

A. The Plain Text of Section 6621(a)(1)

For the majority of the time period relevant to plaintiffs’ claims, the

pertinent statutory text has distinguished between individual and corporate interest

rates for tax overpayments:

(1) Overpayment rate 

The overpayment rate established under this

section shall be the sum of-- 

(A) the Federal short-term rate determined

under subsection (b), plus

(B) 3 percentage points (2 percentage

points in the case of a corporation). 

To the extent that an overpayment of tax by a

corporation for any taxable period (as defined in

subsection (c)(3), applied by substituting “overpayment”

4
for “underpayment”) exceeds $10,000, subparagraph (B)

shall be applied by substituting “0.5 percentage point”

for “2 percentage points”.

26 U.S.C. § 6621(a)(1). Thus, the formula for calculating interest on tax

overpayments generally includes the variable Federal short-term rate (STR) plus a

constant, either three percentage points (for individuals), or two percentage points

(for corporations). There is also a special, reduced rate for interest on tax

overpayments exceeding $10,000 which applies only to corporations, although this

particular provision relies upon a separate section of the statute for clarification

purposes. Plaintiffs in this suit allege that they are subject to neither the lower

(STR plus 2 percentage points) interest rate applicable to “a corporation,”

§ 6621(a)(1)(B), nor the special reduced rate of interest (STR plus .5 percentage

point) applicable to “a corporation” whose tax overpayment exceeds $10,000,

§ 6621(a)(1).1

1. S Corporations are Corporations for § 6621(a)(1)(B)

Interest Purposes

Taking the simpler issue first, the plain text of § 6621(a)(1)(B) singles out

corporations for a lower (STR plus 2 percentage points versus STR plus 3

percentage points) interest rate on tax overpayments. S corporations are

corporations, as both a common sense interpretation of this designation and the

IRC indicate. See Def.’s Mot. at 7-8 (citing, among other authorities, 26 U.S.C.

§ 7701(a) (2012), which provides a definition for ‘corporation’ for use throughout

the Code “where not otherwise distinctly expressed or manifestly incompatible

with the intent thereof”); Oral Argument Transcript (Tr.) at 8 (Plaintiffs’ Counsel)

(“An S corporation is a corporation.”). Because plaintiffs are S corporations, and

thus, are corporations as generally defined by the IRC, the lower (STR plus 2

percentage points) interest rate applies to their tax overpayments under $10,000

1

/ The second formula, for the special reduced rate for interest on larger corporate

overpayments, is contained in a portion of the statute that the parties refer to as the “flush

language” of § 6621(a)(1), meaning that it is published flush with a left margin and is not

indented.

5
during the time that § 6621(a)(1)(B) existed in its current form (1998 and later).2

2. S Corporations are Corporations for the Reduced Interest

Rate for Corporate Tax Overpayments Exceeding $10,000

Section 6621(a)(1) also provides, in its flush language,3 an even lower

interest rate for corporations whose tax overpayments exceed $10,000. The court

begins with the initial presentation of this special interest rate before turning to the

other statutory guidance referenced in the flush language of § 6621(a)(1). As

stated earlier, the statute provides that 

[t]o the extent that an overpayment of tax by a

corporation for any taxable period (as defined in

subsection (c)(3), applied by substituting “overpayment”

for “underpayment”) exceeds $10,000, subparagraph (B)

shall be applied by substituting “0.5 percentage point”

for “2 percentage points”.

26 U.S.C. § 6621(a)(1). This flush language text governing overpayments

exceeding $10,000 establishes that the lower corporate interest rate in

§ 6621(a)(1)(B), i.e., the STR plus 2 percentage points rate, will be reduced further

when .5 percentage point replaces the 2 percentage points constant. 

The cited flush language text of § 6621(a)(1) also directs the Internal

Revenue Service (IRS) to borrow a definition from § 6621(c)(3), although a

substitution of the word ‘overpayment’ for ‘underpayment’ must occur in order to

get an accurate definition. The text of § 6621(c)(3) is reproduced here: 

(3) Large corporate underpayment

For purposes of this subsection– 

(A) In general

The term “large corporate underpayment”

2

/ Plaintiffs present a variety of arguments challenging the plain meaning of

§ 6621(a)(1)(B), but these are best addressed after considering the second formula the special

interest rate for corporate tax overpayments over $10,000.

3

/ See supra note 1.

6
means any underpayment of a tax by a C

corporation for any taxable period if the amount of

such underpayment for such period exceeds

$100,000.

(B) Taxable period

For purposes of subparagraph (A), the term

“taxable period” means– 

(i) in the case of any tax imposed by

subtitle A, the taxable year, or 

(ii) in the case of any other tax, the

period to which the underpayment relates.

26 U.S.C. § 6621(c)(3). The parties disagree as to what, in particular, must be

borrowed from § 6621(c)(3) to interpret the flush language of § 6621(a)(1). As

explained below, defendant provides the only sensible interpretation of the flush

language of § 6621(a)(1).

Stated succinctly, defendant looks to § 6621(c)(3)(B), for the definition of

the term “taxable period” in the flush language of § 6621(a)(1), whereas plaintiffs

focus upon § 6621(c)(3)(A), for the definition of the term “overpayment of tax by

a corporation for any taxable period” to apply to the flush language of

§ 6621(a)(1). Defendant’s borrowing from § 6621(c)(3) is relatively effortless –

the IRS can determine whether an overpayment of over $10,000 has occurred in

the taxable period for the corporation, which is clearly defined in § 6621(c)(3)(B)

as the taxable year for the corporation or any other tax period which may differ

depending on the tax. Once “underpayment” had been replaced by “overpayment”

in § 6621(c)(3)(B)(ii), the definition of “taxable period” in the special interest rate

described in the flush language of § 6621(a)(1) (STR plus .5 percentage point) is

clear and any potential ambiguities as to the meaning of “taxable period” have

been eliminated.

Challenging defendant’s identification of the definition which must be

borrowed from § 6621(c)(3), plaintiffs complain that Congress should have

pointed only to § 6621(c)(3)(B), not the entirety of § 6621(c)(3), for a borrowed

definition of the term “taxable period.” See Pls.’ Mot. at 8 (“[I]f Congress

intended to refer only to subsection (c)(3)(B) [for the definition of “taxable

period”], it would not have chosen to refer to (c)(3) in its entirety.”). The court is

7
not convinced by this argument. First, the definition for taxable period is indeed

found in § 6621(c)(3), and the statutory language directing the reader to consult

§ 6621(c)(3) would point the reader to the appropriate subsection of § 6621. 

