Source: https://litigation.consusgroup.com/2017/05/30/ford-loses-20m-tax-interest-case-ford-motor-company-f-v-usa/
Timestamp: 2019-04-23 06:46:50+00:00

Document:
In sum, Ford and Export are separate entities that should be treated accordingly. Ford is therefore not entitled to net its overpayment interest with Export’s underpayment interest because Ford and Export are not the same taxpayer under Subsection 6621(d).
Robert E. Kolek, Schiff Hardin, LLP, Chicago, Illinois, for plaintiff. With him on the briefs and at the hearing were Robert R. Pluth, Jr. and Ivan H. Golden, Schiff Hardin, LLP, Chicago, Illinois.
Washington, D.C., for defendant. With him on the briefs were David A. Hubbert, Acting Assistant Attorney General, Tax Division, and David I. Pincus, Chief, Court of Federal Claims Section, Tax Division, United States Department of Justice, Washington, D.C.
Export were not the “same taxpayer,” as required by 26 U.S.C. (“I.R.C.”) § 6621(d). Ford contends that it is the “same taxpayer” as Export and that interest netting should accordingly be permitted under I.R.C. § 6621(d).
Pending before the court are Ford’s motion for summary judgment and the government’s cross-motion for summary judgment pursuant to Rule 56 of the Rules of the Court of Federal Claims (“RCFC”). For the reasons stated, Ford’s motion is denied and the government’s crossmotion is granted.
Generally, a taxpayer owes interest on tax underpayments, and the IRS owes interest on tax overpayments. See I.R.C. § 6601(a) (providing for interest on underpayments owed to the government); I.R.C. § 6611(a) (providing for interest on overpayments owed to taxpayers). Between 1939 and 1986, the interest rates for underpayments and overpayments were comparable or the same. See United States Department of the Treasury, Office of Tax Policy, Report to Congress on Netting of Interest on Tax Overpayments and Underpayments (Apr.
at 7. In 1986, Congress amended I.R.C. § 6621, which provides the applicable interest rates for underpayments and overpayments, through the Tax Reform Act of 1986, Pub. L. No. 99-514, § 1511(a), 100 Stat. 2085, 2744. That Act established a higher interest rate for underpayments, setting the overpayment rate as the sum of the short-term Federal rate and two percentage points, and the underpayment rate as the sum of the short-term Federal rate and three percentage points. Id. Those rates have remained the same since 1986 as applied to most corporations, with certain exceptions for large corporate payments where the overpayment rate is decreased to half of one percent and the underpayment rate is increased to five percent. See I.R.C. §§ 6621(a)(1)-(2), (c).
In 1996, Congress directed the Secretary of the Treasury Department to conduct a study and issue a report that addressed the “netting of interest on overpayments and underpayments.” Taxpayer Bill of Rights 2, Pub. L. No. 104-168, § 1208, 110 Stat. 1452, 1473. In its 1997 report, the Treasury Department explained that the IRS permitted “annual netting” of a taxpayer’s equivalent underpayments and overpayments within a single tax year, which negates the interest rate differential to the extent the underpayments and overpayments match for that year. Treasury Report at 1. The IRS also permitted another form of netting for equivalent payments, referred to as “offsetting,” when “taxpayers simultaneously have outstanding tax overpayments and underpayments for different years.” Id. at 1, 8-11; see also I.R.C. §§ 6402(a), 6601(f). In 1997, the IRS also took the position that it did not allow “global netting,” where either the overpayment or underpayment was already satisfied, and thus not outstanding, when the netting computation was performed. Id. at 1, 13 (explaining that the IRS did not allow global netting when “the deficiency has already been fully paid by the taxpayer and/or the overpayment has already been fully refunded by the [g]overnment, so that one of the taxpayer’s tax accounts has a balance of zero”).
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.
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.
S. Rep. No. 105-174, at 61-62 (1998); H.R. Rep. No. 105-364, at 63-64 (1997). Congress directed the Treasury Department to “implement the most comprehensive interest netting procedures that are consistent with sound administrative practice.” S. Rep. No. 105-174, at 62; see also H.R. Rep. No. 105-364, at 65.
