Court Opinion

ID: 4706078
Source: CourtListenerOpinion
Date Created: 2021-07-23 16:03:40.308105+00
Date Added: 2024-06-11T08:06:34.661987
License: Public Domain

In the United States Court of Federal Claims
                                          No. 20-2038C
                                       Filed: July 23, 2021
                                      FOR PUBLICATION

 INDIANA MUNICIPAL POWER
 AGENCY, et al.,

                     Plaintiffs,

 v.

 UNITED STATES,

                     Defendant.

Peggy A. Whipple, Healy Law Offices, LLC, Springfield, MO, for the plaintiffs.

Rebecca S. Kruser, Commercial Litigation Branch, Civil Division, U.S. Department of Justice,
Washington, D.C., for the defendant.

                                   MEMORANDUM OPINION

HERTLING, Judge

       The plaintiffs are public-sector power providers. The plaintiffs all issued Direct Payment
Build America Bonds (“BABs”), authorized by section 1531 of the American Recovery and
Reinvestment Act of 2009 (“ARRA”), Pub. L. No. 111-5, 123 Stat. 115 (2009). Under the
ARRA, issuers of Direct Payment BABs are entitled to a refund from the Internal Revenue
Service (“IRS”) of 35 percent of the interest payable under the BABs.

        The defendant, the United States acting through the Treasury Department and the IRS,
stopped making payments to the plaintiffs based on the ARRA’s 35-percent rate in 2013. The
plaintiffs argue that, since 2013, the defendant has been violating its statutory obligation to pay
35 percent of the interest payable under their Direct Payment BABs. The plaintiffs also allege
that section 1531 created a contractual agreement with the defendant, and the defendant’s failure
to pay at the 35-percent rate has breached that contract.

       The defendant has moved to dismiss the complaint for failure to state a claim under
Rule 12(b)(6) of the Rules of the Court of Federal Claims (“RCFC”).

        Legislation enacted by Congress after the issuance of the Direct Payment BABs under the
ARRA required sequestration of direct spending. “Direct spending” does not include budget
authority provided by “appropriation Acts.” See 2 U.S.C. § 900(c)(8)(A). If the tax refunds for
Direct Payment BABs are direct spending, sequestration has the effect of reducing the amount
payable by the IRS to bond issuers. The plaintiffs’ statutory claims turn on whether interest
payments for Direct Payment BABs are direct spending or reflect spending under an
“appropriation Act.”

         The Court finds that the payments are direct spending. The subsequent legislation,
therefore, modified the defendant’s payment obligations, reducing the amount that the defendant
is statutorily required to pay the plaintiffs.

        The plaintiffs’ contract claims also fail. The presumption is that a statute does not create
contract rights. For a statute to obligate the government contractually, the statute must speak in
contractual terms. Section 1531 of the ARRA does not include any such language. Thus, the
plaintiffs have not pleaded facts sufficient to establish the defendant’s intent to contract through
the statute.

       The plaintiffs therefore cannot recover on either their statutory or contract claims. Their
complaint fails to state a claim upon which relief can be granted. The Court grants the
defendant’s motion to dismiss.

I.       BACKGROUND1

         A.    Build America Bonds

               1.      Statutory Authority

        Following the 2008 financial crisis, the ARRA sought to promote economic recovery
through, among other means, investment in infrastructure and stabilization of state and local
government budgets. ARRA § 3(a), 123 Stat. 115, 115-16 (listing the purposes of the ARRA).
Section 1531 authorized refundable credit or tax credits to state and local governments that issue
BABs, which were subsidized to lower the cost of borrowing for state and local governments.
Id. § 1531, 123 Stat. 115, 358-60.2 The BABs at issue here, Direct Payment BABs, were to be
used for capital expenditures. Id.

      The provisions relevant to BABs were codified at 26 U.S.C. §§ 54AA and 6431.
Although those sections were removed from the Code in 2017, Congress limited the amendment

     In considering the defendant’s motion to dismiss, the Court assumes the facts alleged in the
     1

plaintiffs’ amended complaint to be true. (ECF 13.) This summary of the facts does not
constitute findings of fact but is simply a recitation of the plaintiffs’ allegations.
     2
      A “tax credit” is “[a]n amount that offsets or reduces tax liability.” Government
Accountability Office, A Glossary of Terms Used in the Federal Budget Process 94 (Sept. 2005)
(“GAO Glossary”), available at https://www.gao.gov/assets/gao-05-734sp.pdf. A tax credit is
considered refundable “[w]hen the allowable tax credit amount exceeds the tax lability and the
difference is paid to the taxpayer . . . .” Id.

                                                 2
removing the provisions to “apply [only] to bonds issued after December 31, 2017.”3 Budget
Fiscal Year 2018, Pub. L. No. 115-97, § 13404(a), (b) & (d), 131 Stat. 2054, 2138 (2017). The
citations that follow are to those provisions as they appeared prior to their repeal.

        Section 54AA(g) of Title 26 authorized issuers of Direct Payment BABs to receive a
refundable credit in lieu of tax credits under section 6431 of the same title. 26 U.S.C.
§ 54AA(g). Section 6431 provided the payment scheme: “In the case of a qualified bond issued
before January 1, 2011, the issuer of such bond shall be allowed a credit with respect to each
interest payment under such bond which shall be payable by the Secretary,” who “shall pay
(contemporaneously with each interest payment date under such bond) to the issuer of such bond
(or to any person who makes such interest payments on behalf of the issuer) 35 percent of the
interest payable under such bond on such date.” Id. § 6431(a)-(b).

        The Treasury Department pays issuers of BABs annually upon receiving a timely Form
8038–CP (Return for Credit Payments to Issuers of Qualified Bonds) filed by the issuers. IRS
Notice 2009-26, § 3.1. The “payments are treated as overpayments of tax.” Id. § 3.3. As a
refundable tax credit, the payments for the Direct Payment BABs are funded by the permanent,
indefinite appropriation for refund of internal revenue collections. See 31 U.S.C. § 1324
(providing for the appropriation of “[n]ecessary amounts . . . for refunding internal revenue
collections,” including refunds due under 26 U.S.C. § 6431).

              2.      Plaintiffs’ Bonds

        The plaintiffs are the following public power entities: Indiana Municipal Power Agency;
Missouri Joint Municipal Electric Utility Commission; Northern Illinois Municipal Power
Agency; American Municipal Power, Inc.; Illinois Municipal Electric Agency; and Kentucky
Municipal Power Agency. (ECF 13, ¶¶ 3-8.) All the plaintiffs issued Direct Payment BABs to
fund capital investments in projects that provide electric power to more than 300 municipalities
in nine states. (Id. ¶ 31.)

        The plaintiffs collectively issued $4,097,680,000 in Direct Payment BABs before January
1, 2011—within the timeframe for bonds to qualify under 26 U.S.C. § 6431 and before the 2017
cutoff created by Congress when it repealed § 6431. (Id. ¶¶ 30, 32.) The plaintiffs allege that
their Direct Payment BABs comply with the requirements established by section 1531 of the
ARRA. (Id. ¶¶ 32-34.) Indeed, the defendant paid the full 35 percent of the bonds’ interest
payments from January 2010 through the end of 2012. (Id. ¶ 36.)

