Complications from Extensions and Unprocessible Returns

Bob Probasco returns today with an important alert on overpayment interest. Christine

A few months ago, Bob Kamman flagged a number of surprising phenomena he’d observed recently, one of which related to refunds for 2020 tax returns.  Normally, when the IRS issues a refund within 45 days of when you filed your return, it doesn’t have to pay you interest.  That’s straight out of section 6611(e)(1).  Yet, taxpayers were getting refunds from their 2020 returns within the 45 day period and the refunds included interest.  As Bob explained, that was a little-known benefit of COVID relief granted under section 7805A.  Not only were filing and payment dates pushed back but also taxpayers received interest on refunds when they normally would not have.

On July 2, 2021, the IRS issued PMTA 2021-06, which raised two new wrinkles—one related to returns that were not processible; the other related to returns for which taxpayers had filed extensions.  How do those factors affect the results Bob described?

read more...

Interest on Refunds Claimed on the Original Return

The general rule is that the government will pay interest from the “date of the overpayment” to the date of the refund.  Normally the “date of the overpayment” will be the last date prescribed for filing the tax return, without regard to any extension—April 15th for individuals—unless some of the payments shown on the return were actually made after that date.  But there are three exceptions applicable to refunds claimed on the original return: 

  • Under section 6611(b)(2), there is a “refund back-off period” of “not more than 30 days” before the date of the refund, during which interest is not payable.  In practice, this period is significantly less than 30 days.  See Bob Kamman’s post and the comments for details.
  • Under section 6611(b)(3), if a return is filed late (even after taking into account any extension), interest is not payable before the date the return was filed.
  • Under section 6611(e)(1), no interest is payable if the refund is made promptly—within 45 days after the later of the filing due date (without regard to any extension) or the date the return was filed.

Section 6611(b)(3) and (e)(1) affect when overpayment interest starts running, while section 6611(b)(2) affects when it ends.

Other Code provisions, however, may adjust this further.

When Is the Return Considered Filed?

This is where “processible” comes in.  Section 6611(g) says that for purposes of section 6611(b)(3) and (e), a return is not treated as filed until it is filed in processible form.  As the PMTA explains, a return that is valid under Beard v. Commissioner, 82 T.C. 766 (1984), may not be processible yet, because it omits information the IRS needs to complete the processing task.  IRM 25.6.1.6.16(2) gives an example of a return missing Form W-2 or Schedule D.  Those are not required under the Beard test, but the return cannot be processed “because the calculations are not verifiable.”  The PMTA also mentions a return submitted without the taxpayer identification number; still valid under the Beard test but the IRS needs the TIN to process it.

As a result, under normal conditions, if a valid but unprocessible return is filed timely, and a processible return is not filed until after the due date, the latter is treated as the filing date for purposes of section 6611(b)(3) and (e).  The return is late, so the taxpayer is not entitled to interest before the date the (processible) return was filed.  And the 45-day window for the IRS to issue a refund without interest doesn’t start until the (processible) return was filed.

And Now We Add COVID Relief

The previous discussion covered normal conditions, but today’s conditions are not normal  As we all recall, the IRS issued a series of notices in early 2020 that postponed the due date for filing 2019 Federal income tax returns and making associated payments from April 15, 2020, to July 15, 2020.  The IRS did the same thing for the 2020 filing season, postponing the due dates from April 15, 2021, to May 17, 2021.  (Residents of Oklahoma, Louisiana, and Texas received a longer postponement, to June 15, 2021, as a result of the severe winter storms.)

This relief is granted under authority of section 7508A(a)(1), responding to Presidential declarations of an emergency or terroristic/military actions.  For purposes of determining whether certain acts were timely, that provision disregards a period designated by Treasury—in effect, creating a “postponed due date.”  The acts covered are specified in section 7508(a) and potentially, depending on what relief Treasury decides to grant, include filing returns and making payments.  For the 2019 filing season, the IRS initially postponed the due date for payments and then later expanded that relief to cover the due date for filing tax returns.

(Yes, the section 7508A provision for Presidentially declared emergencies piggybacks on the section 7508 provision for combat duty.  As bad as the disruptions caused by COVID have been, I prefer them to serving in an actual “combat zone.”  Hurricane Ida, which I am also thankful to have missed, may be somewhere in between.  All get similar relief from the IRS.)

Section 7508A(a)(2) goes beyond determining that acts were timely.  It states that the designated period, from the original due date to the postponed due date, is disregarded in calculating the amount of any underpayment interest, penalty, additional amount, or addition to tax.  No penalties or underpayment interest accrue during periods before the postponed due date, just as they don’t accrue (in the absence of a Presidentially declared emergency) before the normal due date. 

That’s the right result, and section 7508A(a)(2) is necessary to reach it.  Section 7508A(a)(1) simply says that the specified period is disregarded in determining whether acts—such as payment of the tax balance due—are timely.  It doesn’t explicitly modify the dates prescribed elsewhere in the Code for those acts.  The underpayment interest provisions, on the other hand, don’t focus on whether a payment was timely.  Section 6601(a) says underpayment interest starts as of the “last date prescribed for payment” and section 6601(b) defines that without reference to any postponement under section 7508A.

What about overpayment interest on a refund?  Section 7508A(c) applies the rules of section 7508(b).  That provision tells us that the rule disregarding the period specified by Treasury “shall not apply for purposes of determining the amount of interest on any overpayment of tax.”  Great!  We won’t owe interest for that designated period—April 15, 2020 to July 15, 2020 for the first emergency declaration above—on a balance due, but we can potentially be paid interest for that period on a refund.

Section 7508(b) also states that if a postponement with respect to a return applies “and such return is timely filed (determined after the application of [the postponement]), subsections (b)(3) and (3) of section 6611 shall not apply.”  That certainly sounds reasonable with respect to 6611(b)(3); it’s a de facto penalty of sorts for filing late, but if you filed your 2019 tax return by July 15, 2020, that should be treated as though you had paid by the original due date of April 15, 2020. 

Section 6611(e)(1) is a little bit different.  It’s not a de facto penalty for late filing; it’s essentially (1) a recognition that processing returns and issuing refunds takes some minimal amount of time and (2) possibly a small incentive for the IRS to do that expeditiously.  But when Treasury grants relief after a Presidentially declared emergency, any refund issued from a timely return will include interest, unless some other provision overrides it.  That’s what Bob Kamman’s Procedurally Taxing post pointed out and explained. 

And Now, the PMTA

It appears that the PMTA is correcting earlier analysis.  I haven’t been able to track down any earlier guidance, but the PMTA refers to “our previous conclusions” and those differed from the conclusions in the PMTA.  The conclusions in the PMTA seem correct.  Summarized:

  1. If the IRS determined a postponed due date under section 7508A, a return filed by the postponed due date means section 6611(b)(3) and (e) do not apply.  The return need only be valid under the Beard test to be timely and trigger the provisions of section 7508A; it doesn’t need to be processible.  This is what the “previous conclusions” got wrong, apparently thinking that whether a return was timely for purposes of section 7508A depended on whether it was processible.  But section 6611(g) defines “timely” only for purposes of section 6611(b)(3) and (e), not section 7508A.  It doesn’t matter whether the return was timely filed for purposes of 6611(b)(3) and (e); section 7508A negated them.  The default rules below don’t apply.  Interest will run from the date of the overpayment and there is no exception for a prompt refund.
  2. If the IRS determined a postponed due date under section 7508A, but a valid return is not filed by the postponed due date, it doesn’t meet one of the requirements for sections 7508A(c)/7508(b)—that the return is timely filed by the postponed due date—so the default rules below apply. 