245(c)(1)(A). “The net effect of this scheme was to shift a prescribed amount of profit on export sales from an entity with a 35 percent effective tax rate to an entity (the FSC) with an effective tax rate of approximately 12 percent.” Abbott Labs., 84 Fed. Cl. at 100 (citing Staff of Joint Comm. on Taxation, 98th Congress, General Explanation of the Revenue Provisions of the Deficit Reduction Act of 1984 (Comm. Print 1984), at 1045).
In light of the taxation precepts set forth by the World Trade Organization’s General Agreement on Tariffs and Trade (“GATT”), which permit “an exemption from tax of export income . . . only if the economic processes [giving] rise to the income take place outside the United States,” the Senate Finance Committee provided that “a FSC must have a foreign presence, it must have economic substance, and [its] activities that relate to the export income must be performed by the FSC outside the U.S. customs territory.” S. Print No. 98-169 at 636. A foreign corporation seeking to qualify as a FSC would thus need to, among other requirements, be created and organized under the laws of a foreign country or under the “laws applicable to any possession of the United States,” maintain an office and accounting records in a foreign country, include at least one individual on the board of directors who is not a resident of the United States, and make a formal election with the IRS to receive FSC treatment. I.R.C. § 922(a). FSCs were also required to be “managed outside the United States,” holding board meetings and maintaining a principal bank account in a foreign country, and conducting “economic processes . . . outside the United States,” such as soliciting and negotiating contracts in a foreign country. I.R.C. §§ 924(b)(1), (c)-(d).
Congress repealed the FSC provisions through the FSC Repeal and Extraterritorial Income Exclusion Act of 2000.
Formation of Export as a FSC.
On December 28, 1984, Ford, a corporation organized and existing under Delaware law, formed Export, “a Netherlands private company with limited liability.” Stipulation of Facts (“Stip.”) ¶¶ 1, 3, ECF No. 22. Ford owned all of Export’s common stock “[a]t all times.” Stip. ¶ 4. It formed Export “with the intent that Export would qualify as a FSC” and that Ford would benefit from the tax advantages provided to United States corporations engaging in certain transactions with FSCs. Stip. ¶ 10. Export thus structured its management in accord with the FSC requirements, and it elected to be treated as a FSC with the IRS. Stip. ¶¶ 9-10. Export maintained its office and records, held a bank account “with a minimal cash balance,” and held board of directors and shareholder meetings in the Netherlands. Stip. ¶¶ 5, 11-12. Such activities were conducted by ABN AMRO Trust Company (Nederland) B.V. (“ABN AMRO”), a company hired by Ford for the purpose of managing Export. Stip. ¶¶ 5, 11-12. The Export board of directors always included “personnel from ABN AMRO and at least one Ford employee, one of whom was not a United States resident.” Stip. ¶ 7. To remain qualified as a FSC, Export also paid certain administrative expenses directly. Stip. ¶ 13.
December 31, 1984.” Stip. ¶ 16; see also Stip., Ex. 6 (Commission Agency Agreement (1985)), ECF No. 22-1. In accord with the FSC requirements, Export conducted particular activities outside of the United States with respect to the other companies’ “qualifying export transactions.” Stip. ¶ 17. Those activities included, among others, soliciting and negotiating contracts, advertising, processing customer orders, determining and transmitting final invoices, and assuming credit risk. Stip. ¶ 17. Export agreed to perform these activities to “ensure that Export’s income would be treated as foreign trading gross receipts and would be subject to federal income tax at a favorable effective rate.” Stip. ¶ 18. It received commissions for the transactions. Stip. ¶ 19.
