Court Opinion

ID: 2653548
Source: CourtListenerOpinion
Date Created: 2014-02-18 16:27:01.327983+00
Date Added: 2024-06-11T09:11:24.061889
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                ______________________

               DEUTSCHE BANK AG,
                 Plaintiff-Appellant,

                           v.

                  UNITED STATES,
                  Defendant-Appellee.
                ______________________

                      2013-5062
                ______________________

    Appeal from the United States Court of Federal
Claims in No. 08-CV-0569, Judge Lynn J. Bush.
                 ______________________

              Decided: February 18, 2014
               ______________________

   FRANK AGOSTINO, Agostino & Associates, PC, of Hack-
ensack, New Jersey, argued for plaintiff-appellant. With
him on the brief was SON-YUNG ERICA SON.

    DEBORAH K. SNYDER, Attorney, Tax Division, United
States Department of Justice, of Washington, DC, argued
for defendant-appellee. With her on the brief were
KATHRYN KENEALLY, Assistant Attorney General, and
RICHARD FARBER, Attorney.
                ______________________

 Before RADER, Chief Judge, LOURIE and PROST, Circuit
                       Judges.
2                                  DEUTSCHE BANK AG   v. US

LOURIE, Circuit Judge.
    Deutsche Bank AG (“Deutsche Bank”) appeals from
the decision of the United States Court of Federal Claims
(the “Claims Court”) denying Deutsche Bank’s motion for
summary judgment and holding that Deutsche Bank was
not entitled to additional interest on an overpayment of
its 1999 income tax. See Deutsche Bank AG v. United
States, 95 Fed. Cl. 423 (2010). Because we conclude as a
matter of law that Deutsche Bank’s 1999 income tax
return was not filed by the extended return filing due
date in processible form to commence the accrual of
overpayment interest, we affirm.
                      BACKGROUND
     Deutsche Bank filed its 1999 income tax return on or
before September 15, 2000 (“the original return”), after
obtaining a six-month extension of time from the return
filing due date of March 15, 2000. Deutsche Bank, 95 Fed.
Cl. at 426. The original return consisted of Form 1120F
(U.S. Income Tax Return of a Foreign Corporation) and
supporting documents. On the first page of Form 1120F,
Deutsche Bank reported a total tax of $105,725,463 (line
5), a total payment of $188,256,721 (line 6i) including
credit for taxes withheld at the source in the amount of
$13,256,721 (line 6h), and a resulting overpayment of
$82.5 million (line 9), which Deutsche Bank requested to
be credited to the 2000 tax year. J.A. 146.
    Form 1120F does not itemize the withholding credit
reported on line 6h, which is the total of individual taxes
withheld at different sources. Deutsche Bank, 95 Fed. Cl.
at 431. The individual withholding credits are derived
from information returns such as Internal Revenue Ser-
vice (“IRS”) Form 8805 (Foreign Partner’s Information
Statement of Section 1446 Withholding Tax) and Form
1042-S (Foreign Person’s U.S. Source Income Subject to
Withholding), which are issued by a withholding agent to
the taxpayer to report income paid or allocated to that
DEUTSCHE BANK AG   v. US                                  3

