Opinion ID: 4528264
Heading Depth: 2
Heading Rank: 1

Heading: whether gmi’s refund claims are subject to the

Text: SPECIAL SIX-MONTH LIMITATIONS PERIOD OR THE GENERAL TWO-YEAR LIMITATIONS PERIOD 1. GMI’S REFUND CLAIMS FALL WITHIN SECTION 6230(c) Section 6230(c)’s six-month limitations period, in relevant part, applies to particular claims for refund, including to claims under § 6230(c)(1)(A)(ii) that the IRS “erroneously computed a[] computational adjustment necessary . . . to apply to the partner a settlement.” §§ 6230(c)(1)(A)(ii), (c)(2)(A). GMI argues that its refund claims do not fall under this provision because its dispute over LCU interest allegedly does not involve [1] a “computational adjustment” that was [2] “erroneously computed” and [3] “necessary . . . to apply to the partner a settlement.” We agree with the Court of Federal Claims that GMI’s claim that the IRS used the incorrect “applicable dates” to calculate the amount of LCU interest owed falls within the statutory language of § 6230(c)(1)(A)(ii). By its terms, § 6230(c)(1)(A)(ii) covers circumstances when the IRS makes a computational error when changing a taxpayer’s tax liability to properly reflect the treatment of a partnership item based on the settlement of a TEFRA proceeding. 8 8 The dissent relies on United States v. Merriam for the premise that, “If the words are doubtful, the doubt must be resolved against the Government in favor of the taxpayer.” 263 U.S. 179, 188 (1923). But in White v. United States, 305 U.S. 281 (1938), after noting that it was not “impressed” by this very argument, the Court said: It is the function and duty of courts to resolve doubts. We know of no reason why that function Case: 19-1124 Document: 42 Page: 17 Filed: 04/23/2020 GENERAL MILLS, INC. v. UNITED STATES 17 That is what GMI alleges the IRS did in this case. As explained below, the essence of GMI’s challenge is to the IRS’s computation of the change in its tax liability resulting from the Partnership’s settlement of partnership items. First, we agree with the Court of Federal Claims’ analysis that the assessment of LCU interest in this case was the result of a “computational adjustment” as the term is defined by statute and regulation. General Mills, 123 Fed. Cl. at 586. The Internal Revenue Code defines “computational adjustment” as “the change in the tax liability of a partner which properly reflects the treatment . . . of a partnership item.” I.R.C. § 6231(a)(6). Moreover, “[a] computational adjustment includes any interest due with respect to any underpayment . . . of tax attributable to adjustments to reflect properly the treatment of partnership items.” Treas. Reg. § 301.6231(a)(6)–1(b) (emphases added); see also Olson, 172 F.3d at 1318 (stating that “the [Treasury] regulations set forth that interest is to be included as a computational adjustment”). GMI does not challenge the validity of this Treasury regulation. The court correctly noted “[t]hat ‘any’ is the modifier for both ‘interest’ and ‘underpayment’ in” § 301.6231(a)(6)–1(b), and thus, “this regulatory provision makes clear that no interest attributable to an underpayment is to be excluded from its reach.” General Mills, 123 Fed. Cl. at 584. Second, GMI argues the ground for its refund claims— that the IRS used the incorrect applicable dates to compute the amount of LCU interest—alleges a legal error and not a “computational” error. According to GMI, “[t]he should be abdicated in a tax case more than in any other where the rights of suitors turn on the con- struction of a statute and it is our duty to decide what that construction fairly should be. 305 U.S. at 292. Case: 19-1124 Document: 42 Page: 18 Filed: 04/23/2020 18 GENERAL MILLS, INC. v. UNITED STATES underlying dispute . . . turns on a legal disagreement about which statutory provision prescribes the applicable date.” Appellant’s Reply Br. at 11–12. The Court of Federal Claims found, and we agree, that GMI’s claim that the IRS used the incorrect applicable dates is a complaint that the IRS “erroneously computed” the amount of LCU interest. General Mills, 123 Fed. Cl. at 586; see § 6230(c)(1)(A)(ii). The Internal Revenue Code does not provide a precise definition of what constitutes an “erroneous[] comput[ation]” under § 6230(c). However, the fact that this provision immediately follows § 6230(b), titled “Mathematical and clerical errors appearing on partnership returns,” indicates that the statutory phrase “erroneously computed” refers to a class of errors that is distinct from mere “[m]athematical and clerical errors,” as the Court of Federal Claims observed. General Mills, 123 Fed. Cl. at 586 (citing Acute Care Specialists II v. United States, 727 F.3d 802, 813 (7th Cir. 2013)). In Acute Care Specialists II, the Court of Appeals for the Seventh Circuit rejected the taxpayers’ argument that the statutory phrase “erroneously computed any computational adjustment” refers exclusively to mathematical mistakes to the exclusion of substantive issues. 