In a separate agreement, Ford and its subsidiaries agreed to “participate in and perform” all of the activities that Export was responsible for under the Commission Agency Agreement in exchange for compensation. Stip. ¶¶ 22-24 (noting that such an arrangement was authorized by I.R.C. § 925(c) and 26 C.F.R. (“Treas. Reg.”) § 1.924(d)-1(b)). The commissions and income received by Export were immediately paid to Ford as a dividend, with the exception of the finances necessary to satisfy Export’s outstanding obligations. Stip. ¶¶ 21, 24. The transactions between Export and Ford never involved the physical transfer of money from or to Export’s bank account. Stip. ¶ 27. Instead, they were only “reflected as entries on the books of account or accounting and tax records.” Stip. ¶ 27. “Ford credited Export’s books of account in the amount of the commissions and debited Export’s books of account in the same amount (less any expenses or obligations that Export was legally obligated to pay directly) to reflect a dividend to Ford.” Stip. ¶ 28 (explaining that such an arrangement was permitted by Treas. Reg. § 1.924(c)1(d)(4)(ii)).
Export ceased its sales commission activities after the FSC provisions were repealed in 2000. Stip. ¶ 39.
Ford’s and Export’s tax returns between 1990 and 1998.
The relevant tax return filings by Ford and Export occurred between the taxable years of 1990 and 1998. See Am.
Compl. ¶¶ 28-56, 66-69. Ford and Export each filed annual tax returns with separate taxpayer identification numbers. Stip. ¶ 34. Export underpaid its income taxes every year from 1990 to 1998, with the exception of 1994, while Ford overpaid its income taxes for 1992. Am. Compl. ¶ 66. Ford paid the underpayments owed by Export, plus interest accruing at the standard underpayment interest rate pursuant to I.R.C. §§ 6621(a)(2), (c), between 1999 and 2005, and the government credited the overpayments due to Ford, plus interest accruing at the standard overpayment interest rate pursuant to I.R.C. § 6621(a)(1), on approximately June 2, 2008. See Am.
Compl. ¶¶ 2, 38-55, 67-68. The IRS did not apply any interest netting under I.R.C. § 6621(d). Am. Compl. ¶ 2.
In August 2008, Ford filed a claim for refund and request for abatement to recover $11,740,528 from the IRS. Stip., Ex. 15 (Form 843, Claim for Refund and Request for Abatement (Aug. 28, 2008)), ECF No. 22-2. Ford requested, among other things, that the “net interest rate of zero under [Subsection] 6621(d) be applied to the underpayments and overpayments” of Export and Ford as the same taxpayer. See id. at FMC-SOF000187. In support of its claim, Ford noted that Export had been liquidated into Ford on May 15, 2003. Id.; see also Stip. ¶¶ 40-41 (stating that Export had elected to be treated as a disregarded entity and that all of its assets and liabilities were deemed to be transferred to Ford) (citing Treas. Reg. § 301.7701-3(g)(1)(iii)). The IRS disallowed the claim on April 16, 2009, noting that Export and Ford had filed separate tax returns under different identification numbers and that Export’s liquidation into Ford was “insufficient to satisfy the ‘same taxpayer’ requirement.” Stip., Ex. 16 (Letter from Jon Schwartz, Acting Field Director, IRS to Ford Motor Company (Apr. 15, 2009)) at 1-2, ECF No. 22-2.
Export was subsequently involved in a series of transactions in 2010, including three mergers and one sale: (1) Export merged into Ford Export Services Luxembourg, a Luxembourg entity; (2) that entity merged into 3000 Schaefer Road Company, a Michigan corporation; (3) Ford Export Services, Inc., a Delaware corporation, purchased “the assets and liabilities related to the business formerly conducted by [Export]” from 3000 Schaefer Road Company in exchange for stock; and (4) Ford Export Services, Inc. merged into Ford. See Stip. ¶¶ 46, 47, 50, 52, 54, 55, 61; Am. Compl. ¶¶ 18-24. On November 8, 2010, Ford filed a second claim for refund and request for abatement to recover $20,410,788 from the IRS. Stip. ¶ 65; Compl., Ex. A at A-1. Ford again requested that the IRS apply interest netting to its overpayments and Export’s underpayments, and justified the request by referring to Export’s merger into Ford through the transactions described above. See Compl., Ex. A at A-2. In December 2010, the IRS denied Ford’s second claim. Stip. ¶ 66. The IRS determined that Export and Ford were still not the “same taxpayer” because the 2010 transactions “did not result in [Ford] being both liable . . . for the tax that [Export] underpaid and entitled to a credit or refund of the tax that [Export] overpaid,” and thus “did not result in a merger” of Export and Ford. Stip., Ex. 30 (Office of Chief Counsel, IRS, Mem. (Feb. 23, 2012)) at 2, ECF No. 22-2.