Second, as defendant points out, only one term explicitly defined in § 6621(c)(3)

is present in both the flush language of § 6621(a)(1) and § 6621(c)(3) – that term

is “taxable period.” Def.’s Mot. at 11. Third, Congress might have cited to

§ 6621(c)(3) generally, and not to § 6621(c)(3)(B) specifically, to address the fact

that the definition of taxable period in § 6621(c)(3)(B) itself references

§ 6621(c)(3)(A), another part of § 6621(c)(3) which gives context for the

definition of taxable period. Defendant’s correct interpretation, and indeed, the

only reasonable interpretation of the flush language of § 6621(a)(1) is not

controverted by the statute’s reference to § 6621(c)(3), rather than a reference

specifically to § 6621(c)(3)(B).

Plaintiffs face two major obstacles in their proposed borrowing from

§ 6621(c)(3). First, when plaintiffs rely on § 6621(c)(3)(A), Pl.’s Mot. at 7-8, they

cannot avoid the obvious discrepancy between a provision penalizing

overpayments over $10,000, 26 U.S.C. § 6621(a)(1), and a rewritten

§ 6621(c)(3)(A) which would target, incongruously, overpayments over $100,000. 

If plaintiffs’ approach to borrowing is followed, and the substitution of

‘overpayment’ for ‘underpayment’ occurs as required by § 6621(a)(1),

§ 6621(c)(3)(A) would read:

The term “large corporate [over]payment” means any

[over]payment of a tax by a C corporation for any

taxable period if the amount of such [over]payment for

such period exceeds $100,000.

26 U.S.C. § 6621(c)(3)(A). If such a definition is inserted into § 6621(a)(1), the

conflicting $10,000 and $100,000 terms become irreconcilable and render the

statutory provision meaningless and unenforceable.

For this reason alone, defendant’s argument as to the plain meaning of

§ 6621(a)(1) must prevail. When an S corporation has overpaid its taxes for the

relevant taxable period in an amount exceeding $10,000, the correct interest rate is

STR plus .5 percentage point. This formula applies to such overpayments

exceeding $10,000 during the time the relevant language of § 6621(a)(1) existed

8
in its current form (after 1994).4

 The court turns now to the second major obstacle

to plaintiffs’ proposed interpretation of the statute.

B. Canon of Statutory Construction

Plaintiffs’ second major obstacle to their proposed borrowing from

§ 6621(c)(3)(A) is the rule of the last antecedent. The disputed sentence in the

statute reads:

To the extent that an overpayment of tax by a

corporation for any taxable period (as defined in

subsection (c)(3), applied by substituting “overpayment”

for “underpayment”) exceeds $10,000, subparagraph (B)

shall be applied by substituting “0.5 percentage point”

for “2 percentage points”.

26 U.S.C. § 6621(a)(1). According to defendant, the parenthetical “(as defined in

subsection (c)(3), applied by substituting ‘overpayment’ for ‘underpayment’)”

modifies “taxable period.” Although plaintiffs do not concede the applicability of

the doctrine of the last antecedent, arguing that it is overcome by other indicia of

meaning, plaintiffs’ analysis would have the parenthetical modify “an

overpayment of tax by a corporation for any taxable period.” Pls.’ Mot. at 7-8;

Def.’s Mot. at 10-11. Contrary to plaintiffs’ contentions, the rule of the last

antecedent, in addition to the first obstacle to plaintiffs’ interpretation discussed

supra, is determinative in this dispute.

There is not much disagreement as to how the rule of the last antecedent

operates. The meaning of a statute may be discerned using “the grammatical ‘rule

of the last antecedent,’ according to which a limiting clause or phrase . . . should

ordinarily be read as modifying only the noun or phrase that it immediately

follows.” Barnhart v. Thomas, 540 U.S. 20, 26 (2003) (citation omitted). 

Applying that rule to the flush language of § 6621(a)(1), the borrowing from

§ 6621(c)(3) defines “taxable period,” not “corporation” and not “an overpayment

of tax by a corporation for any taxable period.” This is defendant’s position, and it

4

/ A minor clarification of the wording of this statutory formula did not actually occur

until 1997, but the basic framework for the formula was established in 1994.

9
is a sound one. Although plaintiffs correctly argue that the rule of the last

antecedent can be “overcome by other indicia of meaning,” Barnhart, 540 U.S. at

26, the court finds no such indicia here, as discussed infra.

Plaintiffs also rely on a recent pronouncement by the United States Court of

Appeals for the Federal Circuit which states that the rule of the last antecedent

“provides only marginal assistance.” Res. Conservation Grp., LLC v. United

States, 597 F.3d 1238, 1245 (Fed. Cir. 2010) (citing Finisar Corp. v. DirecTV

Grp., Inc., 523 F.3d 1323, 1336 (Fed. Cir. 2008)). This limited focus on one brief

commentary on the rule of the last antecedent ignores other discussions of the rule

and its usefulness in statutory construction. E.g., Jama v. Immigration & Customs

Enforcement, 543 U.S. 335, 343 (2005); Anhydrides & Chems., Inc. v. United

States, 130 F.3d 1481, 1483 (Fed. Cir. 1997). Indeed, the Federal Circuit has not

discarded the rule since it commented in Resource Conservation that the rule was

of “marginal assistance.” See Energy East Corp. v. United States, 645 F.3d 1358,

1361 (Fed. Cir. 2011) (citing Barnhart and construing a tax statute by applying the

rule of the last antecedent). Although the rule of the last antecedent is not always

helpful in statutory construction, the court sees no need to refrain from applying

the rule of the last antecedent in this case to ensure that the statutory text of

§ 6621(a)(1) is properly interpreted. See, e.g., Rojas v. Attorney Gen. of U.S., 728

F.3d 203, 209 (3d Cir. 2013) (following the rule of the last antecedent and

holding, in that case, that a parenthetical in statutory text which borrowed a

definition – “(as defined in section . . . of Title . . .)” – only modified its immediate

antecedent). Because the flush language of § 6621(a)(1) employs an “as defined”

parenthetical to modify the last antecedent “taxable period,” defendant’s

grammatical construction of the statute is correct.