727 F.3d at 812–13. The court in Acute Care Specialists II relied on the fact that the Internal Revenue Code provides separately for “[m]athematical and clerical errors” under § 6230(b) and “erroneous[] comput[ations]” under § 6230(c). Id. at 813. There, the taxpayers claimed that the IRS erroneously included in its tax computation an adjustment for a deduction that the taxpayers did not actually claim, and the court held that the taxpayers’ claim alleged an “erroneous computat[ion]” of a “computational adjustment,” thus requiring application of § 6230(c)’s six-month limitations period. Id. at 812. Acute Care Specialists II is analogous to the present case. GMI has effectively claimed that the IRS used an Case: 19-1124 Document: 42 Page: 19 Filed: 04/23/2020 GENERAL MILLS, INC. v. UNITED STATES 19 incorrect variable in the formula for computing LCU interest, as the Court of Federal Claims observed. General Mills, 123 Fed. Cl. at 586. As with Acute Care Specialists II, GMI’s complaint is based on a substantive issue with computing a computational adjustment, rather than a mere mathematical or clerical error. Further, while GMI attempts to differentiate between “legal” errors and “computational” errors, we see no basis for making that distinction. GMI cites no authority in support of its argument that the statutory phrase “erroneously computed any computational adjustment” excludes a challenge such as GMI’s to the IRS’s determination of the applicable date for computing the amount of LCU interest owed. Third, the six-month limitations period covers circumstances, inter alia, where the “computational adjustment” was “necessary . . . to apply to the partner a settlement.” § 6230(c)(1)(A)(ii). GMI argues that circumstance does not apply to its case because choosing an applicable date and imposing LCU interest were not “necessary . . . to apply . . . a settlement” to GMI. GMI points to the fact that the Partnership settlement agreements executed by Form 870LT(AD) did not expressly cover any aspect of how LCU interest would be imposed. Appellant’s Br. at 46–47. Instead, GMI argues, a global settlement agreement executed in November 2011 by GMI and its subsidiaries with the IRS carved out “the right [for GMI] to challenge interest calculations made by the Service with respect to” particular tax years that included 2002–2006. J.A. 604. We agree with the Court of Federal Claims that the IRS’s assessment of LCU interest was “necessary . . . to apply” the Partnership settlement agreements to GMI. General Mills, 123 Fed. Cl. at 586–87. The Court of Federal Claims noted that the executed Form 870-LT(AD) provided that the IRS could assess “any interest provided by law” against GMI with respect to the settled amounts of tax underpayments for the 2002–2006 tax years. E.g., J.A. 257– 58, 262–63, 267–68, 272–73, 379–477. By executing Forms Case: 19-1124 Document: 42 Page: 20 Filed: 04/23/2020 20 GENERAL MILLS, INC. v. UNITED STATES 870-LT(AD), GMI agreed that it “consent[ed] to the assessment and collection of . . . any . . . additions to tax[] and additional amounts that relate to adjustments to partnership items . . . (plus any interest provided by law).” E.g., J.A. 257, 262 (emphasis added). Although the Partnership settlement agreements did not explicitly explain how LCU interest would be determined, as the Court of Federal Claims noted, “the tax code prescribes the amount of interest that applies for a large corporate underpayment and the applicable date for determining interest accrual.” General Mills, 123 Fed. Cl. at 587. We agree with the Court of Federal Claims that because interest was “clearly contemplated” as part of the Partnership settlement agreements, the particular aspects of how LCU interest would be imposed need not have been set forth in the executed Form 870-LT(AD). See id. 2. SECTION 6511(A) DOES NOT APPLY TO GMI’S REFUND CLAIMS Unlike the general two-year limitations provision