Ford filed suit on May 28, 2014, seeking to recover $20,410,788. Compl. ¶ 2 see also Am. Compl. ¶ 2. Ford alleges that this amount represents the additional interest for its 1992 overpayment that it would have received if the IRS had applied interest netting to Ford’s overpayment and Export’s underpayments pursuant to Subsection 6621(d). See Am.
Compl. ¶¶ 1-3, 61. Ford specifically seeks to increase the interest rate by which the government credited Ford for its 1992 overpayment, such that the rate would equal the underpayment rate applied to the equivalent amount of Export’s underpayments. See Am.
purposes pursuant to the FSC regime of [Sections] 921-927.” Am. Compl. ¶ 71.
On September 15, 2015, the court granted the parties’ joint motion to stay the case pending resolution of an interlocutory appeal to the Federal Circuit in another case that addressed the “same taxpayer” provision under Subsection 6621(d) that is at issue here. Order of Sept. 15, 2015, ECF No. 25 (referring to Wells Fargo & Co. v. United States, 119 Fed. Cl. 27 (2014), aff’d in part, rev’d in part, and remanded, 827 F.3d 1026 (Fed. Cir. 2016)). The stay was lifted on July 28, 2016 after the Federal Circuit issued its decision in the Wells Fargo case. Order of July 28, 2016, ECF No. 26.
Subsection 6621(d). Pl.’s Mem. of Law in Support of Pl.’s Mot. for Summary Judgment (“Pl.’s Mot.”), ECF No. 35-1. The government filed a cross-motion for summary judgment, arguing that interest netting is not permitted because Ford and Export are not the same taxpayer. Def.’s Mem. in Support of Def.’s Cross-Mot. for Summary Judgment and in Resp. to Pl.’s Mot. for Partial Summary Judgment (“Def.’s Cross-Mot.”), ECF No. 38. The competing motions were addressed at a hearing held on April 26, 2017.
846 F.2d 746, 748 (Fed. Cir. 1988). Pursuant to the Tucker Act, the court has jurisdiction “to render judgment upon any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.” 28 U.S.C. § 1491(a)(1). The Tucker Act waives sovereign immunity and allows a plaintiff to sue the United States for money damages, United States v. Mitchell, 463 U.S. 206, 212 (1983), but it does not provide a plaintiff with any substantive rights, United States v. Testan, 424 U.S. 392, 398 (1976). “[A] plaintiff must identify a separate source of substantive law that creates the right to money damages.” Fisher v. United States, 402 F.3d 1167, 1172 (Fed. Cir. 2005) (en banc in relevant part) (citing Mitchell, 463 U.S. at 216; Testan, 424 U.S. at 398).
841 F.3d 975, 981 (Fed. Cir. 2016); Foxx v. United States, 130 Fed. Cl. 415, 418 (2017). This case, however, has a different jurisdictional basis. Here, Ford seeks to recover interest allegedly owed by the government due to Ford’s tax overpayment, which claim for interest on an overpayment is not a tax refund claim, but rather is a money claim based upon I.R.C. § 6611. That statute, coupled with the Tucker Act, provides this court with jurisdiction. See Alexander Proudfoot Co. v. United States, 454 F.2d 1379, 1384 (Ct. Cl. 1972); see also Cherbanaeff v. United States, 77 Fed. Cl. 490, 500 (2007) (noting that the court has jurisdiction over claims for statutory interest when the taxpayer has already made an overpayment) (citing Brown & Williamson, Ltd. v. United States, 688 F.2d 747, 752 (Ct. Cl. 1982)), aff’d, 300 Fed.