   3
     For the bonds to qualify for the program, the bonds had to be issued before January 1, 2011.
See 26 U.S.C. §§ 54AA(d)(1)(B), 6431(a). As a result, any bonds issued after December 31,
2017, would not qualify for the program, regardless of the 2017 amendments. The discrepancy
between these dates makes no difference to the resolution of this case.

                                                3
       B.      Sequestration

        Congress reinstated and amended the Budget and Emergency Deficit Control Act of
1985, Pub. L. No. 99-177, 99 Stat. 1037 (1985) (codified at 2 U.S.C. § 900 et seq.), through the
Budget Control Act of 2011 (“Budget Control Act”), Pub. L. No. 112-25, 125 Stat. 240 (2011).
The Budget Control Act requires automatic reductions of certain government spending through
sequestration, which “refer[s] to or mean[s] the cancellation of budgetary resources provided by
discretionary appropriations or direct spending law.” 2 U.S.C. §§ 900(c)(2), 901a.

        The term “budgetary resources” refers to “new budget authority, unobligated balances,
direct spending authority, and obligation limitations.” Id. § 900(c)(6). “Direct spending,” in
turn, refers to “budget authority provided by law other than appropriation Acts”; “entitlement
authority”; and “the Supplemental Nutrition Assistance Program.” Id. § 900(c)(8). Except for
one exception not relevant here, sequestered budgetary resources are permanently cancelled. Id.
§ 906(k)(1).

        The Budget Control Act requires reductions in discretionary appropriations and direct
spending accounts in accordance with 2 U.S.C. § 901a, which directs the Office of Management
and Budget (“OMB”) to determine the amount of funds to be sequestered and the President to
order sequestration. Id. § 901a. The only programs exempt from sequestration are listed in
2 U.S.C. § 905. Although “[p]ayments to individuals made pursuant to provisions of Title 26
establishing refundable tax credits” are exempt from reduction, payments to entities, such as the
plaintiffs, are not exempt. Id. § 905(d). The lists of programs that are exempted likewise do not
include the Direct Payment BABs payment program. See id. § 905.

          At the beginning of 2013, the American Taxpayer Relief Act of 2012 (“Taxpayer Relief
Act”), Pub. L. No. 112-240, 126 Stat. 2313 (2013), amended the statutes created by the Balanced
Budget and Emergency Deficit Control Act of 1985. The Taxpayer Relief Act provided that
“[n]otwithstanding any other provision of law, the fiscal year 2013 spending reductions required
by . . . the Balanced Budget and Emergency Deficit Control Act of 1985 shall be evaluated and
implemented on March 27, 2013.” Taxpayer Relief Act § 901(b), 126 Stat. 2313, 2370.

       Under the sequestration required by the Taxpayer Relief Act, in 2013 the defendant
stopped making payments to issuers of Direct Payment BABs at the rate of 35 percent of the
bonds’ interest as provided under the ARRA. (See ECF 13, ¶ 37.) Although the BABs program
remains in effect for bonds issued before January 1, 2018, the defendant has been paying issuers
of BABs at rates reduced by the amount of funds determined by OMB to be covered by
sequestration. (ECF 15 at 8-9.) In 2013, for example, payments were reduced from 35 percent

                                                4
to 8.7 percent, the fiscal year 2013 sequestration rate.4 Sequestration has been extended through
2030.5

          C.   Procedural History

        On December 30, 2020, the plaintiffs filed their complaint (ECF 1), which was later
amended (ECF 13). The amended complaint seeks damages for the defendant’s failure to make
direct cash payments to the plaintiffs equal to 35 percent of each interest payment made by the
plaintiffs for their Direct Payment BABs. (See id., Prayer for Relief.) Counts I, III, and V allege
that the defendant has violated (and continues to violate) section 1531 of the ARRA. (Id. ¶¶ 41-
50, 57-66, 73-82.) Counts II, IV, and VI allege that the defendant has breached its contractual
obligations created by section 1531. (Id. ¶¶ 51-56, 67-72, 83-88.)

       The defendant moved to dismiss (ECF 15), and the matter was fully briefed. The Court
heard oral argument on June 22, 2021. Following oral argument, the Court allowed the plaintiffs
to submit a sur-reply, which was filed on July 9, 2021.

II.       JURISDICTION6

      The Tucker Act, 28 U.S.C. § 1491(a), gives this court limited jurisdiction over claims for
damages against the United States:

               The United States Court of Federal Claims shall have jurisdiction to
               render judgment upon any claim against the United States founded

      4
     The degree to which sequestration reduces the percentage of interest the government pays
varies each year. The following link provides the yearly sequestration rate reductions from 2013
through the present: https://www.irs.gov/tax-exempt-bonds/effect-of-sequestration-on-state-
local-government-filers-of-form-8038-cp.
      5
      Sequestration was extended through fiscal year 2023 by the Bipartisan Budget Act of 2013,
Pub. L. No. 113-67, § 101, 127 Stat. 1165 (2013); through fiscal year 2024 by the Extension of
Direct Spending Reduction for Fiscal Year 2024, Pub. L. No. 113-82, § 1, 128 Stat. 1009 (2014);
through fiscal year 2025 by the Bipartisan Budget Act of 2015, Pub. L. No. 114-74, § 101, 129
Stat. 584 (2015); through fiscal year 2027 by the Bipartisan Budget Act of 2018, Pub. L. No.
115-123, § 30101, 132 Stat. 64 (2018); through fiscal year 2029 by the Bipartisan Budget Act of
2019, Pub. L. No. 116-37, § 402, 133 Stat. 1049 (2019); and through fiscal year 2030 by the
Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136, § 3709, 134 Stat. 281
(2020).

      The defendant argues that the Court has no jurisdiction to consider the plaintiffs’ claims for
      6

damages beyond six years of filing this case. See 28 U.S.C. § 2501. The effect on the damages
available to the plaintiffs of a dismissal based on the statute of limitations would not be known
until after discovery because there is not yet a sufficient factual record to identify which damages

                                                 5
               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 itself does not “create[ ] a substantive right enforceable
against the Government by a claim for money damages.” United States v. White Mountain
Apache Tribe, 537 U.S. 465, 472 (2003). Instead, the Tucker Act limits this court’s jurisdiction
to causes of action based on separate money-mandating statutes and regulations. Metz v. United
States, 466 F.3d 991, 995-98 (Fed. Cir. 2006).

        The defendant does not challenge this court’s jurisdiction over Counts I, III, and V of the
plaintiffs’ amended complaint. Because section 1531 creates a payment obligation on the
government, the Court finds that section 1531 is money-mandating and, therefore, that the Court
has jurisdiction over the plaintiffs’ Counts I, III, and V. See LCM Energy Sols. v. United States,
128 Fed. Cl. 728, 729 (2016) (finding a similar provision of the ARRA to be money-mandating).

        Although the defendant initially challenged this court’s jurisdiction over the plaintiffs’
contract claims in its opening brief (ECF 15 at 20), the defendant admitted at oral argument that
the plaintiffs may have asserted nonfrivolous allegations of a contract with the United States, as
required to establish jurisdiction over their contract claims (ECF 22, Oral Arg. Tr. at 23:16-24:8).
As a result, the defendant conceded that its motion would be more appropriately analyzed as a
motion to dismiss for failure to state a claim upon which relief can be granted.