C. Legislative History

The court now considers whether the legislative history of § 6621 offers any

insights into the appropriate interest to be applied to overpayments by an S

corporation. Because plaintiffs challenge two different interest rate formulas that

have been applied to their overpayments, the court addresses the statutory

enactments of these formulas separately. One formula is the “STR plus 2

percentage points” formula set forth in § 6621(a)(1)(B), which differentiates

between the interest rate paid individuals (STR plus 3 percentage points) and the

rate paid corporations. This corporate interest rate provision was enacted in 1998. 

10
The other interest rate formula applies to corporate overpayments which

exceed $10,000, and this formula (“STR plus .5 percentage point”) in the flush

language of § 6621(a)(1) was enacted in 1994. The court addresses the earlier

enactment first. As a threshold matter, the record before the court shows that

neither of the relevant legislative acts amending § 6621(a)(1) has legislative

history which contains any direct reference to S corporations. Nor is there

reference to the difference between S corporations and C corporations, or to the

impact of the amendments to § 6621(a)(1) on S corporations or pass-through

entities in general.

5

 Thus, plaintiffs have no clear statement of congressional

intent with which they might persuade the court to ignore the plain text of

§ 6621(a)(1).

1. 1994 Uruguay Round Agreements Act

Section 6621(a)(1), along with numerous other provisions of law, was

amended in 1994 to implement international trade agreements established by the

Uruguay Round of the General Agreement on Tariffs and Trade (GATT). See

Uruguay Round Agreements Act, Pub. L. No. 103-465, Title VII, § 713, 108 Stat.

4809, 5001-02 (1994). It is not surprising that there is almost no commentary on

this change to § 6621(a)(1), given that it was part of a massive set of statutory

amendments produced through the Uruguay Round negotiations. Plaintiffs cite

only one portion of a House Report section titled “Reduction in rate of interest

paid on certain corporate overpayments of tax,” which comments on the

amendment of § 6621(a)(1):

Distortions may result if the rates of interest in the Code

differ appreciably from market rates. Reducing the

overpayment rate for large corporate overpayments of

taxes will reduce the possibility of distortions.

Pls.’ Mot. at 9 (citing H.R. Rep. No. 103-826, pt.1, at 178 (1994) (House Report)). 

5

/ The term “pass-through entity,” a term upon which plaintiffs greatly rely, refers to

business entities such as partnerships which for income tax purposes are taxed largely at the

individual owner level, as opposed to the entity level. See Pls.’ Mot. App. at 3-4 (describing the

income taxation of S corporations, which are treated more like partnerships than C corporations). 

As plaintiffs’ counsel conceded at oral argument, however, this is not an income tax case but an

excise tax case, where the tax was paid by the S corporations at the corporate level. Tr. at 46.

11
Although plaintiffs ask the court to infer that “distortions” from “large corporate

overpayments” must refer exclusively to C corporations, the court sees no reason

to make such a leap based on this anodyne passage of the House Report. 

Moreover, plaintiffs avoid any quotation of another relevant portion of the

report’s commentary: 

The overpayment rate is reduced to the sum of the

Federal short-term rate plus one-half percentage point for

any portion of an overpayment of tax by a corporation

for a taxable period that exceeds $10,000. (The

overpayment rate is the same as under present law for the

first $10,000 of any overpayment of tax by a

corporation.) The provision applies to all types of taxes.

H.R. Rep. No. 103-826, pt.1, at 178. When the entirety of the relevant legislative

commentary on Section 713 is considered, there is nothing Congress has said

which indicates that S corporations should be treated any differently under

§ 6621(a)(1) than any other type of corporation. The legislative history is

fundamentally silent on the issue before the court. 

The court notes, too, that in the House Report the reference to “large

corporate overpayments” is coupled with a reference to overpayments exceeding

$10,000. Plaintiffs argue that “[i]t is only logical that in decreasing overpayment

rates in 1994, Congress chose to favor S corporations [again] by referencing the

same subsection (c)(3) by which Congress excluded S corporations from the

higher underpayment rate [for underpayments over $100,000] just four years

earlier.”). Pls.’ Reply at 7. It is more logical, in the court’s view, to infer that the

Uruguay Round negotiations produced a tax provision which Congress

implemented without regard for prior enactments of differential treatment in the

Code for S corporations and C corporations.

6

 The court finds nothing in the

legislative history of the 1994 amendment to § 6621(a)(1) which supports

plaintiffs’ interpretation of the statute.

6

/ Plaintiffs have not suggested that any differences in the tax treatment of S corporations

and C corporations in the IRC were discussed during the Uruguay Round negotiations.

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2. Internal Revenue Service Restructuring and Reform Act of

1998

In 1998, § 6621(a)(1) was amended so as to increase the interest rate on

overpayments for individuals but to retain the same interest rate for corporations. 

See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No.

105-206, Title III, § 3302, 112 Stat. 685, 741-42 (1998) (the IRS Reform Act). 

The amendment to § 6621(a)(1), which is just one among many other changes to

the Code, is located within Title III of the IRS Reform Act, a group of changes to

the IRC denoted “Taxpayer Protection and Rights.” IRS Reform Act, 112 Stat. at

726. The subdivisions of Title III include such topics as “Low-Income Taxpayer

Clinics,” “Disclosures to Taxpayers,” “Protections for Taxpayers Subject to Audit

or Collection Procedures,” “Relief for Innocent Spouses and for Taxpayers Unable

to Manage their Financial Affairs Due to Disabilities,” and “Provisions Relating to

Interest and Penalties.” Id. at 734-76. In this context, the fact that Congress

increased the rate of interest for overpayments by individuals but did not do so for

corporations appears to indicate a concern for individual taxpayers more than a

concern for particular types of business entities. Indeed, the title of this section of

the IRS Reform Act is “[i]ncrease in overpayment rate payable to taxpayers other

than corporations.” IRS Reform Act § 3302, 112 Stat. at 741 (emphasis added). 

Plaintiffs do not cite any passages from the legislative history of the IRS Reform

Act.

The House Conference Report explaining Section 3302 of the IRS Reform

Act is succinct:

The House bill [which is the same as the Senate bill in

this respect] provides that the overpayment interest rate

will be [ST]R plus three percentage points, except that

for corporations, the rate remains at [ST]R plus two

percentage points.

H.R. Conf. Rep. No. 105-599, at 257-58 (1998). Interestingly, in the preceding

section of the IRS Reform Act – Section 3301 – the Conference Report noted that

there are different interest rates which apply to various overpayments and

underpayments, and in particular noted the circumstances of pass-through entities

such as partnerships. Id. at 257. Obviously, Congress in 1998 was aware of pass13
through entities and could state a special concern for them, as it did in the

commentary on Section 3301 of the IRS Reform Act amending 26 U.S.C.