Appx. 933 (Fed. Cir. 2008); cf. Marsh & McLennan Cos. v. United States, 302 F.3d 1369, 137273, 1375-81 (Fed. Cir. 2002) (construing and applying I.R.C. § 6611). Ford also satisfied the statute of limitations by bringing its claim within six years after the claim first accrued, see 28 U.S.C. § 2501, because Ford filed suit on May 28, 2014, less than six years after the government credited the overpayments due to Ford in June 2008, see Barnes v. United States, 137 F. Supp. 716, 718 (Ct. Cl. 1956) (“[A] cause of action for interest does not accrue until the refund or credit is allowed.”) (citation omitted).
Further, Ford’s claims are not barred by the “substantial variance” rule, which prevents “a taxpayer from presenting claims in a tax refund suit that ‘substantially vary’ the legal theories and factual bases set forth in the tax refund claim presented to the IRS.” Lockheed Martin Corp. v. United States, 210 F.3d 1366, 1371 (Fed. Cir. 2000) (citing I.R.C. § 7422(a); Treas. Reg. § 301.6402-2(b)(1); Cook v. United States, 599 F.2d 400, 406 (Ct. Cl. 1979)). That rule stems from the tax laws pertaining to tax refund claims, and thus only applies in the refund context. See id. Here, regardless of whether Ford’s claims before this court vary from its claims presented to the IRS, the substantial variance rule does not apply because Ford is seeking interest on an overpayment pursuant to I.R.C. § 6611, rather than pursuing a tax refund claim.
Under RCFC 56(a), a grant of summary judgment is proper when the pleadings, affidavits, and evidentiary materials of the case demonstrate that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-49 (1986). A genuine dispute exists when the issue “may reasonably be resolved in favor of either party,” id. at 250, and a fact is considered material when it “might affect the outcome of the suit under the governing law,” id. at 248. The moving party has the burden of establishing that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The court therefore draws all factual inferences “in the light most favorable to the party opposing the motion.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)). Summary judgment will be appropriate if “the record taken as a whole could not lead a rational trier of fact to find for the non-moving party.” Id. at 587 (citation omitted).
The issue before the court is whether Ford and Export are the “same taxpayer” under Subsection 6621(d), such that interest netting would apply to Ford’s overpayment and Export’s underpayments. Subsection 6621(d) permits global netting of “equivalent underpayments and overpayments by the same taxpayer,” but “[t]he definition of ‘same taxpayer’ is not plain from the face of the statute.” Wells Fargo, 827 F.3d at 1035. The term “same taxpayer” is not defined in the Internal Revenue Code, and it is not self-defining. Id.
6621(d) in Energy E. Corp. v. United States, 645 F.3d 1358 (Fed. Cir. 2011). In that case, Energy East underpaid its taxes while several other companies, unrelated to Energy East at the time, overpaid their taxes. Id. at 1359-60. Energy East subsequently acquired those companies and argued that interest netting should apply pursuant to Subsection 6621(d). Id. at 1359-61. The issue turned on “the point in time” at which the “same taxpayer” standard is applied. Id. at 1361. The Federal Circuit rejected Energy East’s interest netting claim, holding that entities must be the same at the time the overpayments and underpayments were made. Id. at 1361, 1363.
id. at 1036-39 (construing Subsection 6621(d) broadly because it was intended to remedy “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”).