       The Court agrees. The plaintiffs have asserted a nonfrivolous claim of a contract with the
United States and, accordingly, the Court has jurisdiction over the plaintiffs’ contract claims in
Counts II, IV, and VI. See 28 U.S.C. § 1491(a)(1) (providing jurisdiction over claims founded
on express or implied contracts with the United States); Engage Learning, Inc. v. Salazar,
660 F.3d 1346, 1353 (Fed. Cir. 2011) (“[J]urisdiction under [28 U.S.C. § 1491(a)(1)] requires no
more than a non-frivolous allegation of a contract with the government.” (emphasis in original)).

III.   STANDARD OF REVIEW

        The defendant has moved to dismiss the plaintiffs’ complaint for failure to state a claim
under RCFC 12(b)(6). Dismissal for failure to state a claim upon which relief can be granted “is
appropriate when the facts asserted by the claimant do not entitle him to a legal remedy.”
Lindsay v. United States, 295 F.3d 1252, 1257 (Fed. Cir. 2002). A court must both accept as true
a complaint’s well-pleaded factual allegations, Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009), and
draw all reasonable inferences in favor of the non-moving party. Sommers Oil Co. v. United
States, 241 F.3d 1375, 1378 (Fed. Cir. 2001). To avoid dismissal, a complaint must allege facts
“plausibly suggesting (not merely consistent with)” a showing that the plaintiffs are entitled to

would be barred. Dismissing the amended complaint for failure to state a claim, the Court does
not consider the defendant’s argument on the statute of limitations.

                                                 6
the relief sought. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007). “The plausibility
standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility
that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at
556).

IV.    DISCUSSION

        The defendant argues that both the plaintiffs’ statutory claims and their contract claims
must be dismissed for failure to state a claim. First, the defendant argues that the statutory
scheme to pay Direct Payment BABs is funded through direct spending, not an “appropriation
Act.” As direct spending, the payment scheme was altered by subsequent legislation, which
sequestered that spending. Second, the defendant argues that the plaintiffs have not pleaded the
requisite elements to establish a contract with the government. Namely, the plaintiffs cannot
show that the government intended to contract through the statute authorizing Direct Payment
BABs. The Court considers both arguments in turn.

               1.      Statutory Payment Obligation

         The plaintiffs issued Direct Payment BABs in accordance with section 1531 of the
ARRA. That section authorized issuers of qualifying Direct Payment BABs to receive
refundable tax credit. ARRA § 1531, 123 Stat. 115, 358-60. The defendant does not dispute that
the added provisions obligate the government to pay. (ECF 15 at 16.) Notably, section 6431(a)
of Title 26, added by the ARRA, provided that “the issuer of such bond shall be allowed a credit
with respect to each interest payment under such bond which shall be payable by the Secretary,”
and subsection (b) of the same section provided that “[t]he Secretary shall pay
(contemporaneously with each interest payment date under such bond) to the issuer of such bond
. . . 35 percent of the interest payable under such bond on such date.” 26 U.S.C. § 6431(a)-(b)
(emphasis added).

        The ARRA also amended 31 U.S.C. § 1324 to provide funding for refunds due under
26 U.S.C. § 6431. ARRA § 1531, 123 Stat. 115, 360; see also 31 U.S.C. § 1324(b)(2) (providing
explicitly for refunds from 26 U.S.C. § 6431). Section 1324 of Title 31 provides for “[n]ecessary
amounts” to be appropriated “for refunding internal revenue collections as provided by law.”
31 U.S.C. § 1324(a). The parties do not dispute whether § 1324 establishes an indefinite,
permanent appropriation. It does. See Government Accountability Office (“GAO”), Principles
of Federal Appropriations Law 2-23 (4th ed. 2016), available at
https://www.gao.gov/assets/2019-11/675709.pdf (listing 31 U.S.C. § 1324 as a statute that makes
an appropriation); see also id. at 2-10 (“[A] ‘permanent indefinite’ appropriation is open ended
as to both period of availability and amount.”).

        Sequestration, as implemented by the Budget Control Act and the Taxpayer Relief Act,
has the effect of permanently cancelling certain budgetary resources, which includes direct
spending authority. 2 U.S.C. §§ 900(c)(6), 906(k)(1). The term “direct spending,” as relevant
here, means “budget authority provided by law other than appropriation Acts . . . .” Id.
§ 900(c)(8) (emphasis added). The payment program for Direct Payment BABs is not listed as a
program or activity exempted from sequestration. See id. § 905.
                                                  7
        Thus, the crucial issue is whether 31 U.S.C. § 1324, the funding mechanism for paying
issuers of Direct Payment BABs, authorizes direct spending, or whether it is an “appropriation
Act.” If the provision authorizes direct spending, it is subject to sequestration, and the plaintiffs
would be unable to prevail on their statutory claims.

               2.      Appropriation Act

         The United States Constitution commands that “[n]o Money shall be drawn from the
Treasury, but in Consequence of Appropriations made by Law . . . .” U.S. Const. art. I, § 9, cl. 7.
As the D.C. Circuit has noted, “[t]his clause is not self-defining and Congress has plenary power
to give meaning to the provision.” Harrington v. Bush, 553 F.2d 190, 194 (D.C. Cir. 1977).
Appropriating funds to operate the government is a core function of Congress, and “[t]he
Congressionally chosen method of implementing the requirements of Article I, section 9, clause
7 is to be found in various statutory provisions.” Id. at 194-95. In exercising this constitutional
function, Congress uses the term “appropriation Act” in a specific, technical sense. Principles of
Federal Appropriations Law, at 2-17 to 2-21 (explaining the legislative process for considering
and enacting appropriation acts).

        To govern this special type of legislation, both houses of Congress have adopted special
rules for the consideration of appropriation bills distinct from the rules governing the
consideration of general legislation. For example, both houses of Congress have similar rules
limiting appropriations in appropriation bills to expenditures already authorized by existing law.
See H.R. Doc. No. 116-177, House Rule XXI, 2(a)(1) (2019); S. Doc. No. 113-18, Senate Rule
XVI, 1. (2013).7 Both houses also prohibit the inclusion of general legislation in appropriation
bills. See House Rule XXI, 2(b); Senate Rule XVI, 2. The latter limitation is a crucial one and
helps to identify with specificity whether a bill is or is not appropriation legislation that, once
enacted, becomes an “appropriation Act.” These rules of each chamber applying special
requirements to appropriations bills were also in effect in 1990 when Congress enacted the
definition of “direct spending,” which excludes budget authority provided by “appropriation
Acts.” See 2 U.S.C. § 900(c)(8); S. Doc. 101-1, Senate Rule XVI (1989); H.R. Doc. No. 100-
248, House Rule XXI (1988).

         The term “appropriation Act” in Title 2 of the United States Code reflects a similar
technical meaning defined, as noted below, elsewhere in the federal law, and, as a result, also
reflects a term of art. See Air Wisconsin Airlines Corp. v. Hoeper, 571 U.S. 237, 248 (2014)
(“‘[I]t is a cardinal rule of statutory construction that, when Congress employs a term of art, it
presumably knows and adopts the cluster of ideas that were attached to each borrowed word in

   7
      The current House Rules are available at
https://rules.house.gov/sites/democrats.rules.house.gov/files/documents/116-House-Rules-
Clerk.pdf. The current Senate Rules are available at https://www.rules.senate.gov/download/the-
rules-of-the-senate.

                                                  8
the body of learning from which it is taken.’” (quoting F.A.A. v. Cooper, 566 U.S. 284, 292
(2012)) (modifications in original)).