of § 6511(a), the specifically drawn six-month limitations provision of § 6230(c) is particularly tailored to specific types of claims, including, inter alia, claims that the IRS “erroneously computed a[] computational adjustment.” §§ 6230(c)(1)(A), (c)(1)(C). The statutory language of § 6511(a), which broadly covers “claim[s] for . . . refund of an overpayment of any tax imposed by [the Internal Revenue Code],” could reasonably be read to account for GMI’s refund claims. Nonetheless, because GMI’s refund claims fall within the narrower, specifically drawn statute, that is the provision that controls. Hinck v. United States, 550 U.S. 501, 506 (2007) (“[I]n most contexts, a precisely drawn, detailed statute pre-empts more general remedies.”) (quoting EC Term of Years Trust v. United States, 550 U.S. 429, 434 (2007)) (internal quotations omitted). GMI next asserts that the policy goal of the shortened six-month limitations period is to allow any errors affecting Case: 19-1124 Document: 42 Page: 21 Filed: 04/23/2020 GENERAL MILLS, INC. v. UNITED STATES 21 the tax liability of multiple partners to flow through the IRS promptly. Oral Arg. at 6:45–8:15, General Mills, Inc. v. United States, No. 2019-1124 (Fed. Cir. Nov. 8, 2019), http://oralarguments.cafc.uscourts.gov/de- fault.aspx?fl=2019-1124.mp3. Based on that policy goal, GMI argues that any claims that are entirely dependent on one partner’s unique factual circumstances should not be governed by the shortened limitations period. Id. Further, GMI argues that its challenge to the IRS’s assessment of LCU interest depends on the unique factual circumstances of the individual partners. Appellant’s Br. at 40–42. GMI fails to point to any authority to support this position. Section 6230(c)’s six-month limitations provision is not so particularly drafted as GMI wishes. Finally, GMI argues that various other provisions in the Internal Revenue Code, §§ 6511(g), 7422(h), and 6230(d)(6), suggest that the six-month limitations period applies only to refund claims that are “attributable to partnership items” and that the general two-year limitations period applies to claims for refund of tax that are “not attributable to partnership items.” 9 Appellant’s Br. at 31– 34. GMI argues that its claim that the IRS applied the incorrect applicable dates is not attributable to a partnership item. Id. at 39. The plain language of § 6230(c), however, gives no hint that the only refund claims governed by the six-month 9 When interpreting § 7422(h), we explained that a tax item is “attributable to a partnership item” if it is “due to, caused by, or generated by a partnership item.” Bush v. United States, 717 F.3d 920, 925 (Fed. Cir. 2013) (quoting Keener v. United States, 551 F.3d 1358, 1365 (Fed. Cir. 2009)); see also Russian Recovery Fund Ltd. v. United States, 851 F.3d 1253, 1261 (Fed. Cir. 2017) (defining “attributable to” in I.R.C. § 6229(a) to mean “due to, caused by, or generated by”). Case: 19-1124 Document: 42 Page: 22 Filed: 04/23/2020 22 GENERAL MILLS, INC. v. UNITED STATES limitations period are those for tax “attributable to partnership items.” See § 6230(c)(2)(A). By its terms, § 6230(c) provides that the six-month limitations period applies to “claims for refund on the grounds that the Secretary erroneously computed any computational adjustment necessary” for certain actions including, among others, “to apply to the partner a settlement.” §§ 6230(c)(1), 6230(c)(2)(A). We decline GMI’s invitation to read into the six-month limitations provision a new requirement that the refund claims be “attributable to partnership items.” As the Court of Federal Claims noted, none of the provisions cited by GMI, § 6511(g) or § 7422(h), “indicate that refund[] [claims] attributable to partnership items are the only instances in which § 6230(c) applies.” General Mills, 123 Fed. Cl. at 592. We agree with the Court of Federal Claims that §§ 6511(g) and 7422(h) “do not expressly exclude” claims that are not attributable to partnership items “from the reach of section 6230(c).” Id. at 594. The same is true for § 6230(d)(6). Instead, those provisions make clear that refund claims “attributable to partnership items” are governed by § 6230(c). Id. at 594; see §§ 6511(g), 7422(h), 6230(d)(6). Accordingly, §§ 6511(g), 7422(h), and 6230(d)(6) do not confine the universe of refund claims to which the six-month limitations period applies to those that are “attributable to partnership items.”