§ 6621(d):

Where interest is payable and allowable on an equivalent

amount of underpayment and overpayment that is

attributable to a taxpayer’s interest in a pass-thru entity

(e.g., a partnership), the conferees intend that the

benefits of the [interest-netting] provision apply.

H.R. Conf. Rep. No. 105-599, at 257. 

No such concern for pass-through entities is expressed in the Conference

Report as to the application of Section 3302 of the IRS Reform Act which

amended § 6621(a)(1). The Conference Report therefore contains no indication

that Congress acted in 1998 to exclude S corporations from the interest rate

formula applicable to corporate overpayments.7 After a thorough review of the

legislative history that might inform an alternate construction of the plain text of

§ 6621(a)(1), the court finds nothing to support plaintiffs’ interpretation of the

interest provisions which should be applied to the tax overpayments of S

corporations.

D. Review of Plaintiffs’ Principal Remaining Arguments Contesting

the Plain Meaning of Section 6621(a)(1)

Having considered and rejected plaintiffs’ interpretation of the plain text of

§ 6621(a)(1), their opposition to the applicability of the rule of the last antecedent

to the flush language of § 6621(a)(1), and their misplaced reliance on the

7

/ Plaintiffs also rely on a Senate committee staff report issued in 1999. Pls.’ Reply at 7

n.1; Tr. at 17, 47. Defendant argues that this report is not part of the legislative history of any of

the amendments to § 6621(a)(1) relevant to this suit. Def.’s Reply at 7. The court must agree

with defendant. This report is not part of the legislative history explaining the 1994 and 1998

amendments to § 6621(a)(1). See, e.g., Ogilvie v. United States, 519 U.S. 79, 90 (1996) (stating

that “the view of a later Congress cannot control the interpretation of an earlier enacted statute”)

(citations omitted); AD Global Fund, LLC ex rel. N. Hills Holding, Inc. v. United States, 67 Fed.

Cl. 657, 685 (2005) (“Congress cannot effect an authoritative interpretation of a law passed by

the prior Congress using the vehicle of a committee report.”). 

14
legislative history of § 6621(a)(1), the court now turns, briefly, to the other

principal topics raised by plaintiffs in their briefs.

8

 The first argument focuses

upon the nature of S corporations as “pass-through” entities; plaintiffs contend

that Congress must have meant to treat S corporations more like partnerships than

C corporations for the purposes of overpayment interest rates. The second

argument is that the chronology of various amendments to overpayment and

underpayment interest rate provisions in the IRC must indicate that Congress

granted favorable overpayment interest rate treatment for S corporations similar to

the favorable underpayment interest rate provision for S corporations. Lastly,

plaintiffs urge this court to follow the United States Tax Court, in one respect but

not another, in its interpretation of § 6621(a)(1) as contained in a short opinion

issued in 2006. The court addresses each of these topics in turn.

1. Whether Congress, Sub Silentio, Provided that S

Corporations Should Be Treated Like Partnerships, and

Not Like C Corporations, in § 6621(a)(1)

Plaintiffs contend that pass-through entities like S corporations and

partnerships, because they are so different from C corporations, must have all been

excluded from any corporate overpayment interest rate set by § 6621(a)(1). See

Pls.’ Reply at 12 (“Section 6621 conforms to the inherent differences between C

and S corporations by allowing S corporations, like other pass-through entities, to

pay and receive interest at the regular rates that apply to individuals.”). Plaintiffs

found their contentions in this regard on “reason”:

Congress could have reasonably wanted to treat S

corporations like partnerships, and not like C

corporations, not because they are partnerships, but

because the incidents of taxation in an S corporation, as

in a partnership, fall directly upon the owners. . . . Thus,

there is ample reason why Congress would have wanted

to treat interest owed by and owed to S corporations

differently from that of C corporations and why through

the provisions of Section 6621 it did so.

8

/ The court has considered all of plaintiffs’ arguments raised in briefing and at oral

argument. None of these arguments has been persuasive. 

15
Id. at 11-12. 

The fundamental problem with plaintiffs’ argument is that although

Congress could have reasonably exempted S corporations from the corporate

overpayment interest rates set by § 6621(a)(1), it has stated no such intent, either

in the language of the statute or in relevant legislative history. The court cannot

rewrite § 6621(a)(1) simply because it might be reasonable to do so. If plaintiffs

wish to have the statute amended in their favor, they must address such concerns

to Congress, not to this court. See Def.’s Reply at 12 (“Even if subjecting the

plaintiffs to reduced overpayment interest rates were somehow unfair, the

plaintiffs’ argument is best directed to Congress.”).

Plaintiffs also place undue reliance on a decision issued by the United States

District Court for the District of New Jersey, Naporano v. United States, 834 F.

Supp. 694 (D.N.J. 1993). Plaintiffs construe Naporano to hold that the word

“corporation” in the Code does not always refer to S corporations:

Applying the same reasoning invoked by the government

in Naporano and accepted by the court, “corporation” in

Section 6621 should be defined as C corporation [and

excluding S corporations]. . . . It should be read as C

corporation not only in the flush language of subsection

(a)(1), but also in subsection (a)(1)(B).

Pls.’ Reply at 14. The Naporano court, however, was not interpreting

§ 6621(a)(1), but another, entirely unrelated statute, 26 U.S.C. § 245(c)(1) (2012). 

834 F. Supp. at 699. As defendant notes, there is no holding in Naporano which

applies to every instance of the utilization of the word “corporation” in the IRC. 

Def.’s Reply at 9. The court finds no useful guidance in Naporano to determine

whether S corporations should be excluded from the ambit of the term

“corporation” in § 6621(a)(1). Notwithstanding the inapposite statutory analysis

provided by Naporano, this court holds that because S corporations are

corporations they are subject to the overpayment interest rates for corporations

established by § 6621(a)(1). See supra. 

2. Whether Congress’s Amendments to § 6621 Show an Intent

to Create Parallel Advantages for S Corporations in

16
§ 6621(a)(1) and § 6621(c)

Plaintiffs argue that the history of various changes to § 6621 and the fact

that § 6621(c) contains different treatment of C corporations and S corporations

regarding underpayment interest show that Congress could not have treated C and

S corporations the same in § 6621(a)(1) for the purposes of determining

overpayment interest. See Pls.’ Mot. at 7-8, 10-11; Pls.’ Reply at 3-4, 8, 10-11; Tr.

at 10-14. According to defendant, plaintiffs are asking the court to infer that the

text of § 6621(a)(1) means not what it says, but instead expresses a general

concern for S corporations that has been present since 1990 in § 6621(c). Def.’s

Reply at 9. The court must agree with defendant’s characterization of plaintiffs’

argument, i.e., a faulty premise that the intent of Congress should be inferred from

the enactment of disparate legislative measures over the course of a number of

years.