         The plaintiffs contend that 31 U.S.C. § 1324 is an “appropriation Act” because it
permanently appropriates funds for refunding internal revenue collections. The Court disagrees.
Appropriation acts are not, as the plaintiffs’ argument suggests, all statutes referring to the
appropriation of funds. Two sources provide relevant definitions of “appropriation Act”: another
statute in Title 2 and the GAO Glossary.

        First, in the sections of Title 2 of the United States Code governing congressional budget
and fiscal operations, Congress has defined the term “appropriation Act” to mean “an Act
referred to in section 105 of Title 1.” 2 U.S.C. § 622(5). Section 105 of Title 1 of the U.S. Code,
cross-referenced in 2 U.S.C. § 622(5), provides the following: “The style and title of all Acts
making appropriations for the support of Government shall be as follows: ‘An Act making
appropriations (here insert the object) for the year ending September 30 (here insert the calendar
year).’” 1 U.S.C. § 105. The term “appropriation Act” from the definition of “direct spending”
in 2 U.S.C. § 900(c)(8) should be read in pari materia and given the same meaning as it has in
§ 622(5) of the same Title. See United States v. Davis, 139 S. Ct. 2319, 2329 (2019) (“[Courts]
normally presume that the same language in related statutes carries a consistent meaning.”).

        Second, the GAO Glossary defines the term “Appropriation Act” as “[a] statute, under
the jurisdiction of the House and Senate Committees on Appropriations, that generally provides
legal authority for federal agencies to incur obligations and to make payments out of the
Treasury for specified purposes.” GAO Glossary 13. The GAO’s definition carries persuasive
weight in the budget context because the GAO has a statutory mandate to “establish, maintain,
and publish standard terms and classifications for fiscal, budget, and program information” in
cooperation with the Secretary of the Treasury, the Director of the OMB, and the Director of the
Congressional Budget Office (“CBO”). See 31 U.S.C. § 1112(c)(1). The Supreme Court has
relied on the GAO Glossary in interpreting federal law. See Maine Cmty. Health Options v.
United States, 140 S. Ct. 1308, 1319, 1322 (2020).

        Section 1324 is not an “appropriation Act” under either definition. Section 1324 of Title
31 does not fall within the definition of “appropriation Act” found in Title 2. The Act in which
Congress enacted section 1324 did not use the style and title specified in 1 U.S.C. § 105 and did
not make appropriations for a specific calendar year. See Pub. L. No. 97-258, 96 Stat. 877
(1982) (creating section 1324 as part of “[a]n Act to revise, codify, and enact without substantive
change certain general and permanent laws, related to money and finance, as title 31, United
States Code, ‘Money and Finance’”).

        At oral argument, the plaintiffs argued that section 1324 is an “appropriation Act,” and
the special title required by 1 U.S.C. § 105 “applies only to ‘appropriations for the support of
Government.’” (ECF 22, Oral Arg. Tr. at 27:1-22 (quoting 1 U.S.C. § 105).) They argued that
“the payments at issue here are not appropriations for the support of government, they are the
Government’s promised share of the interest payments that are due for the life of the BABs
bonds . . . .” (Id. at 27:12-15.) This “support of Government” language, however, is itself a term
of art. The same phrase is mirrored in the Senate Rule XXV(b) summarizing the legislative
                                                 9
jurisdiction of the Senate Appropriations Committee. See Senate Rule XXV(b). As a term of
art, the phrase “for the support of Government” is not restricted to the appropriation of funds for
the operations of government agencies; if it were so limited, the word “agencies” would follow
“government” in the phrase. Instead, the phrase reflects that it applies to all bills appropriating
any money “in support of Government” policies, which is necessary under the Constitution if
any federal funds are to be expended from the Treasury. That phrase, therefore, does not limit
the application of § 105 to appropriations for the operation of federal agencies.

        The Act creating section 1324 also did not fall under the legislative jurisdiction of the
House or Senate Committees on Appropriations, as provided in the GAO Glossary definition, but
rather was referred to the Judiciary Committees of both houses of Congress. The Act was not
considered under the rules of either chamber governing floor consideration of appropriation bills.
See 128 Cong. Rec. H19932-H20003 (Aug. 9, 1982) (House floor consideration), S22597 (Aug.
20, 1982) (Senate passage without amendment by unanimous consent). Accordingly, although
the Act contains multiple authorizing provisions and provides for the appropriation of funds to
pay tax refunds, it is not an “appropriation Act” in the technical sense.

       If section 1324 is not an appropriation Act, what is it? It does provide on its face for
spending to cover permanent expenditures for the payment of tax refunds, but that feature,
standing alone, does not convert the provision into an appropriation Act. By authorizing such
permanent spending, section 1324 is most naturally seen as providing for direct spending. As
“budget authority provided by law other than appropriation Acts,” section 1324 is direct
spending for the purposes of sequestration. See 2 U.S.C. § 900(c)(8).

        This conclusion is consistent with the GAO Glossary’s definition of “direct spending.”
The GAO explains that “[d]irect spending may be temporary or permanent, definite or indefinite
(as to amount) but it is an appropriation or other budget authority made available to agencies in
an act other than an appropriation act.” See GAO Glossary 45 (emphasis added); see also id. at
21 (“An appropriation act is the most common means of providing appropriations, however,
authorizing and other legislation itself may provide appropriations.”). Accordingly, and contrary
to the plaintiffs’ argument, a statute may provide permanent, indefinite appropriation authority,
as does section 1324, without being an “appropriation Act.”8

   8
      In their sur-reply, the plaintiffs allege that “[t]he Judgment Fund is similarly funded by a
permanent appropriations act.” (ECF 23 at 6 n.15.) They are correct that the Judgment Fund,
like 31 U.S.C. § 1324, is an indefinite, permanent appropriation. Unlike tax refunds to entities
under § 1324, however, the category of “Claims, Judgments, and Relief Acts” is expressly
exempted from sequestration. See 2 U.S.C. § 905(g)(1)(A). Congress would have no reason to
enact that exemption if the Judgment Fund were already exempt from sequestration as an
“appropriation Act.” The plaintiffs’ citation to the Judgment Fund undercuts rather than supports
their argument.

                                                10
       To emphasize the point that a statute can provide an appropriation without being an
appropriation act, the GAO provides an example from a law enacted to settle land claims by the
Coushatta Tribe against the United States:

               The Secretary of the Treasury is authorized and directed to pay to
               the Secretary of the Interior . . . for the benefit of the Coushatta Tribe
               of Louisiana . . . out of any money in the Treasury not otherwise
               appropriated, the sum of $1,300,000.

Principles of Federal Appropriations Law, at 2-56 (quoting Pub. L. No. 100-411, § 1(a)(1), 102
Stat. 1097 (1988)) (modifications added by the GAO). The GAO explains that “it is certainly an
appropriation—it contains a specific direction to pay and designates the funds to be used—but,
in a technical sense, it is not an appropriation act.” Id. The GAO also notes that the cited
provision “contains its own authorization” but does not fit the description of an authorization act.
Id. As a result, the GAO concludes that “we have an authorization and an appropriation
combined in a statute that is neither an authorization act . . . nor an appropriation act.” Id.