645 F.3d at 1361, 1363, but timing is not at issue here. There is no dispute that Export was a valid FSC owned by Ford during the pertinent time period of Ford’s overpayment and Export’s underpayments. See generally Stip. Additionally, in light of the decision in Wells Fargo, Ford is not claiming that Export’s 2003 liquidation or 2010 transactions rendered Export and Ford the same taxpayer for purposes of the 1990 to 1998 time period. See generally Pl.’s Mot. Ford instead takes a different approach, arguing that the court should disregard Export’s corporate form. See id. at 22-32. The Federal Circuit has not addressed Subsection 6621(d) in the context of a FSC and its parent corporation, and Ford recognizes that its claim does not fall within the circumstances addressed in Wells Fargo and Energy East. See Hr’g Tr. 22:25 to 23:25 (Apr. 26, 2017).
Ford specifically asserts that it was the same taxpayer as Export during the pertinent time period because Export was wholly owned by Ford and maintained no business purpose other than providing tax advantages to Ford pursuant to the FSC rules, thus making Export “an extension of Ford” for purposes of Subsection 6621(d). Pl.’s Reply in Support of Pl.’s Mot. for Summary Judgment and Resp. to Def.’s Cross-Mot. for Summary Judgment (“Pl.’s Reply”) at 1, 3, ECF No. 39. The government responds that Ford “chose to establish Export as a separate taxpayer,” and that Export’s substantive business activities and purpose under the FSC provisions demonstrate that Export’s separate corporate form should be respected. See Def.’s Reply in Support of Cross-Mot. for Summary Judgment (“Def.’s Reply”) at 2, ECF No. 40; Hr’g Tr. 63:15-18. The government proposes two tests to guide the court’s analysis, stating that two corporations should only be considered the same taxpayer if they (1) share the same taxpayer identification number or (2) have the same “relevant essentials.” Def.’s Mot. at 6. The court need not accept or reject either of the government’s proposed tests in deciding this case.
The doctrine of corporate entity fills a useful purpose in business life. Whether the purpose be to gain an advantage under the law of the state of incorporation or to avoid or to comply with the demands of creditors or to serve the creator’s personal or undisclosed convenience, so long as that purpose is the equivalent of business activity or is followed by the carrying on of business by the corporation, the corporation remains a separate taxable entity.
Id. at 438-39 (footnotes and citations omitted). Accordingly, “a corporation formed or operated for business purposes must share the tax burden despite substantial identity, in practical operation, with its owner.” National Carbide Corp. v. Commissioner, 336 U.S. 422, 429 (1949); see also Ocean Drilling & Expl. Co. v. United States, 988 F.2d 1135, 1144 (Fed. Cir. 1993) (“Moline Properties stands for the proposition that a parent corporation and its subsidiary corporation be accorded treatment as separate taxable entities.”) (citing Moline Props., 319 U.S. at 438-39; National Carbide Corp., 336 U.S. 422); Clougherty Packing Co. v.
Commissioner, Revenue, 811 F.2d 1297, 1302 (9th Cir. 1987) (“While Moline Properties concerned an attempt by the sole shareholder of a corporation to report on his personal return income attributable to the corporation, the rule it enunciates applies as well to a corporation and its subsidiaries.”) (citing National Carbide Corp., 336 U.S. 422).
Munson S.S. Line v. Commissione, 77 F.2d 849 (2d Cir. 1935)).
Ford asserts that Export’s separate corporate form should be disregarded because (1) Export, as a FSC, had no economic substance or business purpose apart from reducing Ford’s tax liabilities, and (2) the legislative purpose underlying the FSC provisions and Subsection 6621(d) support such a finding. See Pl.’s Mot. at 22-27, 30-32; Pl.’s Reply at 3-14. Ford’s contentions are unpersuasive for the reasons stated below.
Export maintained economic substance and a legitimate purpose as a FSC.
(finding that a corporation performed business functions because it, among other activities, executed leases, paid taxes, maintained a checking account, held director and shareholder meetings, and “followed the formalities of corporate operation”); see also Britt v. United States, 431 F.2d 227, 237 (5th Cir. 1970) (stating that “minimal” business activity can be sufficient in recognizing a corporation as a separate entity).
Ford emphasizes that Export, as a FSC, was a “legal fiction” under the ownership and control of Ford, see Pl.’s Reply at 1, 3, but such an argument is misplaced. Control and ownership are not “of significance in determining taxability.” National Carbide Corp., 336 U.S.