Such an inference, in the court’s view, would ignore the likelihood that the

specific legislative acts which amended § 6621(a)(1) in 1994 and 1998 had

different goals than the legislation which favored S corporations in 1990. 

Although plaintiffs contend that such a change in concern for the tax realities of S

corporations would be an “anomaly,” Tr. at 13, amendments to the IRC are not

constrained by the concerns of any prior Congress, particularly where, as here,

different topics (overpayment interest versus underpayment interest) are addressed

in successive amendments. See, e.g., Wells Fargo & Co. v. United States, 641

F.3d 1319, 1322-23 (Fed. Cir. 2011) (describing certain amendments to the IRC

from 1981 through 2004 which adjusted statutory provisions to address the

evolving concerns of Congress).

The court has considered all of plaintiffs’ arguments which focus on the

history of the amendments to § 6621 and which highlight the allegedly anomalous

differences between the treatment of C corporations and S corporations in

§ 6621(a)(1) and § 6621(c), if the government’s view of the statute is adopted by

this court. None of plaintiffs’ arguments persuade the court that the plain text of

the statute should be ignored or that a rewritten § 6621(a)(1) should override the

corporate overpayment interest rate provisions clearly set forth in the text of this

statute. For these reasons, the court rejects plaintiffs’ interpretation of § 6621 and

its history as unpersuasive. 

17
3. Whether a Tax Court Interpretation of § 6621(a)(1) is

Persuasive

“Although decisions by judges of the United States Tax Court are not

binding on this court, the court gives their interpretations [of the IRC] due

consideration.” RP1 Fuel Cell, LLC v. United States, 120 Fed. Cl. 288, 345

(2015); see also Otis Elevator Co. v. United States, 618 F.2d 712, 719 (Ct. Cl.

1980) (noting that Tax Court decisions do not provide binding precedent for this

court). Here, plaintiffs rely, in part, on Garwood Irrigation Co. v. Commissioner,

126 T.C. 233 (2006). Plaintiffs agree with the holding in Garwood concluding

that S corporations are not included in the definition of corporation for purposes of

the STR plus .5 percentage point overpayment interest rate for overpayments

exceeding $10,000. Pls.’ Mot. at 9-10. Plaintiffs disagree, however, with the

holding in Garwood which included S corporations in the STR plus 2 percentage

points interest rate formula for smaller corporate overpayments. Id. at 13.

The court disagrees with the portion of Garwood upon which plaintiffs rely,

for a number of reasons. While the Garwood court found the flush language of the

statute to be ambiguous, the text of § 6621(a)(1), as stated supra, is unambiguous

and only defendant’s proposed reading of the statute provides a reasonable,

enforceable corporate overpayment interest rate formula for overpayments

exceeding $10,000 (STR plus .5 percentage point). Inappropriately, in this court’s

opinion, the Garwood court chose to rely on legislative history that is silent as to

the treatment of S corporations. The Tax Court discerned significance in a mere

“echo[]” between language in § 6621(c), a provision enacted at an earlier date, and

a similar phrase in the 1994 House Report. 126 T.C. at 235 (identifying the

similarities between the phrases “large corporate underpayment” and “large

corporate overpayments” as providing “some guidance”). In this court’s view, the

Garwood court discerned congressional intent where there was none. See supra. 

The court notes, too, that Garwood contains a very brief statutory analysis

of the STR plus .5 percentage point provision in the flush language of

§ 6621(a)(1).9 Garwood therefore does not provide a sufficiently persuasive

9

/ The lawsuit in Garwood was primarily concerned with a determination of the tax

liabilities of the petitioner, not with the proper interest rate to be calculated upon any

(continued...)

18
analysis of this issue. Further, Garwood has not been followed by any other court. 

See Maimonides Med. Ctr. v. United States, 54 F. Supp. 3d 194, 205 n.11

(E.D.N.Y. 2014) (stating that “to the extent Garwood might suggest a contrary

outcome, the Court declines to follow it”), appeal docketed, No. 14-4279 (2d Cir.

Nov. 14, 2014); see also United States v. Talley Def. Sys., Inc., 393 F. Supp. 2d

964, 971-72 (D. Ariz. 2005) (commenting that S corporations should be subject to

the corporate overpayment rates in § 6621(a)(1)). For all of these reasons, the

court declines to follow the portion of Garwood upon which plaintiffs rely.

E. IRS Administrative Materials

Finally, the court considers whether administrative materials issued by the

IRS offer any guidance for the interpretation of § 6621(a)(1). One type of

administrative material is contained in the Internal Revenue Manual (IRM). 

Plaintiffs cited to provisions of the IRM as support for their interpretation of

§ 6621(a)(1). Before turning to the IRM, however, the court first discusses

another type of IRS administrative material that addresses the legal issue presented

by this case – a program manager technical assistance memorandum issued in

1998.

1. Program Manager Technical Assistance Memorandum

Although the parties did not cite to any IRS memoranda in their briefs, the

court discovered one IRS memorandum potentially relevant to this dispute and

requested that the parties comment on this document at oral argument. See Order

of April 20, 2015. The document is labeled “Technical Assistance Memorandum”

and is dated December 22, 1998. See TAM CC-TAM-PMTA-00244 (Dec. 22,

1998) (hereinafter, “1998 Memorandum”).10 Before turning to the content of this

9

(...continued)

overpayment. See Garwood Irrigation Co. v. Comm’r, 88 T.C.M. (CCH) 173 (2004).

10

/ The original document is available on the IRS’s website, at

http://www.irs.gov/pub/lanoa/pmta00244_7034.pdf (last visited July 1, 2015). The acronym

PMTA signifies “program manager technical assistance memorandum.” E.g.,

http://www.irs.gov/pub/lanoa/pmta_2012-16.pdf (last visited July 1, 2015). Such documents are

indexed by year and are described as “Legal Advice Issued to Program Managers.” See

(continued...)