         As the GAO Glossary explains, “direct spending” is also referred to as “mandatory
spending,” a term matching the permanent appropriation at issue here: “By defining eligibility
and setting the benefit or payment rules, Congress controls spending for these programs
indirectly rather than directly through appropriations acts.” See id. at 66. The statutory
definitions in 2 U.S.C. § 900 likewise draw the distinction between “discretionary
appropriations” and “direct spending.” “Discretionary appropriations” is defined as “budgetary
resources (except to fund direct-spending programs) provided in appropriation Acts.” 2 U.S.C.
§ 900(c)(7). The CBO’s cost estimate for the conference agreement for the ARRA also
distinguishes between discretionary spending and direct spending. See Letter of Douglas W.
Elmendorf, Director, CBO to the Hon. Nancy Pelosi (Feb. 13, 2009).9 The ARRA’s tax-
provisions section, which created the BABs program, is listed by the CBO as direct spending.10
Id. at tbl. 1.

   9
     Congress created the CBO in 1974. Congressional Budget and Impoundment Control Act
of 1974, Pub. L. No. 93-344, 88 Stat 297 (1974). The primary duty and function of the CBO is
“to provide to the Committees on the Budget of both Houses information which will assist such
committees in the discharge of all matters within their jurisdictions, including . . . information
with respect to the budget, appropriation bills, and other bills authorizing or providing new
budget authority or tax expenditures . . . .” 2 U.S.C. § 602(a).
   10
      As part of the ARRA, the BABs program was created under Division B (Tax,
Unemployment, Health, State Fiscal Relief, and Other Provisions), Title I (Tax Provisions),
Subtitle F (Infrastructure Financing Tools), Part IV (Build America Bonds). The CBO lists all of
Division B as direct spending, explicitly listing refundable tax credits in that category. The
CBO’s letter is available at https://www.cbo.gov/sites/default/files/111th-congress-2009-
2010/costestimate/hr1conference0.pdf.

                                                  11
        The GAO’s Principles of Federal Appropriations Law distinguishes between
appropriation acts and appropriation-authorization legislation. See Principles of Federal
Appropriations Law, at 2-54 to 2-82. “Appropriation authorization legislation . . . is legislation
that authorizes the appropriation of funds to implement the organic legislation,” which is the
legislation that “creates an agency, establishes a program, or prescribes a function.” Id. at 2-54.
The authorization may be indefinite, “authorizing ‘such sums as may be necessary to carry out
the provisions of this act.’” Id. 2-56. Section 1324 provides similar language, authorizing an
indefinite appropriation: “Necessary amounts are appropriated to the Secretary of the Treasury
for refunding internal revenue collections as provided by law . . . .” 31 U.S.C. § 1324(a).

         Refundable income tax credits paid to individuals under 31 U.S.C. § 1324 are exempt
from sequestration, further indicating that Congress understood that, absent an exemption, the
section is subject to sequestration. See 2 U.S.C. § 905(d). Because that funding comes from
appropriations authorized under section 1324, as does funding for Direct Payment BABs, the
exemption undercuts the plaintiffs’ argument. If section 1324 were not subject to sequestration
as an appropriation act, Congress would have had no need to exempt from sequestration
payments of refundable tax credits to individuals. Congress did not provide the same exemption
for refundable income tax credits to entities other than individuals, like the plaintiffs. See id. In
fact, accepting the plaintiffs’ arguments would have the effect of adding Direct Payment BABs
to the list of programs exempted from sequestration, even though Congress itself had not done
so. Rewriting the law as the plaintiffs propose is a task for Congress, not the courts.

       The Court finds that 31 U.S.C. § 1324, the statute providing funding for tax refunds to
pay the issuers of Direct Payment BABs, is not an “appropriation Act.” Instead, the statute
authorizes direct spending and, therefore, is subject to sequestration unless Congress exempted
the program, which it did not.

               3.      Overpayment of Taxes or Obligated Funds

       The plaintiffs cannot preserve the full 35-percent payment rate for Direct Payment BABs
from sequestration by characterizing the payments as an overpayment of taxes or as obligated
funds.

        The plaintiffs rely on 26 U.S.C. §§ 6401(b)(1) and 6402(a), arguing that these provisions
mandate payment to issuers of Direct Payment BABs as an overpayment of tax. (ECF 16 at 10.)
Section 6401 is the tax code’s general provision defining which amounts are treated as
overpayments, and section 6402 provides the IRS the authority to apply an overpayment “against
any liability in respect of an internal revenue tax on the part of the person who made the
overpayment.” 26 U.S.C. §§ 6401(b)(1), 6402(a). Because section 6402 provides the IRS
authority not to pay a taxpayer, it is irrelevant here. Neither provision defeats sequestration. As
discussed, payments to the bond issuers are funded through 31 U.S.C. § 1324, which, at least
regarding tax refunds to entities like the plaintiffs, is subject to sequestration.

        The plaintiffs also argue that the payments for Direct Payment BABs were exempt from
sequestration as obligated funds, citing section 256(l) of the Balanced Budget and Emergency
Deficit Control Act of 1985. (ECF 16 at 10-11.) That section provides an exemption from
                                                 12
sequestration for “those contracts the reduction of which would violate the legal obligations of
the Government.” Pub. L. No. 99-177, § 256(l)(2)(B). This obligated-funds argument relies on
the plaintiffs’ claim that they had contracts with the government, an argument the Court rejects
below, IV.B. Even worse for the plaintiffs, the section applies only to “contracts in major
functional category 050,” which relates to national defense spending. Id. § 256(l)(2); see also
House Committee on Budget, Budget Functions, available at
https://budget.house.gov/budgets/budget-functions (listing the major budget functions with
function number and category). The plaintiffs do not allege to have contracts related to national
defense spending, rendering section 256(l) irrelevant to their claims.

        Apparently uncertain of which concept applies, the plaintiffs in their sur-reply argue that
the defendant’s “obligation to pay [them] the full 35% of the interest payments for the life of the
BABs at issue here easily falls within [the GAO Glossary’s] definitions of obligation, obligated
balance and unobligated balance.” (ECF 23 at 7.) The GAO Glossary provides the following
definition of “obligation”:

               A definite commitment that creates a legal liability of the
               government for the payment of goods and services ordered or
               received, or a legal duty on the part of the United States that could
               mature into a legal liability by virtue of actions on the part of the
               other party beyond the control of the United States.

GAO Glossary 70. An “obligated balance” is “[t]he amount of obligations already incurred for
which payment has not yet been made.” Id. at 71.

        As the defendant notes, the government did not obligate funds for the life of the bonds.
(See ECF 19 at 14 n.3.) Instead, the defendant argues that its obligation arising from the Direct
Payment BABs arises not when the bonds are issued, but only after the IRS receives from the
bond issuers and processes a timely Form 8038–CP. The government’s payment obligation,
therefore, does not extend beyond the year processed.