That a corporation is regarded as a ‘straw,’ a ‘dummy,’ a ‘phantom,’ in itself proves nothing. The concept of the corporation is itself a fiction. . . . The decision to recognize or not to recognize the tax identity of a corporation depends upon what the corporation does, not what it is called, how many or how few own it, or how they regard it.
Love v. United States, 96 F. Supp. 919, 922 (Ct. Cl. 1951). Regardless of whether Ford considered Export a “fiction,” Export engaged in substantive business activities in accord with the FSC requirements.
Energy E., 645 F.3d at 1359, 1363 (rejecting Energy East’s interest netting claim with particular acquired corporations, even though Energy East assumed all of the companies’ liabilities after the acquisition). To qualify as a FSC and receive the tax advantages offered by Sections 921 to 927, Export was required to and did in fact establish itself as a foreign corporation with a separate and distinct identity from Ford. Additionally, the fact that Ford formed Export to reduce its tax liability does not alter the analysis because those tax benefits were specifically authorized by Congress. Ford relies on precedents where a taxpayer used the corporate form to improperly avoid tax liability, rendering the entity a sham. See, e.g., United States v. Scherping, 187 F.3d 796, 801-02 (8th Cir. 1999) (applying an “alter ego” analysis and favoring substance over form to ultimately conclude that the entities at issue were “sham entities created on behalf of and used by taxpayers to evade payment of their federal income tax liabilities”). Ford’s “substance over form” position is misplaced not only because Export maintained economic substance, but also because “[t]he substance over form doctrine applies to disregard the separate corporate entity where ‘Congress has evinced an intent to the contrary.'” Humana Inc. v. Commissioner, 881 F.2d 247, 254 (6th Cir. 1989) (quoting Clougherty, 811 F.2d at 1302). Here, Export complied with the FSC rules expressly provided by Congress to lawfully receive tax benefits that would have been otherwise unavailable to Ford. See Evans v. Commissioner, 557 F.2d 1095, 1099 (5th Cir. 1977) (explaining that the formation of a corporation to obtain an interest rate that would not have otherwise been available to the individual forming the corporation “was a valid business purpose”) (citing Collins v. United States, 386 F. Supp. 17, 20-21 (S.D. Ga. 1974), aff’d, 514 F.2d 1282 (5th Cir. 1975)). Because Export’s conduct fell squarely within the scheme intended by Congress, Export’s existence as a valid FSC is not analogous to a “sham” entity that is organized to impermissibly avoid tax obligations and undermine congressional intent. See Moline Props., 319 U.S. at 439; see also Gregory, 293 U.S. at 470 (affirming the lower court’s disregard of petitioner’s reorganization because the transaction, although within the terms of the tax code, was “an elaborate and devious form of conveyance masquerading as a corporate reorganization” that fell “outside the plain intent of the statute“) (emphasis added); Strick Corp.
“explained that Export’s tax underpayments were more than offset by Ford’s tax overpayments,” Pl.’s Reply at 6-7. Nonetheless, in these interactions with Ford and Export, the IRS did not concede any legal position or make any legal determinations that would now be binding. See Dickman v. Commissioner, 465 U.S. 330, 343 (1984) (“[T]he Commissioner may change an earlier interpretation of the law, even if such a change is made retroactive in effect.”) (citations omitted); Automobile Club of Mich. v. Commissioner, 353 U.S. 180, 183 (1957) (“The doctrine of equitable estoppel is not a bar to the correction by the Commissioner of a mistake of law.”) (footnote omitted).