19
document, the court notes that a technical assistance memorandum occupies a low

place in the hierarchy of documents released to the public by the IRS. See, e.g.,

Treas. Reg. § 301.6110-2(a) (stating that “a [formal] written determination [issued

by the IRS] does not include for example, . . . technical assistance memoranda”). 

 As plaintiffs pointed out at oral argument, a technical assistance

memorandum is of limited utility in tax litigation. It is undisputed that a technical

assistance memorandum lacks precedential value. See

http://www.irs.gov/uac/Legal-Advice-Issued-to-Program-Managers (last visited

July 1, 2015) (noting that program manager technical assistance memoranda

“cannot be used or cited as precedent”). In this case, the only significance that

should be accorded the 1998 Memorandum is that it states the legal position of the

Office of Chief Counsel of the IRS regarding the interest provisions of

§ 6621(a)(1) as they apply to S corporations, in response to an inquiry in 1998

from the acting director of an IRS department that occupied itself with “Interest

Administration.” See Tax Analysts v. I.R.S., 294 F.3d 71, 81 (D.C. Cir. 2002)

(noting that program manager technical assistance memoranda present the Office

of Chief Counsel’s “final legal position concerning the Internal Revenue Code”)

(emphasis removed). 

For the sole purpose of illustrating the legal position taken by the IRS in

1998, the court reproduces the text of the 1998 Memorandum here. After

introducing the subject as “Overpayment Interest Rate for S Corporations,” the

memorandum states:

This responds to your request for clarification of the

interest rate on overpayments for S corporations under

§ 6621(a)(1) of the Internal Revenue Code (Code).

General Overpayment Rate

Section 3302 of the Internal Revenue Service

Restructuring and Reform Act of 1998, Pub. L. 105-206,

10

(...continued)

http://www.irs.gov/uac/Legal-Advice-Issued-to-Program-Managers (last visited July 1, 2015).

20
112 Stat. 685, 745 (RRA 1998) amended § 6621(a)(1) of

the Code to provide that for the calendar quarter

beginning on January 1, 1999 and succeeding calendar

quarters, the overpayment rate is the Federal short term

rate plus 3 percentage points (2 percentage points in the

case of a corporation). Section 1361(a)(1) of the Code

defines an “S corporation” as a small business

corporation that made the election provided under

§ 1362(a). Nothing in the legislative history

accompanying § 3302 of RRA 1998 indicates that

Congress intended to exclude S corporations from the

term corporation as used in that subsection. 

Accordingly, the general overpayment rate for S

corporations for the calendar quarter beginning on

January 1, 1999 and succeeding calendar quarters, is the

Federal short term rate plus 2 percentage points.

Overpayments in Excess of $10,000

The last sentence of § 6621(a)(1) provides that to the

extent that an overpayment of tax by a corporation for

any taxable period exceeds $10,000, the overpayment

rate is the Federal short term rate plus 0.5 percentage

point.

TAM CC-TAM-PMTA-00244 (Dec. 22, 1998). The court notes that the position

taken by the Office of Chief Counsel of the IRS in 1998 is consistent with the

position the government takes in this litigation in 2015. Beyond that observation,

however, the court finds no further significance in the 1998 Memorandum.

2. Internal Revenue Manual

Plaintiffs rely, to some extent, on a provision of the Internal Revenue

Manual (IRM) which discussed the overpayment interest due corporations under

the Code, although the text cited by plaintiffs has since been replaced. Before

turning to the cited content of a historical version of the IRM, and related

provisions of the IRM that plaintiffs did not cite, the court briefly examines the

21
weight courts typically accord provisions in the IRM. As a threshold matter, the

IRM itself notes that its provisions are made available to the public to fulfill

certain statutory disclosure requirements, but describes the function of the IRM as

providing “instructions to staff”:

The IRM is the primary, official source of “instructions

to staff” that relate to the administration and operation of

the IRS. It details the policies, delegations of authorities,

procedures, instructions, and guidelines for daily

operations for all IRS organizations.

IRM 1.11.2.2(1) (05-08-2014). see also IRM 1.11.1.3.1 (09-04-2009) (discussing

disclosure requirements as they pertain to instructions to IRS staff).

Both parties agree that the IRM binds neither the IRS nor the courts. Pls.’

Mot. at 12; Def.’s Mot. at 16. The only case cited by plaintiffs for the proposition

that the IRM may provide “guidance” to courts, Pls.’ Mot. at 13; Pls.’ Reply at 16,

is Ransom v. FIA Card Services, N.A., 562 U.S. 61 (2011). Although criticized by

Justice Scalia in his dissent, the majority of the Court in Ransom defended its

citation to “guidelines” issued by the IRS by stating that “[t]he [IRS] might . . .

have something insightful and persuasive (albeit not controlling) to say about

[collection standards set forth in the IRM].” Ransom, 562 U.S. at 73 n.7. It is

noteworthy that the statute at issue in Ransom specifically referenced the

collection standards that are set forth in the IRM. Id. at 69 (citing 11 U.S.C.

§ 707(b)(2)(A)(ii)(I) (2006 and Supp. III)). Thus, Ransom is a rather unusual case

of statutory interpretation where the statute at issue specifically references the

IRM. That is not the case here. Ransom contains no general pronouncement as to

the weight that the IRM should be accorded in interpreting the Code.

Courts generally rely very little, if at all, on the IRM for guidance in

interpreting the Code. First, it is beyond cavil that the IRM does not have the

force of law. E.g., Fargo v. Comm’r, 447 F.3d 706, 713 (9th Cir. 2006) (citing

cases). Second, this court, when it has cited the IRM, typically uses IRM

provisions to understand the procedural facts of a case, not as a tool of statutory

construction so as to determine money damages due a tax plaintiff. See

Adamowicz v. United States, 101 Fed. Cl. 485, 487-88 (2011) (relying on

regulations as well as the IRM to resolve a jurisdictional challenge to a claim

22
against the IRS brought before this court); Kennedy v. United States, 95 Fed. Cl.