taxpayer and taxes withheld on behalf of that taxpayer.
The withholding agent prepares duplicative copies of an
information return, sends one copy directly to IRS, retains
one copy for its records, and sends the remaining copies,
e.g., two copies of Form 8805 or three copies of Form 1042-
S, to the taxpayer. Id.
    For the 1999 tax year, Deutsche Bank received one
Form 8805 and five Forms 1042-S from six different
withholding agents. Id. The instructions for 1999 Forms
1120F, 8805, and 1042-S and statements on those forms
required Deutsche Bank to attach Forms 8805 and 1042-S
to its federal income tax return. Id.; see also J.A. 281,
289, 311, 314, 326. Deutsche Bank, however, did not
attach Forms 8805 and 1042-S. Deutsche Bank, 95 Fed.
Cl. at 426. IRS sent the original return back unprocessed
and requested documentation to support the $13,256,721
withholding credit claimed on line 6h. Id.
    Deutsche Bank resubmitted the original return with
Forms 8805 and 1042-S in November 2000 (“the resub-
mitted return”). Id. In an accompanying letter, Deutsche
Bank informed IRS that upon review of the forms, it
discovered that it had overstated the withholding credit
by $11,240 and therefore that the correct amount on line
6h should have been $13,245,481 and that the claimed
overpayment should have been reduced by $11,240. J.A.
46. IRS processed the resubmitted return without cor-
recting the $11,240 error and credited the overpayment to
the 2000 tax year. Deutsche Bank, 95 Fed. Cl. at 426.
    In March 2002, Deutsche Bank filed an amended 1999
income tax return on Form 1120X (Amended U.S. Corpo-
ration Income Tax Return) claiming an additional refund
of $59 million based on a valuation adjustment. IRS
issued the $59 million refund in November 2002 along
with $5 million in overpayment interest for the period
from January 1, 2001 to November 14, 2002. Id. When
Deutsche Bank requested additional interest from March
4                                    DEUTSCHE BANK AG   v. US

15 to December 31, 2000, IRS contended that the original
return was not filed in processible form. Because no
interest on overpayment accrues before a return is filed in
processible form, IRS explained that Deutsche Bank was
entitled to interest only from January 1, 2001, the date on
which IRS had recorded the resubmitted return as filed.
Id. at 427.
    Deutsche Bank sued the United States in the Claims
Court for additional interest on the $59 million overpay-
ment and moved for summary judgment. The court
denied the motion, holding that the original return was
not in processible form because Deutsche Bank “did not
include all of the required documentation with its original
income tax return” and that “the initial return did not
itself contain sufficient information to allow the mathe-
matical verification of income tax liability.” Id. at 425–26.
The parties subsequently stipulated that the resubmitted
return was filed on December 4, 2000 and the United
States agreed to pay interest from December 4 to Decem-
ber 31, 2000. The court then entered final judgment for
the United States.
    Deutsche Bank appeals to this court seeking interest
for the period from March 15 to December 3, 2000. We
have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).
                        DISCUSSION
    In an appeal from the Claims Court, we review the
court’s legal conclusions de novo and its factual findings
for clear error. Columbia Gas Sys., Inc. v. United States,
70 F.3d 1244, 1246 (Fed. Cir. 1995). Statutory interpreta-
tion is a question of law. Id. We review the Claims
Court’s denial of summary judgment de novo when the
disputed issues concern the interpretation of a statute.
Massie v. United States, 166 F.3d 1184, 1187 (Fed. Cir.
1999). If there are no material facts in dispute precluding
summary judgment, then our task is to determine wheth-
er the judgment granted is correct as a matter of law.
DEUTSCHE BANK AG   v. US                                       5

Bankers Trust N.Y. Corp. v. United States, 225 F.3d 1368,
1372 (Fed. Cir. 2000).
     A taxpayer claiming a refund in a tax return is enti-
tled to interest on overpayment when the refund is issued
more than forty-five days after the initial due date for
filing the return or the actual return filing date, whichev-
er occurs later. 26 U.S.C. § 6611(a), (e) (2000). 1 If the
return is timely filed, then interest accrues from the date
of the overpayment, which is generally the initial return
filing due date. Id. § 6611(b)(2), (d). However, if the
return is filed late, i.e., “after the last date prescribed for
filing such return determined with regard to extensions,
no interest shall be allowed or paid for any day before the
date on which the return is filed.” Id. § 6611(b)(3). In
that case, interest accrues from the date on which the late
return was filed. To determine the return filing date,
section 6611(g) provides that:
    (1) For purposes of subsections (b)(3) and (e), a re-
        turn shall not be treated as filed until it is filed
        in processible form.
    (2) For purposes of paragraph (1), a return is in a
        processible form if—
        (A) such return is filed on a permitted form, and
        (B) such return contains—
          (i) the taxpayer’s name, address, and identi-
              fying number and the required signature,
              and