Default rules, if there was no section 7508A relief from Treasury, or the taxpayer did not file a valid return by the postponed due date.  Sections 7508A(c)/7508(b) have no effect, so sections 6611(b)(3) and (e) are in effect and the return is “filed” only when it is processible pursuant to section 6611(g).  Thus:

  • If a processible return is filed by the original due date (or extended due date if applicable) it is not late under section 6611(b)(3), so interest runs from the date of the overpayment.  If it is filed after the original due date (or extended due date if applicable) it is late under section 6611(b)(3), so interest runs from the date the processible return was filed.
  • Whether or not the processible return is filed late, no interest is payable at all if the IRS makes a prompt refund under section 6611(e).  The 45-day grace period starts at the later of the original due date (even if the taxpayer had an extension) or the date the return is filed. 

Note that a return filed after the postponed due date (July 15, 2020) but on or before the extended due (October 15, 2020, if the taxpayer requested an extension) is not timely for purposes of section 7508A.  As a result, sections 6611(b)(3) and (e) are not disregarded.  But it is timely for purposes of 6611(b)(3).  Interest runs from the date of the overpayment rather than the date the return is filed, but the taxpayer may still lose all interest if the IRS issues the refund promptly.

Although the PMTA doesn’t mention it, the “refund back-off period” of section 6611(b)(1) will apply in all cases.  That rule is not dependent on whether a return is processible or filed timely, and it is not affected by a Presidentially declared emergency.

Two Final Thoughts

First, I think the PMTA is clearly right under the Code.  That the IRS originally reached the wrong conclusion, in part, is a testament to the complex interactions of the different provisions and the need for close, attentive reading.  I double-checked and triple-checked when I worked my way through the PMTA.  This was actually a relatively mild instance of a common problem with tax.  Code provisions are written in a very odd manner.  They’re not intended to be understandable by the general public; they’re written for experts and software companies, and sometimes difficult even for them.  I suspect that people who work through some of these complicated interpretations would fall into two groups: (a) those who really enjoy the challenging puzzle; and (b) those who experience “the pain upstairs that makes [their] eyeballs ache”.  My bet is that (b) includes not only the general public and most law school students but also a fair number of tax practitioners.  Which group are you in?

Second, that (relative) complexity leads to mistakes.  I assume that these interest computations have to be done by algorithm.  There are simply too many returns affected to have manual review and intervention for more than a small percentage.  An algorithm is feasible but will require re-programming every time there’s a section 7508A determination, with changes from year to year.  Even when the law is clear, there is a lot of opportunity for mistakes to creep in.  (We’re seen some of those recently in other contexts, e.g., stimulus payments and advanced Child Tax Credit.)  Whether by algorithm or manual intervention, particularly given the change from the original conclusions, there’s a good chance that some refunds were issued that are not consistent with the correct interpreation and may not have included enough interest.  Is the IRS proactively correcting such errors?  If the numbers are big enough, it might be worth re-calculating the interest you received—it’s easier than you may think—and filing a claim for additional interest if appropriate.

Things That Make You Say Hmmm

We welcome back guest blogger and commenter in chief, Bob Kamman.  As usual, Bob has found things that the rest of us overlook. 

In addition to the interesting twists on the way things work that Bob discusses below, I received a message from Carl Smith who, though retired, still takes some interest in what is happening in the world of tax procedure.  Carl provides some data on the Tax Court that might be of interest to court watchers.  After checking DAWSON, Carl sent the following message:

The last docket number for 2020 was 15,351.  Since the court doesn’t give out the first 100 docket numbers (i.e., the court starts at docket no. 101), that means filings in 2020 totaled 15,251, which is the lowest in two decades.  (The 1998 Act so froze the IRS that, according to Dubroff and Hellwig (Appendix B), only roughly 14,000 petitions were filed in 1999 and 15,000 petitions were filed in 2000.)  The last docket number in 2019 was 23,105, so filings in 2020 fell off about a third from 2019 to 2020.

As of right now, May 27, before the court’s Clerk’s Office opens, the last docket number is 8856-21 — only slightly ahead of the pace for 2020, though I would note that the first 10 weeks of 2020 were not impacted by the virus at all.

Oddly, the Tax Court is still very backlogged in serving petitions on the IRS.  Docket 8856-21 was filed on 3/15, but says it was served 5/27 — i.e., it will be later today.  That time gap of two and a half months to serve the petition is typical right now. Looking to the last few dockets of 2019, it typically took only 14 days to serve a petition filed on Dec. 31, 2019.

Keith

I thought I knew at least the basics of tax procedure, but lately I am starting to wonder if they changed the rules while I was slipping into old age.

read more...

For example, there is the statute of limitations for refunds of individual income tax.  From a Notice CP81 mailed from IRS in Austin and dated May 24, 2021: “We haven’t received your tax return for the year shown above.  The statue [yes, that’s what it says, not statute] of limitations for claiming a refund for the tax year shown above is set to expire.  As a result, you are at risk of losing the right to a potential refund of your credits and/or payments shown above.”

The credit on the account is $145. The tax year is 2017.

No, the taxpayer does not live in Texas or other disaster area.  I should say, did not live there.  He died in July 2020. 

Of course it’s possible that the credit came from a timely-filed extension request in April 2018.  No one alive now, has any records of what he did back then.  We do know that IRS paid him refunds on 2018 and 2019 returns, without any reminders or requests about 2017.  Requesting an account transcript for a decedent would take some time, to find out. 

And another thing.  I thought I knew the rules about when IRS would pay interest on refunds, and when it would not.

Then another tax practitioner reported that a Form 1040 that was e-filed on April 15 resulted in a refund deposited on April 23, with several dollars of interest added.  The refund was in the $10,000 range.  I had my doubts about this, until something similar happened with one of my clients.

They had filed their return in March, but claimed a “Recovery Rebate Credit” for a payment they had not received.  IRS is verifying all of these, so the refund was not approved and deposited to their bank account until April 28.  It included $1.31 in interest. 

I had always thought that IRS has 45 days from the date the return is due, or when received if later, to pay the refund without interest.  The IRS website states, “We have administrative time (typically 45 days) to issue your refund without paying interest on it.”

So I did some research, and this is what I found.  But I may not have gone far enough.

Code Section 7508A deals with disaster areas and allowed IRS to permit last year’s 3-month extension and this year’s 1-month extension.  It provides:

( c)        Special rules for overpayments
The rules of section 7508(b) shall apply for purposes of this section.

And Section 7508(b) says

(b)         Special rule for overpayments
(1)         In general
Subsection (a) shall not apply for purposes of determining the amount of interest on any overpayment of tax.
(2)         Special rules
If an individual is entitled to the benefits of subsection (a) with respect to any return and such return is timely filed (determined after the application of such subsection), subsections (b)(3) and (e) of section 6611 shall not apply.

So what are these two parts of Section 6611 that should be disregarded?

The second one mentioned, 6611(e) has the 45-day rule. So IRS can’t rely on that.

But the first one, 6611(b)(3), deals only with “late returns”. That still leaves Section 6611(b)(2), which gives IRS 30 days to issue a refund with no interest:

(b)         Period
Such interest shall be allowed and paid as follows: . . .
(2)         Refunds
In the case of a refund, from the date of the overpayment to a date (to be determined by the Secretary) preceding the date of the refund check by not more than 30 days, whether or not such refund check is accepted by the taxpayer after tender of such check to the taxpayer. 