197, 204-05 (2010) (relying on the IRM to determine the nature of a suit brought

by the government in a district court tax collection proceeding); Sara Lee Corp. &

Subsidiaries v. United States, 29 Fed. Cl. 330, 334 (1993) (relying on the IRM to

understand the nature of a “formal action” taken by the IRS against the plaintiff in

that case). Third, it is well-established that IRM provisions are not precedential

and may not be used to overcome the plain meaning of a statute. E.g., Ransom,

562 U.S. at 73; Electrolux Holdings, Inc. v. United States, 71 Fed. Cl. 748, 759

(2006) (citation omitted). Fourth, if and when courts rely on the IRM for guidance

in interpreting the Code, the IRM is typically cited last, or in a footnote, showing

that the IRM is not considered to carry much weight. See, e.g., Cencast Servs.,

L.P. v. United States, 729 F.3d 1352, 1363 n.5 (Fed. Cir. 2013) (citing the IRM in

a footnote, after construing a Code provision, to show the weakness of the

plaintiff’s contrary construction of that provision). Because neither Ransom nor

the court’s independent research have shown that the IRM carries significant

weight in the interpretation of a Code provision, the court is wary of giving any

substantive weight to the IRM for the purposes of construing § 6621(a)(1).11

The court now turns to the content of the IRM to determine whether it offers

any useful “guidance” as to the interpretation of the overpayment interest

provisions contained in § 6621(a)(1). There are several provisions of the IRM

which might inform the court’s analysis here, but the guidance provided in these

provisions is mixed, and in general these provisions support defendant’s position

more than plaintiffs’ position. Plaintiffs rely specifically on the 2010 version of

IRM 20.2.4.9, but concede that the 2002 and 2015 versions of IRM 20.2.4.9 are

not clearly supportive of their construction of § 6621(a)(1). Defendant urges the

court to ignore the IRM as having “no substantive effect in this case.” Def.’s

Reply at 9 n.5 (citation omitted). In the end, the court adopts defendant’s view

that the IRM provides no significant assistance for the statutory interpretation

required by this case. The following analyses will elaborate on how the court

reached this determination.

11

/ The United States Supreme Court has on two occasions cited to the IRM for the

purposes of statutory construction, but the statutes at issue were part of the Bankruptcy Code, not

the IRC. See Hall v. United States, 132 S. Ct. 1882, 1889-90 (2012) (construing 11 U.S.C.

§ 503(b) (2012)); Ransom, 562 U.S. at 66-73 & nn.2, 7 (construing 11 U.S.C. § 707(b)(2)(A)).

23
a. 2002 Version of IRM 20.2.4.9

Turning first to IRM 20.2.4.9, there are three different versions that discuss

overpayment interest due corporations during the years pertinent to this suit. In

2002, this IRM provision stated that “[t]he corporate overpayment interest rate is

applicable to . . . Form 1120 returns.” IRM 20.2.4.9 (03-01-2002) (“Special Credit

Interest Rules for Corporations”). As plaintiffs concede, this version of IRM

20.2.4.9 does not clearly indicate that S corporations, which file Form 1120S

returns, are excepted from the “corporate overpayment interest rate.” See Pls.’

Reply at 15 n.6 (stating that “[b]ecause this subsection provides that the corporate

overpayment interest rate is applicable to Form 1120 Returns, it is possible to

conclude that this [corporate overpayment interest rate] includes Form 1120S, the

return filed by an S corporation”). The court notes that in 2002 this IRM

provision also stated, more generally, that “[a] corporate overpayment interest rate

is established for returns deemed to be corporations,” and that “corporate filers”

are not entitled to the individual overpayment interest rate. IRM 20.2.4.9 (03-01-

2002). 

The court agrees with plaintiffs that the 2002 version of IRM 20.2.4.9 does

not explicitly exclude S corporations from the corporate overpayment interest rates

in § 6621(a)(1). Further, the court reads this provision as a whole to target

corporate filers as entities that are restricted to the corporate overpayment interest

rates set forth in § 6621(a)(1). For these reasons, the 2002 version of IRM

20.2.4.9 appears to favor defendant’s position in this suit, not plaintiffs’ position. 

b. 2010 Version of IRM 20.2.4.9

Plaintiffs find support, however, in a change to IRM 20.2.4.9 in 2010. Pls.’

Mot. at 11-13; Pls.’ Reply at 15-16 & n.6. This version appears to exclude S

corporations from the definition of corporations which are subject to the corporate

overpayment interest rates set forth in § 6621(a)(1). The phrase upon which

plaintiffs rely states that:

A corporation is any . . . taxable entity with at least one

of the following significant filing requirements: 

. . .

Form 1120 with Doc. Code other than 16 (i.e., Form

24
1120S).

IRM 20.2.4.9 (09-03-2010) (“Special Credit Interest Rules for Corporations”).

Although other more general pronouncements in the 2010 version of IRM

20.2.4.9 continue to indicate that corporate filers are subject to the corporate

overpayment interest rates set forth in § 6621(a)(1), the specific reference to Form

1120S in the 2010 version of IRM 20.2.4.9 is a departure from the 2002 version. 

In the 2010 version of IRM 20.2.4.9, Form 1120S is not, apparently, considered a

corporate return for the purposes of § 6621(a)(1). Because S corporations file

Form 1120S returns, the 2010 version of IRM 20.2.4.9 does not indicate that S

corporations should necessarily be subject to the corporate overpayment interest

rates set forth in § 6621(a)(1). Thus, the 2010 version of IRM 20.2.4.9 appears to

favor plaintiffs’ position in this suit, not defendant’s position. 

c. 2015 Version of IRM 20.2.4.9

In 2015, the IRS changed IRM 20.2.4.9 again, and the text largely reverted

to the content provided in the 2002 version. The court excerpts here a few

relevant pronouncements: (1) “A corporate overpayment interest rate is

established for entities deemed to be corporations.”; (2) “A corporation is any . . .

taxable entity with [a] significant filing requirement[] [such as] Form 1120”; and

(3) “‘corporate’ filers are [not] allowed overpayment interest at the equalized

non-corporate rate.” IRM 20.2.4.9 (03-05-2015). As plaintiffs conceded at oral

argument, the 2015 version of IRM 20.2.4.9 removed the language of the 2010

version upon which they relied. Tr. at 24 (Plaintiffs’ Counsel) (asserting that IRM

20.2.4.9 supported plaintiffs’ position “up until” March 2015). In the court’s

view, nothing in the 2015 version of IRM 20.2.4.9 indicates that S corporations

are exempted from the lower overpayment interest rates applicable to corporations. 