        The Court agrees with the defendant. As the GAO explains, under permanent
appropriations, such as 31 U.S.C. § 1324, “the money is available for obligation or expenditure
without further action by Congress.” Principles of Federal Appropriations Law, at 2-24
(emphasis added). In other words, section 1324 does not obligate the funds for tax refunds but,
instead, makes the funds available to be obligated. The ARRA directed the government to pay
issuers of Direct Payment BABs “contemporaneously with each interest payment due under such
bond . . . 35 percent of the interest payable under such bond on such date.” 26 U.S.C. § 6431(b)
(emphasis added). In the budgetary sense in which the GAO definition applies, the funds are not
“obligated” until a bond issuer applies for the refund and the IRS determines how much is due to
the bond issuer for the given tax year. As the Court elaborates below, the IRS can no longer
authorize payment or obligate funds at the original payment rate due to sequestration. See
31 U.S.C. § 1341(a)(1)(C) (“Except as specified in this subchapter or any other provision of law,
an officer or employee of the United States Government . . . may not . . . make or authorize an
expenditure or obligation of funds required to be sequestered under section 252 of the Balanced
Budget and Emergency Deficit Control Act of 1985 . . . .”).
                                                13
        At oral argument and in their sur-reply, the plaintiffs argue that payments for Direct
Payment BABs are exempted from sequestration as “[n]on-defense unobligated balances” under
2 U.S.C. § 905(e). (ECF 23 at 6.) They urge that this exemption is the “current iteration” of
§ 256 of the Balanced Budget and Emergency Deficit Control Act of 1985. (Id.) They again
point to the GAO Glossary, which defines “unobligated balance” as “[t]he portion of obligational
authority that has not yet been obligated.” GAO Glossary 72.

        The GAO Glossary entry on “unobligated balance” explains the source of unobligated
balances as being from fixed-period appropriations or no-year accounts. Id. For fixed-period
appropriations, the unobligated balance remains available for five additional fiscal years. Id.
For no-year accounts, the unobligated balance carries forward indefinitely until either
“specifically rescinded by law” or “the head of the agency concerned or the President determines
that the purposes for which the appropriation was made have been carried out and disbursements
have not been made from the appropriation for 2 consecutive years.” Id.

        As a permanent appropriation, 31 U.S.C. § 1324 is neither a fixed-period appropriation
nor a no-year account. First, section 1324 provides a permanent appropriation, so it is not
established for a fixed period. Second, although the GAO notes the concepts are similar, it
distinguishes between permanent appropriations and no-year appropriations: “In actual usage,
the term ‘permanent appropriation’ tends to be used more in reference to appropriations
contained in permanent legislation, such as legislation establishing a revolving fund, while ‘no-
year appropriation’ is used more to describe appropriations found in appropriation acts.” See
Principles of Federal Appropriations Law, at 2-10 n.9. Since section 1324 did not create an
obligation that carried over into subsequent fiscal years through a fixed-period or no-year
appropriation, the payments to issuers of Direct Payment BABs are not exempt from
sequestration as an “unobligated balance.” See 2 U.S.C. § 905(e) (exempting from sequestration
“[u]nobligated balances of budget authority carried over from prior fiscal years”).

        In sum, the plaintiffs’ characterizations of the payments—as overpayment of taxes,
obligated funds, or unobligated funds—do not provide a way around the conclusion that
payments for Direct Payment BABs are funded through direct spending, subject to
sequestration.11

   11
      In paragraph 25 of their amended complaint, the plaintiffs note that section 5 of the ARRA
provided that “‘[a]ll applicable provisions of this Act are designated as an emergency for
purposes of pay-as-you-go principles.’” (ECF 13, ¶ 25 (quoting ARRA § 5(b), 123 Stat. 115,
116).) Pay-as-you-go refers to another type of budgeting enforcement mechanism, not at issue
here. See H.R. Res. 5, 111th Cong. (2009); see also House Committee on Budget, FAQs on
Sequester: An Update for 2020, available at https://budget.house.gov/publications/report/FAQs-
on-Sequester-An-Update-for-2020 (explaining the difference between pay-as-you-go, under
which sequestration has never occurred, and sequestration under the Budget Control Act).
Section 5 of the ARRA has no implication for this case and does not exempt the provision

                                               14
               4.      Payment for Direct Payment BABs Sequestered

         Having found that 31 U.S.C. § 1324 is subject to sequestration, the Court next considers
what effect sequestration has on payments to issuers of Direct Payment BABs. Generally,
Congress is not bound by earlier legislation; it remains free to modify earlier statutes. Dorsey v.
United States, 567 U.S. 260, 274 (2012) (“[S]tatutes enacted by one Congress cannot bind a later
Congress, which remains free to repeal the earlier statute, to exempt the current statute from the
earlier statute, to modify the earlier statute, or to apply the earlier statute but as modified.”).
Congress can modify an earlier statute expressly or by implication as it chooses. Id.

        Here, the Taxpayer Relief Act, enacted after the ARRA, altered the payment formula for
paying issuers of Direct Payment BABs, reducing the government’s payment obligation. The
Taxpayer Relief Act provided that “[n]otwithstanding any other provision of law, the fiscal year
2013 spending reductions required by . . . the Balanced Budget and Emergency Deficit Control
Act of 1985 shall be evaluated and implemented on March 27, 2013.” Taxpayer Relief Act
§ 901(b), 126 Stat. 2313, 2370 (emphasis added). The Federal Circuit has held that “[t]he
introductory phrase ‘[n]otwithstanding any other provision of law’ connotes a legislative intent
to displace any other provision of law that is contrary to the Act [containing that phrase] . . . .”
Shoshone Indian Tribe of Wind River Rsrv. v. United States, 364 F.3d 1339, 1347 (Fed. Cir.
2004) reh’g and reh’g en banc denied, cert. denied, 544 U.S. 973 (2005). As implemented by
the Taxpayer Relief Act—notwithstanding any other provision of law—the “[b]udgetary
resources sequestered from any account shall be permanently cancelled . . . .” 2 U.S.C.
§ 906(k)(1). These later expressions of Congress control. The government was statutorily
required to reduce its payment obligations.

        This court has considered the effect of sequestration on the government’s payment
obligations in a similar situation involving the Payment in Lieu of Taxes Act (“PILT Act”). See
Kane Cnty. v. United States, 127 Fed. Cl. 696 (2016). The PILT Act was enacted “to
compensate local governments such as counties for the loss of tax revenue stemming from their
inability to tax federal lands located within their jurisdictions.” Id. at 697. In 2008, an
amendment made payments mandatory, providing “that local government units ‘shall be entitled
to payment,’ and that appropriated ‘sums shall be made . . . for obligation or expenditure.’” Id.
(quoting 31 U.S.C. § 6906) (emphasis in original). When Congress later passed the Budget
Control Act and the Taxpayer Relief Act, it did not include PILT Act payments in the list of
programs exempt from sequestration. Id.

        In Kane County, this court held that Congress, by enacting the Taxpayer Relief Act,
“diminished funds available to PILT and other spending programs, and altered their funding
authority as well.” Id. at 699. As a judge of this court explained, “by providing that the Budget
Control Act ‘shall’ be implemented ‘notwithstanding any other provision of law,’ Congress
required reductions to the non-exempt PILT program, notwithstanding the 2008 amendments to

authorizing the issuance of BABs from sequestration required by the Budget Control Act and the
Taxpayer Relief Act.

                                                 15
PILT.” Id. at 698. The court also noted that sequestered budgetary resources are permanently
cancelled under 2 U.S.C. § 906(k)(1). Id. The Taxpayer Relief Act controlled, and it altered
PILT’s funding payout regime in 2013, despite the mandatory language in PILT’s amendments.
Id.

        As in Kane County, this case presents a conflict between an earlier payment obligation
and later sequestration under the Taxpayer Relief Act and the Budget Control Act. The same
reasoning that led the court in Kane County to uphold the application of sequestration to the
PILT program applies here to the ARRA and produces the same result.