So the 45-day rule is out, but shouldn’t the 30-day rule still be followed? At least, that’s the way I followed the trail.  But I could be wrong. I’m expecting a TIGTA or GAO report later this year, telling me why IRS did it right.  But I also expect some members of Congress to lament the interest expenditures.

Then there came along the repeal of the tax on ACA premium underpayments in 2020.  If taxpayers paid less for health insurance last year because they underestimated their income and received too much premium tax credit, they would have to make up the difference – until that requirement was repealed by the American Rescue Plan (ARP) in mid-March.  So now IRS has started issuing refunds to those who had already paid this tax. 

According to other practitioners, these refunds have included interest, even when paid before May 15.

IRS is about to start paying refunds to taxpayers who included unemployment compensation in income, before it was excluded for most returns by ARP.  Should these refunds include interest, even if paid within 45 days of April 15?  I suppose so.  These are, after all, not normal times.

The End of the Line for the Pareskys?

Guest blogger Bob Probasco returns today with perhaps his final update on the Paresky case. Christine

I’ve blogged about the Paresky case before (here, here,  here, and here).  The latest development, and probably the end of the line, came on Friday when the Eleventh Circuit issued its opinion.  The circuit court agreed with the district court, as well as the Second Circuit in Pfizer Inc. v. United States, 939 F.3d 173 (2d Cir. 2019), and the Federal Circuit in Bank of America Corp. v. United States, 964 F.3d 1099 (Fed. Cir. 2020).  District court jurisdiction for “tax refund suits” does not apply to stand-alone suits for additional overpayment interest.

Nothing about the decision was really surprising.  The contrary decision in E.W. Scripps Co. v. United States, 420 F.3d 589 (6th Cir. 2005) was always a strained interpretation of the jurisdictional statutes, and the trend has been moving away from that interpretation over the past few years.  The Eleventh Circuit evidently thought it was an easy case as well; Carl Smith pointed out to me that the decision came only 35 days after oral argument, compared to 17 months for the Pfizer decision.  That’s fast!  But I thought I would offer a few comments as we perhaps close this chapter.

read more...

What was this dispute all about, again?? There are two provisions that might offer district court jurisdiction for a stand-alone case seeking additional interest from the government on tax overpayments.  28 U.S.C. § 1346(a)(1) covers claims for recovery of taxes, that is, tax refund suits.  28 U.S.C. § 1346(a)(2)—the “little” Tucker Act—covers claims against the government under the Constitution, Acts of Congress, regulations, contracts with the government, or non-tort damages.  The little Tucker Act is limited to claims of $10,000 or less, whereas the courts can hear tax refund suits for any amount.  Under 28 U.S.C. § 1491(a)(1), however, the Court of Federal Claims can hear Tucker Act claims for any amount.

Court also have, with very rare exceptions, concluded that a tax refund suit—even if that includes stand-along cases for additional overpayment interest—is subject to the 2-year statute of limitations (from the IRS denial of the administrative claim) in section 6532.  Tucker Act claims, however, fall under the general 6-year statute of limitations (from the date the cause of action accrued, generally when the overpayment was scheduled): 28 U.S.C. § 2401 for district courts or 28 U.S.C. § 2501 for the CFC.

In these cases—Scripps, Pfizer, Bank of America, and Paresky—the taxpayers were arguing that their cases fit under “refund suit” jurisdiction.  And the government was arguing strenuously that their claims only qualified for jurisdiction under the Tucker Act.  Thus, when the amount at issue was over $10,000, the CFC would be the only available forum.

If taxpayers can always go the Court of Federal Claims, why is this important to them??

I think it’s primarily a matter of forum-shopping.  Pfizer’s case involved an issue—interest payable when a refund check is lost and has to be re-issued—for which there was a favorable Second Circuit precedent: Doolin v. United States, 918 F.2d 15, 18 (2d Cir. 1990).  Bank of America’s case, on the other hand, appears to have been filed in Western District of North Carolina to avoid an unfavorable Federal Circuit precedent, specifically, Wells Fargo & Co. v. United States, 827 F.3d 1026 (Fed. Cir. 2016).  (I’m guessing here, but it seems very likely from looking at the pleadings that Wells Fargo would have been a huge incentive to avoid the Federal Circuit.)

For Pfizer and Bank of America, the courts’ decision were not fatal.  Pfizer could still hope for the same result in the CFC; at least, I’m not aware of any negative precedent there.  Bank of America may have lost a significant portion, but not all, of its claim by winding up in the CFC.

The Pareskys, though, were not forum shopping.  In fact, they initially filed suit in the Court of Federal Claims.  But they faced a statute of limitations problem.  By the time they filed suit, the 6-year statute of limitations for Tucker Act claims had expired.  So the CFC dismissed their case for lack of jurisdiction but transferred it to the Southern District of Florida at their request.  A refund suit, for which the statute of limitations had not yet expired, was their only hope.  (The Eleventh Circuit pointed out in a footnote that the Tucker Act statute of limitations had not expired yet when the IRS denied their refund claim, so they still had time to file in the CFC.  And, of course, they could have filed suit even while the refund claim was pending.  Alas, they did not.)

Does this result make sense from a policy perspective?

Debatable.  There are two conflicting policies involved here.  On the one hand, Congress wanted most—and all large—Tucker Act claims to go to the CFC, because claims against the federal government are their area of expertise.  Thus, the $10,000 limit on Tucker Act claims in district court; provide easier access to local courts, but only for smaller cases where the difficulty and expense of litigating in a far-off forum would be relatively harsher.

On the other hand, Congress wanted taxpayers to be able to bring all federal tax refund suits in their local forum.  That may have reflected a judgement that: (a) the relative expertise of the CFC is less of an issue; and (b) there may be a lot more tax refund suits than Tucker Act claims, so it’s better to spread those out. Which of those policies should rule when the suit at issue is for additional interest on federal tax overpayments?  Hard to say.  There are fewer of these cases than tax refund suits, and it may be beneficial to establish precedents that will apply uniformly to all taxpayers.  But the same rationales for district court jurisdiction without a dollar limitation for refund suits might apply to these suits as well.  I doubt if Congress collectively gave it much thought.  If they had, perhaps they would have been comfortable with district courts hearing these cases, just as Pfizer, Bank of America, and the Pareskys wanted.  But we now have three circuit courts that have decided that’s not what Congress enacted.

So, is this really the end of the line for the Pareskys?

They’re really very sympathetic plaintiffs.  The dispute arose out of their losing a lot of money in the Bernie Madoff Ponzi scheme and filing refund claims to recoup taxes because of the loss.  (Rather ironic that Mr. Madoff passed away between oral arguments and the decision, isn’t it?)  This decision is pouring salt on the wound.  But, alas, I don’t see much hope at all for them.  They might ask for an en banc review or file a cert petition with the Supreme Court.  But I think both would likely be rejected.  (DOJ Tax Division might like to see this case go to the Supreme Court, to overturn Scripps, but I seriously doubt if they could convince the Solicitor General to support granting cert.)  And even if an en banc review by the Eleventh Circuit or cert by the Supreme Court were granted, I would certainly expect them to reach the same decision.