    1    The Internal Revenue Code (I.R.C. or the “Code”)
is codified in Title 26 of the United States Code. We apply
the version of the Code that was in effect at the time of
the allowance of the overpayment refund, i.e., November
2002. Pottstown Iron Co. v. United States, 282 U.S. 479,
481 (1931).
6                                    DEUTSCHE BANK AG    v. US

          (ii) sufficient required information (whether
               on the return or on required attachments)
               to permit the mathematical verification of
               tax liability shown on the return.
Id. § 6611(g) (emphases added).
     The issue in this case is whether Deutsche Bank’s
original return without Forms 8805 and 1042-S met the
requirements of section 6611(g) to be in processible form.
If the original return was processible, then interest began
to accrue on March 15, 2000, the initial filing due date.
On the other hand, if the original return was not proces-
sible, then interest began to accrue on December 4, 2000,
the stipulated filing date of the resubmitted return.
    It is undisputed that the original return satisfied the
requirements       of      sections    6611(g)(2)(A)    and
6611(g)(2)(B)(i). Deutsche Bank, 95 Fed. Cl. at 430. The
parties disagree, however, on whether the original return
contained sufficient required information on the return or
the required attachments to permit the mathematical
verification of tax liability under section 6611(g)(2)(B)(ii),
and the Claims Court held that it did not. Id. First, the
court concluded that Forms 8805 and 1042-S “were ‘re-
quired attachments’ as that term is used in section
6611(g).” Id. at 434. Secondly, the court concluded that
“[w]ithout the missing forms, the tax return did not
contain sufficient information to allow the mathematical
verification of the income tax liability shown on the tax
return.” Id. at 436. We review each of those conclusions
in turn.
                              I.
    Deutsche Bank argues that Forms 8805 and 1042-S
are not “required attachments” because they were not
required by any statute or regulation. Deutsche Bank
contends that the Claims Court erroneously relied on non-
binding statements contained in IRS forms and form
DEUTSCHE BANK AG   v. US                                   7

instructions and general compliance rules of section 6011.
Deutsche Bank argues that for purposes of calculating
interest, the specific requirement of section 6611(g)(2)
supersedes the general requirement of section 6011.
Deutsche Bank also asserts that the “required forms” that
we referred to in Columbia Gas are forms on which a tax
return is based, such as Form 1120F, not information
reporting attachments, such as Forms 8805 and 1042-S.
    The government responds that the statements on the
face of Forms 1120F, 8805, and 1042-S, the instructions
accompanying those forms, and the general requirement
of a return under section 6011(a) provided ample basis for
the court’s conclusion that Forms 8805 and 1042-S were
required. Moreover, the government argues that nothing
in section 6611(g) limits the term “required attachments”
to only those that are specifically mentioned in statutes or
regulations. The government also responds that IRS
required the filing of Forms 8805 and 1042-S to allow the
mathematical verification of the claimed withholding
credits and the tax liability shown on the return.
    We agree with the government that Forms 8805 and
1042-S were required attachments under section 6611(g).
As a general matter, IRS had the authority to require
Deutsche Bank to attach Forms 8805 and 1042-S to its
1999 tax return. Section 6011 of the Code provides that a
taxpayer “shall make a return or statement according to
the forms and regulations prescribed by the Secretary
[and] shall include therein the information required by
such forms or regulations.” 26 U.S.C. § 6011(a) (2000).
The requirement to include Forms 8805 and 1042-S in
Deutsche Bank’s 1999 tax return appears not only on the
face of those forms and the form instructions but also on
the principal tax return form, Form 1120F, and its in-
structions. J.A. 281, 289, 311, 314, 326. Deutsche Bank’s
original return failed to satisfy that requirement.
8                                    DEUTSCHE BANK AG   v. US