        The Taxpayer Relief Act mandated sequestration be implemented “[n]otwithstanding any
other provision of law.” Taxpayer Relief Act § 901(b), 126 Stat. 2313, 2370. As a result of this
explicit language, sequestration applies “notwithstanding” the mandatory language in section
1531 of the ARRA. Those sequestered funds are “permanently cancelled.” 2 U.S.C.
§ 906(k)(1).

        The plaintiffs attempt to distinguish Kane County by arguing that it did not involve an
overpayment of taxes under a statute providing a permanent appropriation. (ECF 16 at 11-12.)
As already noted, however, because 31 U.S.C. § 1324 is not an “appropriation Act,”
sequestration applies to refund payments by the IRS for Direct Payment BABs as direct
spending. The factual distinction the plaintiffs advance is without any legal significance. The
later-enacted Taxpayer Relief Act and the Budget Control Act altered the Direct Payment BABs
payment program.

        The plaintiffs’ reliance on cases involving implied repeals is likewise misplaced. They
cite Maine Community Health and Molina Healthcare of California, Inc. v. United States,
133 Fed. Cl. 14 (2017), both of which were brought under the Patient Protection and Affordable
Care Act (“ACA”), Pub. L. No. 111-148, 124 Stat. 119 (2010). The plaintiffs argue that these
cases support their argument that Congress did not impliedly repeal or rescind the government’s
obligation to pay the plaintiffs 35 percent of the interest on the bonds. The Supreme Court’s
opinion in Maine Community Health is controlling and provides the authoritative expression of
the law on implied repeals, not the earlier decisions in Molina Healthcare and other ACA cases
from this court. See Moda Health Plan, Inc. v. United States, 130 Fed. Cl. 436
(2017), rev’d, 892 F.3d 1311 (Fed. Cir. 2018), rev’d and remanded sub nom. Maine Cmty.
Health Options, 140 S. Ct. 1308.

         Maine Community Health presented a very different legal situation from this case. Maine
Community Health involved an alleged implied repeal of the ACA Risk Corridors program.
When Congress appropriated funds for the Centers for Medicare and Medicaid Services, it
included a rider prohibiting the use of those funds to make Risk Corridor payments to health
insurers. Maine Cmty. Health, 140 S. Ct. at 1317. In resolving whether a rider on an
appropriation act impliedly repealed the statutory payment obligation, the Supreme Court held
that it did not because, in part, “a mere failure to appropriate does not repeal or discharge an
obligation to pay.” Id. at 1324 (citing United States v. Vulte, 233 U.S. 509 (1914)).

                                               16
       Relevant to the case at hand, the Supreme Court distinguished Maine Community Health
from a “strand of precedent [that] turned on provisions that reformed statutory payment formulas
in ways ‘irreconcilable’ with the original methods.” Id. at 1325-26 (citing United States v.
Mitchell, 109 U.S. 146 (1883) and United States v. Fisher, 109 U.S. 143 (1883)). In those cases,
subsequent legislation was found to have altered the government’s payment obligation.

        This case does not implicate an implied-repeal theory or a failure to appropriate funds.
The defendant does not (and does not need to) rely on an implied repeal of section 1531 of the
ARRA. (See ECF 19 at 8-9.) The Taxpayer Relief Act expressly modifies the government’s
existing payment obligations, and it does so in a way that directly conflicts with the earlier
payment program created by section 1531 of the ARRA.

        The spending cuts implemented by the Taxpayer Relief Act and the Budget Control Act
are irreconcilable with section 1531’s 35-percent payment rate. As a result, the Taxpayer Relief
Act altered the Direct Payment BABs program, reducing the government’s payment obligation.
When sequestration was implemented in 2013, the defendant was required by law to pay issuers
of BABs a reduced rate. This change was consistent with the basic principle that Congress is
free to amend pre-existing laws. See Dorsey v. United States, 567 U.S. at 274.

        In sum, the defendant’s payments to the issuers of Direct Payment BABs were funded
through direct spending, which was later sequestered. The sequestration rates expressly altered
the payment program, reducing the amount the defendant is obligated to pay. For as long as the
funding is sequestered, as it has been since 2013, the defendant does not owe the plaintiffs the 35
percent of the interest originally payable under the bonds. Accordingly, the Court must dismiss
the plaintiffs’ statutory claim for failure to state a claim upon which relief can be granted.

       B.      Contractual Payment Obligation

        The plaintiffs conceded at oral argument that if their statutory claims failed then so would
their contract claims because, if the Court found that subsequent legislation altered the
defendant’s obligations, then there can be no contractual obligation. (ECF 22, Oral Arg. Tr. at
50:9-51:5.) Even if subsequent legislation had not altered the defendant’s obligations, the Court
nonetheless finds that the plaintiffs have not pleaded a plausible statutory contractual obligation
on the government.

        To establish a contract with the United States, the plaintiffs must show “(1) mutuality of
intent to contract, (2) consideration, (3) lack of ambiguity in offer and acceptance, and
(4) authority on the part of the government agent entering the contract.” Suess v. United States,
535 F.3d 1348, 1359 (Fed. Cir. 2008). The plaintiffs must also overcome the presumption that
statutes do not create contractual rights. Nat’l R.R. Passenger Corp. v. Atchison Topeka & Santa
Fe Ry. Co., 470 U.S. 451, 465-66 (1985). The Supreme Court has held that “absent some clear
indication that the legislature intends to bind itself contractually, the presumption is that ‘a law is
not intended to create private contractual or vested rights but merely declares a policy to be
pursued until the legislature shall ordain otherwise.’” Id. (quoting Dodge v. Bd. of Educ. of City
of Chicago, 302 U.S. 74, 79 (1937)). Courts “proceed cautiously both in identifying a contract

                                                  17
within the language of a regulatory statute and in defining the contours of any contractual
obligation.” Id. at 466.

         “To determine whether a statute gives rise to a contractual obligation, [courts] first look
to the language of the statute.” Am. Bankers Ass’n v. United States, 932 F.3d 1375, 1382 (Fed.
Cir. 2019). As the Federal Circuit has noted, “evidence of an intent to contract” has been
recognized “where a statute ‘provide[s] for the execution of a written contract on behalf of the
United States’ or ‘speak[s] of a contract’ with the United States.” Id. at 1381 (quoting Nat’l R.R.
Passenger Corp., 470 U.S. at 467 (emphasis in original) (modifications added by the Federal
Circuit)).

        Here, section 1531 of the ARRA does not frame the payments it authorizes as a
contractual obligation. See ARRA § 1531, 123 Stat. 115, 358-60. The plaintiffs do not point to
any language in section 1531 creating a contract with the government because they cannot. The
statute neither provides for the execution of a written contract on behalf of the United States nor
reflects any language that could be interpreted to establish a contract between issuers of BABs
and the United States. Section 1531 merely sets forth a payment program for issuers of
qualifying bonds. This authorization is not enough to establish a contractual obligation. See Am.
Bankers Ass’n, 932 F.3d at 1383 (“[A] statute does not create contractual obligations merely by
setting forth ‘benefits to those who comply with its conditions.’” (quoting Wisconsin & M. Ry.
Co. v. Powers, 191 U.S. 379, 387 (1903))).