As far as the issue in general, without a Supreme Court decision, we may still see some of these cases crop up occasionally in other circuits.  The score is still only 3–1 and if the money involved is enough and precedents dictate that a district court would be a more favorable forum, taxpayers may take a shot at it.  But if the issue comes before any of the nine circuits remaining that still haven’t addressed it, I expect they would wind up agreeing with the Second, Eleventh, and Federal Circuits.

Complications With Rolling Credit Elect Transfers – Part 2

Bob Probasco returns with Part Two of his examination of rolling credit elect transfers and their treatment for interest purposes. Christine

In Part 1, I discussed the result in Goldring v. United States, 2020 U.S. Dist. LEXIS 177797, 2020 WL 5761119 (E.D. La. Sept. Sep. 28, 2020) and started laying the framework for a critique of the decision.  That included the treatment of credit elect transfers (CETs), which is now pretty much settled law.  Now we’ll take a look at previous cases with the specific scenario at issue in Goldring – rolling CETs – for which the results have been mixed.

Treatment of rolling CETs for interest purposes

FleetBoston Fin. Corp v. United States, 483 F.3d 1345 (Fed. Cir. 2007) is the only Circuit Court decision clearly on point, for now.  (Rolling CETs were also involved in Marsh & McLennan Cos. v. United States, 302 F.3d 1369 (Fed. Cir. 2002), but the taxpayer agreed with the government’s position later adopted in FleetBoston and the case addressed a different statutory provision, so the court did not have to decide this issue.)  It concluded that interest computation should take into account only the first CET, from the year at issue, and ignore subsequent (rolling) CETs.  Under that approach, the underpayment interest assessed against the Goldrings would be entirely valid.

In re Vendell Healthcare, 222 B.R. 564 (Bankr. M.D. Tenn. 1998), Otis Spunkmeyer, Inc. v. United States, 2004 WL 5542870 (N.D. Cal. 2004), and the dissent in FleetBoston follow the use of money principle from Avon Products and progeny.  The balance in the year at issue doesn’t become “due and unpaid” until the CET amount actually provides the taxpayer with a benefit in a subsequent year – either applied to an estimated tax installment to avoid the addition to tax or included in an overpayment that is refunded instead of transferred to the next year.  Under that approach, the Goldrings would be entitled to a full refund of the underpayment interest.

read more...

FleetBoston disagreed with Vendell and Spunkmeyer, concluding that they

disregard both the account-specific meaning of the term “paid” in the Internal Revenue Code and the regulatory scheme under which a credit elect overpayment will be deemed to reside in the tax account for the succeeding year, even if it is not needed to pay estimated tax in that year. 

In other words, the use of money principle is a tool of statutory construction but cannot override the specific terms of the statutes enacted by Congress. 

Who’s right?

The FleetBoston interpretation may be correct, but I don’t think either the Code or the regulatory scheme are as clear as the Federal Circuit thought they are.  FleetBoston distinguished Vendell and Spunkmeyer in part because of “the account-specific meaning of the term ‘paid’ in the Internal Revenue Code.”  But the issue in these cases is when underpayment interest under section 6601(a) begins running, the “last date prescribed for payment,” not when it stops, “the date paid.”  As discussed in Part 1, Avon Products, Inc. v. United States, 588 F.2d 342 (2nd Cir. 1978) concluded that the beginning date was not clearly addressed by the statute and effectively re-wrote it; the IRS acquiesced in not only the holding but also the reasoning.  That suggests it would be feasible and permissible to re-write it again to address rolling CETs.

The relevant part of the regulatory language, which is the same in both § 301.6402-3(a)(5) and § 301.6611-1(h)(2)(vii), says only that “such amount shall be applied as a payment on account of the estimated income tax for such [succeeding] year or the installments thereof.”  The regulations were enacted back in 1957 and didn’t address when underpayment interest on a subsequently determined deficiency would run.  (I found nothing helpful in the Federal Register when the proposed and final regulations were issued; I doubt if the IRS thought about issues with subsequently determined deficiencies at that time.)  That was worked out through cases and revenue rulings, not regulations.  Even Revenue Ruling 99-40 doesn’t specifically address situations where the CET is not needed at all for estimated tax installments and is rolled to the next year rather than refunded. 

The parties in Goldring argued a lot about the interpretations of cases and rulings, and whether they should apply here.  The disagreement seems to flow from fundamentally different frameworks for thinking about CETs, both in general and with rolling CETs, in this context.

Government perspective – it’s a matter of accounting 

From the perspective of the government (and the FleetBoston court), the focus is on the fact that money has been transferred from one year to another year – the particular year to which the overpayment was first transferred.  The statute and regulations are clear.  The subsequent CETs and the other years are irrelevant.  This has intuitive appeal.  Generally, interest is computed on each tax year independently.  Independence of each tax year is a foundational principle for many purposes in our system and the language in the regulations for CETs is consistent with that perspective.  The initial CET is irrevocable and anything that happens thereafter (a subsequent CET) is not related to the original CET.  If a deficiency arises in the original year of the overpayment, you figure out the effective date of the transfer to the succeeding year, using the approach developed in the cases and summarized in Revenue Ruling 99-40.  If the election on the original year’s return is made before the due date of the return for the succeeding year, which it almost always is, the transfer (a “payment” in the succeeding year) would be effective no later than the due date of that return.

That amount of money is sitting in only one tax year at any point in time.  This is generally how the IRS would record it on account transcripts.  Under this interpretation, in the Goldring case, the amount at issue would be:

  • Included in the account for the 2010 tax year from April 15, 2011, until transferred out on April 15, 2012
  • Transferred into the account for the 2011 tax year on April 15, 2012, and remaining there until transferred out on April 15, 2013
  • Transferred into the account for the 2012 tax year on April 15, 2013, and remaining there until transferred out on April 15, 2014
  • Etc.

In other words, the Code doesn’t offset the 2010 deficiency against the overpayment in 2011 (or subsequent years) as a result of the CET.  The Avon Products decision was not a broad interest netting solution; it just addressed when the transfer between years is considered to take place.

Taxpayer’s perspective – prevent inequitable results

From the perspective of the taxpayer (as well as Vendell, Spunkmeyer, and the FleetBoston dissent), the language is ambiguous enough to allow a construction to meet the policy objectives of Congress.  Avon Products and its progeny, combined with other Code provisions such as sections 6601(f) and 6611(b)(1) and the global interest netting regime of section 6621(d), evidence a strong desire by Congress to avoid “interest arbitrage” results that might be unfair to taxpayers when there are both overpayments and underpayments outstanding.  Global interest netting protects taxpayers from paying underpayment interest at a higher rate than received for overpayment interest on equivalent balances outstanding at the same time.  The same principle should protect all taxpayers from paying underpayment interest during periods when there was an equivalent overpayment balance outstanding for which the taxpayer doesn’t receive interest at all.

Section 6621(d) only allows, by its terms, netting of overpayments on which interest is allowable and underpayments on which interest is payable.  If not for the fact that overpayments that the taxpayer elects to CET to the following year do not earn overpayment interest, that section would give the Goldrings the result they ask for.  But excluding CETs from the reach of section 6621(d) was not necessarily Congress’s intention.  I haven’t done a comprehensive review of the legislative history, but I suspect that limiting section 6621(d) to overpayments on which interest is allowable and underpayments on which interest is payable was only intended to maintain certain restricted interest provisions that give the government an incentive to act quickly. 