Instead, according to this IRM provision, corporate filers, such as S corporations,

appear to fall within the category of entities that are subject to the corporate

overpayment interest rates set forth in § 6621(a)(1). For this reason, the court

views the 2015 version of IRM 20.2.4.9 as slightly favoring defendant’s

interpretation of § 6621(a)(1).

d. IRM 20.2.4.9 Summary

25
The court cannot read IRM 20.2.4.9 as providing clear guidance with

respect to the IRS’s position on the proper interpretation of § 6621(a)(1). The

versions of this manual provision have oscillated from appearing slightly prodefendant, to appearing slightly pro-plaintiffs, and now appear to be slightly prodefendant again. Even if the 2010 version of IRM 20.2.4.9 were considered to be

the clearest indication of the proper treatment of S corporations, the IRS has now

chosen to publish a version of this manual provision that greatly resembles the

2002 version. Thus, were the court to accord the IRM significant weight in its

construction of § 6621(a)(1), as urged by plaintiffs despite the weight of authority

which counsels against such an undertaking, IRM 20.2.4.9 slightly favors

defendant’s position, not plaintiffs’ position. For these reasons, the court finds

plaintiffs’ reliance on IRM 20.2.4.9 to be unavailing.

e. Other IRM Provisions

The court has also examined other IRM provisions that discuss corporate

overpayment interest rates and corporate filing requirements. No extensive

analysis of these provisions is required here. The court simply notes that once an

inquiry into the content of the IRM was expanded beyond the passages cited by

plaintiffs, plaintiffs’ arguments based on the 2010 version of IRM 20.2.4.9 are

weakened and/or rebutted.

One example is IRM 20.2.4.9.1, the provision in the IRM which

immediately follows the one cited by plaintiffs. Titled “GATT Credit Interest

Computations on Overpayments,” this provision, in its 2002 version, stated in

relevant part:

Effective after December 31, 1994, the General

Agreement on Tariffs and Trade (GATT) established a

lower credit interest rate for large corporate

overpayments. The GATT rate is one and a half points

below the normal corporate credit interest rate for

overpayments exceeding $10,000 for all business

taxpayers with a corporate filing requirement (Forms

1120, 990C, 990T).

IRM 20.2.4.9.1 (03-01-2002). The phrase “all business taxpayers with a corporate

26
filing requirement (Forms 1120, 990C, 990T),” id., is broad enough, in the court’s

view, to include S corporations which file Form 1120S returns.12

The court’s interpretation of the phrase “all business taxpayers with a

corporate filing requirement (Forms 1120, 990C, 990T),” id., is informed by the

current IRM’s discussion of corporate filing requirements, which is found at IRM

21.7.13.7.5.2 (10-01-2008). That provision, titled “Tax Form and Filing

Requirement Descriptions for Corporations,” states in relevant part that:

(1) Entities that are incorporated with a state are also

incorporated for federal tax purposes. When an entity is

incorporated, it must file the appropriate Form 1120,

unless it is a non-profit/exempt organization. . . .

. . . .

(3) This subsection describes Form 1120 filing

requirements for various types of corporations.

IRM 21.7.13.7.5.2 (10-01-2008). Thus, the IRM specifies that incorporated

entities have corporate filing requirements, which in the for-profit context means

filing the “appropriate Form 1120” return and observing the “Form 1120 filing

requirements for various types of corporations.” Id. The IRM thus uses the term

Form 1120 filing requirements broadly, to encompass several different types of

Form 1120.

These “Form 1120 filing requirements,” id., are detailed in IRM subsections addressing various types of corporations; the listed types of Form 1120

returns include Form 1120, Form 1120-C, Form 1120-SF, Form 1120-H, Form

1120-IC-DISC, Form 1120-F, Form 1120-FSC, Form 1120L, Form 1120-ND,

Form 1120-PC, Form 1120-POL, Form 1120-RIC, Form 1120-REIT, and Form

1120S. See IRM 21.7.13.7.5.2.1 (10-01-2009) through IRM 21.7.13.7.5.2.14 (10-

12

/ Unlike IRM 20.2.4.9, there was no 2010 rewrite of IRM 20.2.4.9.1. Thus, the 2002

version of IRM 20.2.4.9.1 co-existed with the 2010 version of IRM 20.2.4.9 for approximately

five years. The fact that arguably contradictory guidance was provided IRS staff during this

period further diminishes the persuasive value, if any, of the 2010 version of IRM 20.2.4.9 upon

which plaintiffs rely. The court notes, too, that the 2015 version of IRM 20.2.4.9.1, like the 2002

version, provides no support for plaintiffs’ position in this suit. See IRM 20.2.4.9.1

(03-05-2015).

27
01-2005). As is the case for plaintiffs here, a corporation that elects to be taxed as

an S corporation must file Form 1120S. IRM 21.7.13.7.5.2.14 (10-01-2005). 

Construing these IRM provisions together, IRS staff are instructed that S

corporations, like other for-profit corporations, have a corporate filing

requirement, and are also instructed that S corporations, for the purposes of

overpayment interest, fall within the category of “all business taxpayers with a

corporate filing requirement [such as Form 1120 and Form 1120S]” who receive

only the lower overpayment interest rates set forth in § 6621(a)(1). See IRM

20.2.4.9.1 (03-01-2002).

f. IRM Provisions Provide No Significant Guidance in

This Case

Having reviewed a number of current and historical versions of IRM

provisions which discuss corporate overpayment interest rates established by

§ 6621(a)(1), and corporate filing requirements, the court finds that these

provisions, taken together, are generally more supportive of defendant’s

interpretation of the statute than plaintiffs’ strained reading of the statutory text. 

For the reasons stated above, however, the court does not believe that significant

reliance on the IRM to interpret the Code is appropriate in most instances. The

court sees no reason to depart from that sound practice in this case. The court has

not, therefore, placed any significant weight on the instructions provided by the

IRM to IRS staff for this court’s analysis of § 6621(a)(1). 

CONCLUSION

Pursuant to the language of § 6621(a)(1), the corporate overpayment interest

rate formulas set forth in the statute apply to S corporations as well as C

corporations. The court’s reading of the statute is supported by its plain text as

well as the canon of statutory construction known as the doctrine of the last

antecedent. Neither the statute’s legislative history nor IRS administrative

materials provide support for a contrary interpretation. Because defendant has

shown that there are no genuine issues of material fact and that the government is

entitled to judgment as a matter of law, it is hereby ORDERED that

(1) Plaintiffs’ Motion for Summary Judgment, filed November 19, 2014,

is DENIED;

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(2) Defendant’s Cross-Motion for Summary Judgment, filed December

22, 2014, is GRANTED;

(3) The Clerk’s Office is directed to ENTER final judgment in favor of

defendant, DISMISSING the complaint with prejudice; and

(4) No Costs.

/s/ Lynn J. Bush 

LYNN J. BUSH

Senior Judge

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