        Rather than rely on the text of the statute, the plaintiffs rely solely on Molina Healthcare,
but that case is no help to them. Although Molina Healthcare found all four elements of a
contract met in the statute for the ACA Risk Corridor program, Molina Healthcare’s conclusion
on this point has been undermined by later decisions and can no longer support the burden the
plaintiffs place on it.

        The court in Molina Healthcare relied heavily on Moda Health Plan, which also found a
contract based on the ACA Risk Corridor statute. See Molina Healthcare, 133 Fed. Cl. at 41-45.
On appeal, and following the decision in Molina Healthcare, the Federal Circuit reversed Moda
Health Plan on this issue: “[N]o statement by the government evinced an intention to form a
contract. The statute, its regulations, and [the agency’s] conduct all simply worked towards
crafting an incentive program.” Moda Health Plan, Inc. v. United States, 892 F.3d 1311, 1330
(Fed. Cir. 2018), rev’d on other grounds sub nom. Maine Cmty. Health Options, 140 S. Ct. 1308.
The Federal Circuit recognized “the well-established presumption” from Nat’l R.R. Passenger
Corp. that a law is not intended to create contractual rights. See id. at 1329-30.

        Although the Federal Circuit’s opinion was in turn reversed by the Supreme Court, the
Supreme Court did not reach the contract issue, leaving the Federal Circuit’s reasoning intact on
the issue. See Maine Cmty. Health, 140 S. Ct. at 1331 n.15. In 2019, the Federal Circuit in
American Bankers adopted the same reasoning and legal basis on the statutory contract issue as it
had expressed in its Moda Health Plan decision. Am. Bankers Ass’n, 932 F.3d at 1380-84. This
court’s reasoning in Molina Healthcare does not express the law of this Circuit. The Federal
Circuit’s decisions in Moda Health Plan and American Bankers, decided after this court’s
decision in Molina Healthcare, are the controlling law on the plaintiffs’ contract claims.
                                                 18
        Both Moda Health Plan and American Bankers recognized the presumption that statutes
do not create contract rights. Am. Bankers Ass’n, 932 F.3d at 1381; Moda Health Plan, 892 F.3d
at 1329. The plaintiffs have not overcome that presumption and cannot establish the requisite
mutuality of intent to contract. Specifically, the plaintiffs have not pleaded facts sufficient to
establish the defendant’s intent to contract.

        In ARRA Energy Co. I v. United States, 97 Fed. Cl. 12, 28 (2011), for example, this court
found that the “plaintiffs [had] not demonstrated an unambiguous offer or the parties’ mutual
intent to enter a contract . . . .” The court could “not discern and the plaintiffs [had] not pointed
to any language in section 1603 [of the ARRA] or its legislative history that would allow a
reasonable inference that the government intended to enter into contracts with all persons and
entities that filed applications for reimbursement grants.” Id.; see also LCM Energy Sols., 107
Fed. Cl. at 774 (recognizing that ARRA Energy Co. I “expressly rejected the theory that Section
1603 creates an implied-in-fact contract with qualified applicants for reimbursement”).

         The plaintiffs here likewise cannot point to any language in section 1531 of the ARRA
reflecting a “clear indication” that Congress intended to bind the government contractually. See
Nat’l R.R. Passenger Corp., 470 U.S. at 465-66; Am. Bankers Ass’n, 932 F.3d at 1381-82; Moda
Health Plan, 892 F.3d at 1329 (“Absent clear indication to the contrary, legislation and
regulation cannot establish the government’s intent to bind itself in a contract.” (citing Nat’l R.R.
Passenger Corp., 470 U.S. at 465-66)). The Court does not discern any language that “‘speak[s]
of a contract’ with the United States.” See Am. Bankers Ass’n, 932 F.3d at 1381 (quoting Nat’l
R.R. Passenger Corp., 470 U.S. at 467 (modifications added by the Federal Circuit)). As a
result, the plaintiffs have not provided a basis for finding that the defendant intended to contract
under the terms of section 1531. The plaintiffs have failed to plead mutuality of intent to
contract—the first element of a contract.

        Because the plaintiffs have not pleaded facts sufficient to establish the defendant’s intent
to contract and the statute itself provides no basis on which to demonstrate congressional intent
to create a contract by law, the plaintiffs fail to state a plausible claim for breach of contract.
The Court must dismiss the plaintiffs’ contract claims for failure to state a claim upon which
relief can be granted.12

   12
      The plaintiffs clarified in their briefing that they do not assert an implied-in-law contract
claim (ECF 16 at 15 n.24), so the Court does not address the issue. The plaintiffs also do not
allege a taking of their property. (ECF 22, Oral Arg. Tr. at 37:23-25.)

   At oral argument, the plaintiffs’ counsel disclaimed any reliance on additional documents
constituting a contract, relying on the statutory provisions alone:

               Now, I know Your Honor asked the Government a question about
               whether or not the BABs issue -- my clients, the Plaintiffs, whether

                                                 19
V.     CONCLUSION

         The plaintiffs’ statutory claims and contract claims must be dismissed. The defendant’s
obligation to pay 35 percent of the interest payable under the plaintiffs’ Direct Payment BABs
has been sequestered by subsequent legislation, reducing the defendant’s payment obligation.
The plaintiffs also have not pleaded a plausible contractual relationship with the defendant based
on the Direct Payment BABs legislation. The plaintiffs’ amended complaint, therefore, fails to
state a claim upon which relief can be granted.

       The defendant’s motion to dismiss under RCFC 12(b)(6) is granted.

       The Court will issue an order in accordance with this memorandum opinion.

                                                                     s/ Richard A. Hertling
                                                                     Richard A. Hertling
                                                                     Judge

               or not they were required to execute a contract type document at the
               beginning of their efforts to issue bonds, and the Government’s
               answer, to the best of my knowledge, is correct. No, Your Honor,
               they were not required to do that. What we had, instead, was we
               have a very specific statute which very specifically set forth the
               offer, if you will, the terms of the contract.

(Id. at 50:9-18.) In their sur-reply following oral argument, perhaps prompted by the Court’s
questions at oral argument (see id. at 18:18-22:21), the plaintiffs for the first time appear to rely
on additional documents to try to establish the existence of a contract with the United States.
(ECF 23 at 10-11 (citing Columbus Reg’l Hosp. v. United States, 990 F.3d 1330 (Fed. Cir. 2021);
Suess, 535 F.3d 1348; Hanlin v. United States, 316 F.3d 1325 (Fed. Cir. 2003)).) They refer to
Forms 8038–CP, CP152, and 8038-G, all of which the plaintiffs allegedly submitted to
participate in the Direct Payment BABs program. (Id.)

    The plaintiffs have waived any argument based on these additional documents. See Casa de
Cambio Comdiv S.A. de C.V. v. United States, 291 F.3d 1356, 1366 (Fed. Cir. 2002) (declining to
address the plaintiff’s theory “because it was not properly raised” when “[n]o mention of this
theory appears in [the plaintiff’s] complaint”), reh’g and reh’g en banc denied (Fed. Cir. 2002),
cert. denied, 538 U.S. 921 (2003). The plaintiffs did not plead a contract based on these
documents in their amended complaint, they did not raise this argument in opposition to the
defendant’s motion to dismiss, and they disclaimed the argument at oral argument. Nonetheless,
even if not waived, the plaintiffs’ argument fails. They have not shown how the forms establish
that the government agreed to be bound at the 35-percent rate for the life of the bonds.

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