For that matter, was the regulation providing that an overpayment transferred by CET does not earn overpayment interest the best decision?  Section 6402(b) is a broad specific grant of authority to issue regulations.  But this was also an exception to the general rule of section 6611(a).  The provision makes some sense, given the solution in Avon Products and progeny, if the taxpayer does not continue to roll over CETs.  The IRS could have written the regulation to address rolling CETs in a way that would conform to the Congressional purpose of disallowing government interest arbitrage.

Avon Products and its progeny have an effect very similar to netting.  Prior to those decisions, the IRS treated the original overpayment in those situations (on which interest was not allowable because it was used for a CET) and the subsequently determined deficiency as separate and independent transactions.  Thus, until the CET was effective, there was – for the same year – an overpayment transaction that didn’t earn interest at all and an underpayment transaction for which the IRS charged interest.  Avon Products combined the two transactions into a single balance before computing interest, what I term “annual interest netting.” 

Notably, the final result of this line of cases and rulings did not treat the CET as effective based on an artificial date, such as the date the return was filed for the overpayment year or the unextended filing due date of the overpayment year.  Instead, the CET was effective only when the taxpayer got a benefit from having the money in the succeeding year.  The current IRS practice limits the effective date of the CET to no later than the unextended filing due date for the succeeding year.  Why should it be limited that way, if the taxpayer receives no benefit in the first succeeding year and instead rolls the amount over to the next year? 

Even if the government’s accounting perspective is respected, is the application of it necessarily immutable?  The CET from Year 1 to Year 2 creates a “negative payment” in Year 1 and a payment in Year 2.  The CET from Year 2 to Year 3 creates a “negative payment” in Year 2 and a payment in Year 3.  Can we consider the payment in Year 2 (from Year 1’s CET) and the “negative payment” in Year 2 (from Year 2’s CET) to have simply offset to eliminate both?  Perhaps.

Where do we go from here?

The government’s position prevailed in FleetBoston, the only Circuit Court decision on the issue of rolling CETs to date.  Vendell, Spunkmeyer, and the FleetBoston dissent held for taxpayers on this issue.  The Goldring decision ruled for the government in a fairly cursory manner and it has now been appealed.

I’m not sure which of the opposing position will prevail in the Fifth Circuit.  I suspect the interpretation in FleetBoston will prevail.  But there are certainly arguments for the taxpayers’ position.  We have an example, over the past couple of years, of a single Circuit Court decision on an issue that might have seemed durable – but wasn’t, once other Circuit Courts eventually considered the issue.  We’ll see whether that happens here.

Complications With Rolling Credit Elect Transfers – Part 1

We welcome back guest blogger Bob Probasco. In Part One of this two part post, Bob dives into the history of “credit elect transfers” and their treatment for interest purposes. Part Two will analyze the Goldring case in more detail and discuss the arguments that are likely to be made on both sides as the case goes before the Fifth Circuit. Christine

A brief order was issued in September, concerning an issue related to interest on federal tax overpayments and underpayments.  In Goldring v. United States, 2020 U.S. Dist. LEXIS 177797, 2020 WL 5761119 (E.D. La. Sept. Sep. 28, 2020), the court granted the government’s motion for summary judgement, concluding that the IRS properly assessed $603,335 of underpayment interest.  The court rejected the taxpayers’ arguments concerning the proper treatment of interest in situations with rolling credit elect transfers.

We’re all familiar with “credit transfers,” the terminology for IRS authority under Code section 6402(a) to apply an overpayment for one year against an outstanding tax liability for another year.  IRS records show tax balances from the government perspective, of course, under which an overpayment by the taxpayer is a liability or, in accounting terminology, a credit.  (These transfers show up on transcripts with transaction codes 826/706, labeled “credit transferred out”/“credit transferred in”.)

A “credit elect transfer” (CET) is one the taxpayer requests, on their tax return; I frequently make such an election and some of you may as well.  The election, made on line 36 of the Form 1040 for 2020, is to apply part or all of the overpayment shown on the return to your estimated tax obligations for the next year.  The overpayment that the taxpayer elects to transfer does not earn overpayment interest for the period before the transfer, even if the return is filed well after the due date of that return.  This is not a statutory restriction; section 6402(b) just authorizes Treasury to prescribe regulations governing such CETs.  It did, including § 301.6402-3(a)(5) and § 301.6611-1(h)(2)(vii).

As for “rolling credit elect transfers,” those may be most easily illustrated by the facts of this case.   

read more...

Facts

I’m going to dispense with most of the details and just focus on the key facts regarding the specific issue at hand.

  • Mr. and Mrs. Goldring’s 2010 tax return showed an overpayment of $6,782,794, which was applied to their 2011 tax return at their request.
  • Their 2011 tax return showed an overpayment of $6,521,775, which was applied to their 2012 tax return at their request.
  • Their 2012 tax return showed an overpayment of $5,869,478, which was applied to their 2013 tax return at their request.
  • Etc., etc., etc.

Thus, “rolling” CETs – the Goldrings kept rolling over their overpayments to the next year instead of receiving refunds. 

I’ve used CETs often, occasionally even rolling CETs, although the numbers were much smaller than for the Goldrings.  I intended to use the CET against the estimated tax installment obligation due at the same time as my tax return.  It was easier to make that portion of the obligation by CET rather than making a separate payment for year 2 and getting a refund (without interest) for year 1 several weeks later.

Mr. and Mrs. Goldring had something else in mind.  They anticipated a possible audit deficiency for their 2010 tax return.  Their accountants had suggested the rolling CETs as a way to keep funds with the IRS sufficient to cover the potential deficiency, thereby avoiding underpayment interest.  Remitting a separate deposit in the nature of a cash bond would have been an option as well.  Perhaps rolling CETs were seen as a low key way to accomplish the same thing, without waving a red flag to alert the IRS of the potential deficiency?  If there had never been a deficiency for 2010, the rolling CETs wouldn’t have been an issue.  Eventually the Goldrings would have asked for a refund instead of rolling the overpayments over.  No interest would be allowed on the refund and that would have been an end of it.

But, as they feared, there was a deficiency for 2010.  The IRS began an audit on April 15, 2013 and issued a 30-day letter on August 11, 2015.  Appeals agreed with the audit determination and issued a notice of deficiency for $5,250,549 on March 30, 2017.  On June 20, 2017, rather than go to Tax Court, the taxpayers consented to immediate assessment.  The audit deficiency was eventually paid from overpayment balances for later returns, specifically, Mrs. Goldring’s 2014 separate tax return and Mr. Goldring’s 2016 separate tax return. A refund claim and this refund suit followed.

The validity of the 2010 deficiency itself had been resolved in this same case, by an order issued on April 13, 2020.  That left the question of interest that had been assessed on the deficiency.  The IRS assessed underpayment interest on the 2010 deficiency for the period from April 15, 2012, the due date for the 2011 tax return, until paid.  The Goldrings argued that, because the IRS always had money in its possession sufficient to cover the audit deficiency, no underpayment interest should be accrued.        

The District Court’s Opinion

The court decided this issue in favor of the government.  Section 6601(a) provides for underpayment interest as follows:

If any amount of tax imposed by this title . . . is not paid on or before the last date prescribed for payment, interest on such amount . . . shall be paid for the period from such last date to the date paid.