    The Claims Court did not err in relying on the general
compliance rule of section 6011(a) and IRS form instruc-
tions to determine whether Forms 8805 and 1042-S were
“required attachments” under section 6611(g)(2)(B)(ii).
Congress enacted sections 6611(b)(3) and 6611(g)2 to
restrict payment of interest for certain time periods, such
that interest on an overpayment does not accrue until the
return reporting the overpayment is filed in processible
form. Tax Equity and Fiscal Responsibility Act of 1982,
Pub. L. No. 97-248, § 316, 96 Stat. 324, 636–37 (1982).
The interest provision was one of the provisions designed
to improve taxpayer compliance with internal revenue
rules. S. Rep. No. 97-494 (I), at 76, 88–89 (1982), reprint-
ed in 1982 U.S.C.C.A.N. 781, 846, 858 (“The bill contains
a series of provisions designed to encourage complete and
accurate reporting of income and deductions . . . in-
clud[ing] provisions . . . amending the methods under
which interest on tax deficiencies and overpayments is
computed.”). Thus, rather than superseding the require-
ment of section 6011(a), Congress enacted section 6611(g)
in part to improve compliance with the existing compli-
ance rules. Because Forms 8805 and 1042-S were re-
quired under section 6011(a) and IRS form instructions,
the Claims Court correctly concluded that those forms
were      “required     attachments”      under      section
6611(g)(2)(B)(ii). Deutsche Bank, 95 Fed. Cl. at 434.
    That conclusion, however, does not end the inquiry
concerning whether Deutsche Bank’s original return
satisfied section 6611(g)(2)(B)(ii). A failure to file a “re-
quired attachment” does not in and of itself result in
noncompliance with section 6611(g)(2)(B)(ii). The ulti-
mate question is whether the original return contained

    2   26 U.S.C. § 6611(g) was first enacted in 1982 as
26 U.S.C. § 6611(i) and subsequently renumbered upon
the deletion of other subsections of the statute.
DEUTSCHE BANK AG   v. US                                  9

“sufficient required information (whether on the return or
on required attachments)” to permit mathematical verifi-
cation. 26 U.S.C. § 6611(g)(2)(B)(ii) (2000) (emphases
added). Moreover, we have held that “[m]athematical
verifiability requires sufficient information to permit IRS
to recalculate and corroborate the mathematics and data
reported by the taxpayer.” Columbia Gas, 70 F.3d at
1246 (emphasis added). A return without a required
attachment may nonetheless be processible when the
information contained on that missing attachment is
readily available elsewhere in the return or when the
information is irrelevant to mathematical verification.
Conversely, a return is not in processible form when the
failure to file a required attachment results in a lack of
required information that is necessary for mathematical
verification.
                            II.
    We turn then to the question whether Deutsche
Bank’s original return contained sufficient required
information to permit the mathematical verification of tax
liability. Deutsche Bank argues that Congress used the
term “tax liability” rather than “overpayment” in section
6611(g)(2)(B)(ii) and thus that “tax liability” means total
tax (e.g., line 5, Form 1120F) without consideration of tax
payments such as withholding credits. Deutsche Bank
alternatively argues that even if “tax liability” encom-
passes overpayment, the original return was sufficient
because IRS could mathematically verify the overpayment
using the total withholding credit reported on Form
1120F. Deutsche Bank also contends that the original
return was processible because IRS processed the resub-
mitted return without correcting the $11,240 error and
thus Forms 8805 and 1042-S were not necessary.
Deutsche Bank argues that IRS could mathematically
verify the total withholding credit without undue burden
because it had received copies of Forms 8805 and 1042-S
from the withholding agents.
10                                  DEUTSCHE BANK AG   v. US