43 (citing Internal Revenue Manual § 20.2.5.13.1, Debit Interest on Liabilities Credited from Another Module by a Different Taxpayer (Apr. 27, 2016), https://www.irs.gov/irm/part20/irm_20-002-005r.html#d0e3564)). The transaction codes cited by the IRS also indicate that the transfers between Ford and Export were intended to correct payments placed in the wrong account, rather than to offset any interest. See id. at 43. Second, the issue regarding the IRS abatement turned not on whether Ford and Export were the same taxpayer, but rather whether “reasonable cause” existed for Export’s failure to pay the full taxes owed. See Decl. of Tamara Lopez, Ex. A at 1, ECF No. 39-1.
be disregarded “to avoid a fraud on the taxing statute“) (citing Moline Props., 319 U.S. at 439) (emphasis added).
The legislative purpose behind the FSC rules and Subsection 6621(d) do not support Ford’s claim.
The purpose of the FSC scheme provides further support for the treatment of Export and Ford as separate entities. Holding otherwise would undermine congressional intent, as the Sixth Circuit explained with respect to the DISC provisions that preceded the FSC rules.
Congress intended that a Domestic International Sales Corporation should be treated as a separate entity and current “other earnings income” which was not “previous taxed income” or “accumulated income” should be taxed to the Domestic International Sales Corporation. As the tax court noted, to hold otherwise would, in effect, be calling a Domestic International Sales Corporation a sham corporation and undermine the purpose of Congress in creating an exception to the tax laws through the Domestic International Sales Corporation legislation to encourage international trade by companies such as Addison Products so as to produce a balance between imports and exports. . . . Congress has evidenced its clear intent that a Domestic International Sales Corporation be organized as a separate corporate entity for the express purpose of permitting tax deferral benefits.
Addison Int’l, Inc. v. Commissioner, 887 F.2d 660, 665-66 (6th Cir. 1989).
1504(a)(1), (b)(3) (explaining that an affiliated group encompasses “includible corporations,” but not foreign corporations). Congress did not include a provision that would allow FSCs to be encompassed within a domestic corporation’s consolidated return. See Miles v. Apex Marine Corp., 498 U.S. 19, 32 (1990) (“We assume that Congress is aware of existing law when it passes legislation.”) (citing Cannon v. University of Chicago, 441 U.S. 677, 696-97 (1979)). The FSC rules were thus based upon a FSC’s formation as a substantive foreign corporation, with a separate identity from any parent corporation within the United States.
corporation’s shareholders was not the owner of the property for purposes of federal income taxation.” Id. at 341. The Supreme Court acknowledged that a corporation is generally a separate taxable entity, but found that an exception existed under the facts presented because the corporation had functioned and held itself out as an agent. Id. at 345-51. The holding in Bollinger does not govern Ford’s claim, however, because that decision was specifically premised on agency principles; Ford has acknowledged that the circumstances here are different.
See Hr’g Tr. 24:19-22; see also Moncrief v. United States, 730 F.2d 276, 280 (5th Cir. 1984) (explaining that there are two distinct theories for not treating a corporation as a separate tax entity: (1) disregarding the corporate form, and (2) regarding the corporation as a nominee or agent). Ford instead relies on Bollinger as an exception to the separate corporate entity principle set forth in Moline Properties. Hr’g Tr. 24:19-22. Although exceptions exist, as the court discussed supra, those exceptions are not applicable in this case.
9Ford points to examples in the tax law where an entity or transaction is treated differently depending upon the circumstance or situation, such as when single-member limited liability companies may be recognized as separate entities for certain tax purposes but not others. Pl.’s Reply at 18. Ford’s reliance is unpersuasive because in each example cited by Ford, there are specific Treasury regulations establishing an exception to the general principle that an entity is treated consistently for tax purposes. See Hr’g Tr. 16:23 to 17:7; Def.’s Reply at 17; see also Pl.’s Reply at 18 (citing the specific regulations that permit inconsistent treatment of singlemember limited liability companies, subchapter S corporations, and intentionally defective grantor trusts). No regulation or statute exists here that would justify Ford’s attempt to benefit from inconsistent tax treatment of Export.
For the reasons stated, Ford’s motion for summary judgment is DENIED and the government’s cross-motion for summary judgment is GRANTED. The clerk shall enter judgment in accord with this disposition.

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