The regulations sections cited above provide that the portion of an overpayment designation as a CET “shall be applied as a payment on account of the estimated tax for [the succeeding] year or the installments thereof.”  The 2010 CET was irrevocable and resulted in transferring $6,782,794 from the account for the taxpayers’ 2010 tax year to the account for their 2011 tax year.  That transfer from 2010 to 2011 was effective as of April 15, 2012, the due date of the 2011 tax return.  The original overpayment in 2010, transferred to 2011, would not earn overpayment interest.  But it could shield the taxpayers from underpayment interest from a subsequently determined deficiency, until the funds were deemed transferred to 2011.  Underpayment interest began accruing on April 15, 2012, the last date prescribed for payment for the year to which the overpayment was transferred, and continued until April 15, 2015 and April 15, 2017, when the deficiency was paid by section 6401(a) transfers from subsequent tax returns.  The plaintiffs were not entitled to a refund of underpayment interest and the government was entitled to summary judgement.

This sounds like a very straightforward application of clear law, doesn’t it?  Particularly since the printed order was just barely over 4 pages and the “law and analysis” portion is only 2 pages, double-spaced.  But I’m not sure that answer is necessarily the best interpretation of the law.  Here’s why.

Treatment of CETs for interest purposes

Today, in most instances when you elect to apply some or all of an overpayment to estimated taxes for next year, interest issues don’t come up at all.  You’re not entitled to interest on the overpayment, by regulation.  When an interest issue does come up, it’s because the IRS audits the year with the overpayment and determines a deficiency.  With most CETs, the method of calculating underpayment interest on that subsequently determined deficiency is no longer contested. 

But there was a great deal of uncertainty before the decision in Avon Products, Inc. v. United States, 588 F.2d 342 (2nd Cir. 1978).  By the last date prescribed for payments of its 1967 taxes, the unextended filing due date, the taxpayer had paid in $44,500,086.58.  When it finally filed its tax return on September 15, 1968, it reported its tax liability as $44,384,460.26, resulting in an overpayment of $115,626.32, which it elected to apply to 1968’s tax liability.  A subsequent audit determined that its correct liability was $44,483,062.42, resulting in a deficiency of $98,602.17.

Section 6601(a), by its literal terms, only charges interest on underpayments if the correct tax liability was not paid on or before the last date prescribed for payment.  But the amount paid as of the last date prescribed for payment was $44,500,086.58, which was more than the adjusted tax liability of $44,483,062.42.  Under the literal terms of the statute, the IRS could not assess any underpayment interest at all for that deficiency.

The interpretation didn’t seem right either, but the Second Circuit found an elegant solution.  It interpreted “last date prescribed for payment” in these situations to mean the moment at which the tax first became “due but unpaid.”  It was fully paid by March 15, 1968, the last date prescribed for payment.  But a CET was effectively a “negative payment,” just as a refund would have been.  It reduced the net amount paid by Avon from $44,500,086.58 (as of the date prescribed for payment) to $44,384,460.26 (after the CET).  At that point, the tax liability became “due but unpaid” and underpayment interest would begin accruing.

When the “negative payment” is a refund, we know when that happened and therefore when underpayment interest on a subsequently determined deficiency begins.  But what is the effective date of a “negative payment” by CET?  That wasn’t clear.  The IRS argued for the due date of the return without regard to extensions, or March 15, 1968.  Avon argued for September 15, 1968, the date of both (a) filing the 1967 return and making the election to apply the CET to 1968’s tax liability and (b) the due date of an estimated tax installment for Avon’s 1968’s tax liability.  The Second Circuit agreed with Avon.

Avon Products, several subsequent cases – May Dep’t Stores Co. v. United States, 36 Fed. Cl. 680 (C.F.C. 1996); Kimberly-Clark Tissue Co. v. United States, 1997 U.S. Dist. LEXIS 3100 (E.D. Pa. 1997); Sequa Corp. v. United States, 1996 U.S. Dist. LEXIS 5288 (S.D.N.Y. Apr. 22, 1996); Sequa Corp. v. United States, 1998 U.S. Dist. LEXIS 8556 (S.D.N.Y. June 8, 1998) – and a series of revenue rulings eventually developed what is now the standard treatment for CETs.  “When a taxpayer elects to apply an overpayment to the succeeding year’s estimated taxes, the overpayment is applied to unpaid installments of estimated tax due on or after the date(s) the overpayment arose, in the order in which they are required to be paid to avoid an addition to tax for failure to pay estimated income tax under §§ 6654 or 6655 with respect to such year.”  Revenue Ruling 99-40.

The logic behind this solution was to avoid a double benefit, to either the taxpayer or the government.  The CET amount would provide a potential benefit to the taxpayer in the year of the overpayment (1967 in the Avon Products case) for periods before the effective date of the transfer.  Overpayment interest was not allowable, but the CET amount would reduce the subsequently determined deficiency that would be subject to underpayment interest.  The CET amount would benefit the taxpayer in the succeeding year (1968 in the Avon Products case) for periods after the effective date of the transfer.  It would either (a) avoid the addition to tax for failure to pay estimated taxes or (b) be refunded to the taxpayer for its use.  There would be no period during which the taxpayer received a potential benefit for neither year or received a potential benefit for both years. 

None of the cases or revenue rulings specifically dealt with situations in which the CET is not needed for an estimated tax installment.  IRS practice has been to apply any remaining portion as of the due date of payment for the succeeding year’s tax liability.  That makes perfect sense if there is no rolling CET, as the taxpayer will either need that amount to pay the liability or receive a refund.  It makes less sense in situations with rolling CETs, as in the Goldring case.  That had to wait for a new series of cases, and the results are mixed.  I’ll turn to that in Part 2.

The Tide Keeps Going Out, Carrying Overpayment Interest Suits Away from District Courts

We welcome back regular guest blogger Bob Probasco. Bob is the director of the Low Income tax Clinic at Texas A&M University School of Law. Prior to starting the clinic at Texas A&M, Bob had a long a varied career in different tax positions. Before law school, he spent more than twenty years in various accounting and business positions, including with one of the “Big Four” CPA firms and Mobil Oil Corporation. After law school and a year clerking with Judge Lindsay of the Northern District of Texas, he practiced tax law with the Dallas office of Thompson & Knight. He left T&K in 2014 and started a solo practice before switching to full time academia. Keith

We return to the jurisdictional dispute over taxpayer stand-alone suits claiming additional overpayment interest in excess of $10,000.  The latest development, a decision on July 2nd by the Federal Circuit in Bank of America v. United States, docket number 19-2357, continues a trend that I’ve been following for two years now.  Until recently, the only decision on this issue at the Circuit Court level was E.W. Scripps Co. v. United States, 420 F.3d 589 (6th Cir. 2005), which concluded that district courts can hear such claims.  For years, most lower courts followed the Sixth Circuit.  But recently the tide turned.  Here’s a timeline of recent cases illustrating the change.

read more...

First, the lower courts follow Scripps and agree that district courts have jurisdiction over these claims:

  • October 31, 2016:  The Southern District of New York follows Scripps in Pfizer, Inc. v. United States, 118 A.F.T.R.2d (RIA) 2016-6405 (S.D.N.Y. 2016) and decides it has subject matter jurisdiction.  On May 12, 2017, the court dismissed the case for lack of jurisdiction for failure to timely file the refund suit.  Prior discussion here.  The taxpayer appeals.
  • July 1, 2019:  The Western District of North Carolina follows Scripps in Bank of America Corp. v. United States, 2019 U.S. Dist. LEXIS 109238, 2019 WL 2745856 (W.D.N.C. 2019), and denies the motion to transfer the case to the Court of Federal Claims.  Prior discussion here.  The government appeals.
  • August 30, 2019:  In the Southern District of Florida, the magistrate judge’s report and recommendation in Paresky v. United States, 2019 U.S. Dist. Lexis 149629, 2019 WL 4888689 (S.D. Fla. 2019) follows Scripps.  The magistrate judge concludes that the court has subject matter jurisdiction but recommends dismissal in part for failure to file timely refund claims. Prior discussion here.