     The government responds that because section
6611(g) concerns interest on overpayment, “tax liability”
used therein includes either an underpayment or over-
payment, i.e., the difference between total tax and total
payment, whether positive or negative. The government
contends that Deutsche Bank’s original return was insuf-
ficient because it did not contain enough underlying data
necessary to mathematically verify the total withholding
credit as well as the overpayment claimed on the return.
The government also responds that the statute requires a
processible return to contain sufficient required infor-
mation and thus it is irrelevant whether IRS could have
used documents received from other sources.
    We agree with the government that Deutsche Bank’s
original return did not contain sufficient information to
permit the mathematical verification of tax liability. “Tax
liability” in section 6611(g)(2)(B)(ii) means underpayment
or overpayment, and payments made by the taxpayer
including withholding credits are relevant to the mathe-
matical verification of tax liability. Section 6611 concerns
interest on overpayment. An overpayment arises when
tax payments exceed the tax imposed by the Code, and
the amount of overpayment and the interest due on such
overpayment cannot be determined without calculating
the amount of tax payments already made by the taxpay-
er.
    When Congress enacted section 6611(g), it explained
the reason for the change:
     The committee believes that it is inappropriate to
     require that the United States pay interest on
     amounts prior to the time it has notice that it
     owes such an amount. Thus, no interest is paya-
     ble with respect to any overpayment until the Sec-
     retary can determine that such an overpayment
     exists (or, in the case of an underpayment, that
     the underpayment is reduced) by way of a notice
DEUTSCHE BANK AG   v. US                                   11

    of such overpayment (or reduced underpayment)
    being filed in processible form.
S. Rep. No. 97-494 (I), at 307 (1982), reprinted in 1982
U.S.C.C.A.N. 781, 1049. Accordingly, Congress used the
term “tax liability” in section 6611(g)(2)(B)(ii) to encom-
pass both overpayments and underpayments and intend-
ed that a processible return contain sufficient required
information to permit the mathematical verification of the
existence and amount of overpayment or underpayment.
Id. at 307–08.
     Deutsche Bank did not file Forms 8805 and 1042-S in
its original return, and, as a result, submitted insufficient
information concerning the individual withholding credits
to allow the mathematical verification of the total with-
holding credit claimed on the return. We therefore con-
clude that the missing information is “required
information” under section 6611(g)(2)(B)(ii) because it was
contained on “required attachments”: Forms 8805 and
1042-S. Moreover, because that information was relevant
and necessary to permit the mathematical verification of
the total withholding credit and the tax liability, and was
unavailable from the return or any attachment submitted
with the return, Deutsche Bank’s original return did not
contain “sufficient required information” to satisfy the
requirement of section 6611(g)(2)(B)(ii).
    “Mathematical verifiability requires sufficient infor-
mation to permit IRS to recalculate and corroborate the
mathematics and data reported by the taxpayer.” Colum-
bia Gas, 70 F.3d at 1246. Without the information on
individual withholding credits, IRS could not “recalculate
and corroborate the mathematics and data” reported by
Deutsche Bank. Indeed, Deutsche Bank made a mathe-
matical error of $11,240 in the total withholding credit,
and therefore the overpayment claimed on the original
return, which could not have been easily discovered
without Forms 8805 and 1042-S. Mere notice of a claimed
12                                 DEUTSCHE BANK AG   v. US

overpayment without the required underlying data does
not meet the terms of the statute.
    Because the language of section 6611(g)(2) requires
the tax return to contain sufficient required information,
whether IRS could have used its audit power or could
have used the forms submitted by the withholding agents
to verify Deutsche Bank’s claimed overpayment is irrele-
vant. As we explained in Columbia Gas, a “taxpayer”
must submit sufficient data for IRS to mathematically
verify the tax liability shown on the return without undue
burden. Columbia Gas, 70 F.3d at 1246.
    We have considered Deutsche Bank’s remaining ar-
guments and find them unpersuasive. We therefore
conclude that the original return did not comply with the
requirement of section 6611(g)(2)(B)(ii).
                      CONCLUSION
    For the foregoing reasons, Deutsche Bank is not enti-
tled to interest on the $59 million overpayment for the
period from March 15 to December 3, 2000, and we affirm
the decision of the Claims Court.
                      AFFIRMED