And then a break, with cases now holding that only the Court of Federal Claims, not district courts, have jurisdiction over these claims:

  • September 16, 2019: The Second Circuit reverses the S.D.N.Y., in Pfizer, Inc. v. United States, 939 F.3d 173 (2d Cir. 2019) and concludes there is no subject matter jurisdiction.  Prior discussion here.  The court transfers the case to the Court of Federal Claims, docket number 19-1803. Plaintiff files a motion for summary judgment on April 30, 2020.
  • October 7, 2019:  The District of Colorado agrees with Pfizer, in Estate of Culver v. United States, 2019 U.S. Dist. LEXIS 173235, 2019 WL 4930225 (D. Colo. 2019).  The court transfers the case to the Court of Federal Claims, docket number 19-1941.
  • October 21, 2019:  In the Southern District of Florida, the district court judge in Paresky v. United States declines to adopt the magistrate judge’s report and recommendation and follows Pfizer, dismissing the case for lack of subject matter jurisdiction.  Prior discussion here.  The taxpayers appeal.
  • July 2, 2020:  The Federal Circuit agrees with Pfizer and reverses the WDNC, in Bank of America Corp. v. United States. It remands the case to the WDNC, to sever some of the claims and transfer them to the Court of Federal Claims.

So now we have the Sixth Circuit holding that district courts have jurisdiction over such suits while the Second and Federal Circuits disagree, with one more circuit court considering the issue.  Mr. and Mrs. Paresky’s case is currently pending in the Eleventh Circuit, docket number 19-14589.  Appellants filed their primary brief on May 27, 2020.  The government’s brief is due on July 27, 2020.

When only one circuit court has ruled on a difficult issue, district courts – even in other circuits – tend to follow that decision.  But once another circuit court disagrees, the better analysis tends to win out and lower courts change direction.  It’s possible that the magistrate judge in Paresky, and the district court in Bank of America, would have reached a different conclusion if they were deciding after Pfizer.  My guess is that the Eleventh Circuit will agree with the Second and Federal Circuits on this issue.  This is still a small sample size, but I suspect the tide has turned decisively.

Caveat:  Bank of America lost in the Federal Circuit but has a strong incentive (see below) to seek review by the Supreme Court.  Similarly, the government may want a ruling by the Supreme Court to overturn Scripps once and for all.  With a circuit split, and if both parties ask the Supreme Court to hear the case – well, the Court hates tax cases but might take this one.  If so, all bets are off.

How did we get here?

Before I get into the court’s decision, a brief reminder why Bank of America, appealed from the Western District of North Carolina, wound up in the Federal Circuit instead of the Fourth Circuit. The government had moved to dismiss the case, or in the alternative to transfer it to the Court of Federal Claims, on the basis that the district court did not have jurisdiction for such cases. The district court denied both alternatives, as the court concluded it had jurisdiction. However, if a district court issues an interlocutory order “granting or denying, in whole or in part, a motion to transfer an action to the United States Court of Federal Claims,” a party can make an interlocutory appeal and the Federal Circuit has exclusive jurisdiction. 28 U.S.C. § 1292(d)(4). The government could have done the same in Pfizer, when the district court ruled against it on the first motion to dismiss for lack of subject matter jurisdiction, but it chose not to do so. In the second motion to dismiss, based on failure to timely file the refund suit, the government did not request transfer, so Pfizer’s appeal was to the Second Circuit.

Statutory interpretation

The jurisdictional provision at issue in these cases is 28 U.S.C. § 1346(a)(1). It has no dollar limitation. That’s the statute we rely on when filing tax refund suits, so I think of it as “tax refund jurisdiction.”  The taxpayers in these cases argued that it also covers stand-alone suits for overpayment interest, although technically those are not refund suits.  The alternative jurisdictional provision for district courts, the “little Tucker Act” at § 1346(a)(2), provides jurisdiction for any claim against the United States “founded either upon the Constitution, or any Act of Congress, or any regulation of an executive department . . . .” but is limited to claims of $10,000 or less.  The comparable jurisdictional statute for the Court of Federal Claims, § 1491(a)(1), has no such limitation.  So, if § 1346(a)(1) covers stand-alone suits for overpayment interest, taxpayers can bring suit in either district court or the CFC.  If it doesn’t, and the claim exceeds $10,000, the only option is the CFC.

Here’s what § 1346(a)(1) says, with the relevant language italicized:

Any civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws

The language is very similar to Section 7422(a), which sets forth requirements for tax refund suits.  Because those requirements – exhaustion of administrative remedies and a shorter statute of limitations than for the little Tucker Act – have frequently been held not applicable to these stand-alone overpayment interest suits, the government argues that § 1346(a)(1) doesn’t apply to such suits either.

Overpayment interest doesn’t fall within the first two categories because it is neither tax nor penalty.  But Scripps interpreted the third category, “any sum alleged to have been excessive,” as broad enough to cover overpayment interest suits.  After all, the Supreme Court had stated in Flora v. United States, 362 U.S. 145, 149 (1960): “One obvious example of such a ‘sum’ is interest.”  Scripps concluded that the amount was “excessive” if you looked at how much the government retained rather than collected and, more importantly, focused on the entire balance of the account rather just individual components such as the overpayment interest.  (I provided an illustration of this last point here.)  The comparison to section 7422(a) was inapt because section 7422(a) includes a qualifying header (“No suit prior to filing claim for refund”); § 1346(a)(1) does not and therefore could include both refund suits and “non-refund” suits.

Both the Second Circuit and the Federal Circuit disagreed completely with that analysis.  The comment in Flora, in context, referred to underpayment interest (which is assessed and collected) rather than overpayment interest (which is paid out).  The structure of § 1346(a)(1), including the first two categories in the list, and the use of the present-perfect tense “have been” made it clear that it referred to amounts that had been previously paid to, or collected by, the IRS.  And the statutory language mattered much more than the header for section 7422(a) versus lack of such for § 1346(a)(1).

Legislative history

Both parties in Bank of America also pointed the court to legislative history in support of their positions.  In its opening brief, the government pointed out that the final version of the provision was understood by courts to establish a narrow exception to the $10,000 limitation for “little Tucker Act” claims – only for tax refund claims.  The government also focused on the Supreme Court’s discussions of the legislative history in Flora v. United States, 357 U.S. 63 (1958), and Flora v. United States, 362 U.S. 145 (1960).

Here is a summary of the arguments in the taxpayer’s brief: 

  • The predecessor statutes to § 1346(a)(1) were designed to eliminate several distinctions and inequities.  For example, the earlier provisions (a) for district court jurisdiction, requiring suing the Collector and could not brought after he died; and (b) for Court of Claims jurisdiction, did not allow for awarding interest.  Thus, in some instances, a taxpayer would have no way to recover overpayment interest.  In a floor statement introducing an amendment to the Revenue Act of 1921, a Senator noted those issues and stated that the amendment was intended to eliminate the problems.
  • The Assistant Chief Counsel of the Bureau of Internal Revenue represented, in a 1953 Senate subcommittee hearing, his opinion that the language of § 1346(a)(1) already covered stand-alone overpayment interest suits.
  • In connection with that same hearing, Treasury later provided by letter a list of several cases in district court involving stand-alone claims for interest.    

In its reply brief, the government took issue with the taxpayer’s arguments based on legislative history:

  • The Senator who introduced amendments to the Revenue Act of 1921 was concerned about tax refund claims, on which overpayment interest might be paid, rather than stand-alone claims for overpayment interest.
  • It was not entirely clear that the Assistant Chief Counsel’s statement at the 1953 Senate subcommittee hearing concerned stand-alone claims for overpayment interest.  In any event, a witness from the ABA testifying at the same hearing disagreed with the Assistant Chief Counsel’s opinion that the existing statute covered stand-alone claims. 
  • None of the 14 cases listed on the letter from Treasury of district court litigation concerned jurisdiction under § 1346(a)(1) for stand-alone claims of overpayment interest, the issue in Bank of America.  Only six cases involved overpayment interest at all, of which: (a) two declined to exercise jurisdiction; (b) two didn’t question jurisdiction; and (c) two were based on different jurisdictional provisions and involved claims under $10,000.

This brief summary doesn’t do the arguments justice, of course.  For those interested in more details, I suggest a review of the parties’ briefs, which provide a detailed history of the evolution of the jurisdictional provisions.  I was impressed by the thoroughness of both sides’ work, scratching and clawing for anything they could find or infer in support of their respective positions.  They did the best possible with what little was out there.

I count myself among those who consider legislative history relevant in interpreting ambiguous statutes, and a good tax lawyer (or judge) can find ambiguity in almost anything if they want to.  Even so, I considered these examples unlikely to persuade a court that had not already decided for other reasons.  I went back and looked at some of the original sources when reading the district court decision and they didn’t persuade me in either direction.  The Federal Circuit didn’t seem impressed either.

Impact on Bank of America

When I originally looked at the case, I thought that “most” of Bank of America’s claim would be eliminated if it lost in the Federal Circuit.  The third amended complaint was for $163 million, of which $141 million related to interest netting.  The interest netting claims seemed particularly vulnerable if Bank of America had to litigate in the CFC (see below), based on a cursory review of the complaint.  Now that I’ve reviewed the motion to dismiss more carefully, it appears that “most” overstated the potential impact on Bank of America, although it’s still significant.

The benefits of interest netting – the section 6621(d) adjustments to eliminate the interest rate differential – can be effected two ways.  The government can pay additional overpayment interest to bring that rate up to the underpayment interest rate, or it can refund underpayment interest to bring that rate down to the overpayment interest rate. 

Over $95 million of the benefit from interest netting came from years in which the adjustments were for reductions/refund of underpayment interest. A claim for refund of excessive underpayment interest clearly fits with § 1346(a)(1); under section 6601(e)(1), underpayment interest is treated as tax, except that it is not subject to deficiency procedures. 

Thus, there would be no basis for transferring those claims to the CFC.  (There were small amounts of overpayment interest in those years, presumably interest on the claimed refund of underpayment interest rather than directly from interest netting.  That overpayment interest would not be a disallowed stand-alone claim for overpayment interest; it would be permitted under ancillary jurisdiction.)  The government sought to transfer only $67 million of the total complaint amount to the CFC, of which only $44 million involved interest netting.  Assuming that the non-interest netting claims are not at a particular disadvantage in the CFC, Bank of America’s loss from the Federal Circuit’s decision may be only $44 million, or even less.  Well, to the taxpayer losing the claim, “only” is an inappropriate adverb; that’s still a lot of money.

Interest netting

Most taxpayers are perfectly willing to litigate interest cases in the CFC.  The CFC judges tend to have more experience with interest issues and most large interest cases are litigated there instead of district courts. In fact, Bank of America has another interest netting case pending there now. Taxpayers tend to bring substantial stand-alone interest cases in district court only to: (a) take advantage of favorable precedent in that circuit; or (b) avoid unfavorable precedent in the Federal Circuit.  Pfizer was an example of the former.  It wanted to rely on a favorable precedent, Doolin v. United States, 918 F.2d 15 (2d Cir. 1990).  It won’t necessarily lose its case elsewhere; it might persuade the CFC to reach the same decision as the Second Circuit did in Doolin.  Based on the complaint, I suspect Bank of America is an example of the latter, in this case trying to avoid an unfavorable precedent regarding interest netting, Wells Fargo & Co. v. United States, 827 F.3d 1026 (Fed. Cir. 2016).  (Prior discussion here.) 

Wells Fargo involved interest netting claims between separate corporations that had merged.  The Federal Circuit decided that, in such contexts, interest netting is only permitted if the period of overlap (an underpayment balance for one period and an overpayment balance for another period) began after the date of the merger. Here’s an illustration:

Company A had a $2.5 million underpayment balance for its 2008 tax year outstanding from 3/15/2009.  Company B had a $2 million overpayment balance for its 2011 tax year outstanding from 3/15/2012.  If the balances were still outstanding until paid/refunded on 12/1/2016, there was a $2 million overlap from 3/15/2012 (when the second balance began) until 12/1/2016 (when both balances ended).  During that overlap period, there was an interest rate differential; corporations earned from 1% to 4.5% less on overpayments than they paid on underpayments, and in this scenario the difference would more likely be 4.5% than 1%. 

If the companies merged in 2010, $2 million of the respective balances could be netted to avoid that differential, for the entire period from 3/15/2012 to 12/1/2016.  But if the companies merged in 2013, under Wells Fargo those balances could not be netted at all.  I think a better interpretation of the law would allow interest netting for part of the overlap period, starting from the date of the merger.  But the CFC will rule based on Wells Fargo, not based on my interpretation.

As noted above, Bank of America’s claims that will now wind up in the CFC include $44 million of interest netting benefits.  I don’t know if the entire $44 million will be denied based on Wells Fargo.  But (a) those claims involve Merrill Lynch’s tax years 1987, 1990, 1991, 1999, 2002, 2003, 2005, 2006, and 2007 tax years; and (b) Merrill Lynch merged with Bank of America on October 1, 2013.  I didn’t try to review the interest computations attached to the motion to dismiss, but I anticipate Bank of America stands to lose the vast majority of the $44 million.  Worth a cert petition to the Supreme Court?

Impact elsewhere?

The above discussion concerns how this case impacts Bank of America and more broadly other companies that might prefer to bring stand-alone overpayment interest suits in district court.  That doesn’t mean the impact of this line of cases is limited to overpayment interest.  Pfizer and Bank of America identified a certain type of claim that arises under the Internal Revenue Code but is not a tax refund claim for purposes of jurisdiction.  This distinction might affect not only the available forum, which is what I’ve been focusing on here, but also other issues. For example, a “non-refund claim” under the little Tucker Act will not be subject to the requirement to exhaust administrative remedies and will have a different statute of limitation.

Are there other examples of “non-refund claims” arising under the Code?There may well be, and Carl Smith pointed out one prominent recent example that cited Pfizer. On June 19, 2020, the district court of Maryland decided in R.V. v. Mnuchin, 2020 U.S. Dist. LEXIS 107420 (D. Md. 2020), that the government had waived its sovereign immunity with respect to the CARES Act economic impact payments (EIPs).  The plaintiffs claimed jurisdiction under, among others, the little Tucker Act, § 1346(a)(2).  That jurisdiction requires a separate “money-mandating” statute, for which the plaintiffs pointed to section 6428.  The government argued that section 6428 is a tax statute; any challenge to the denial of a credit falls within the jurisdiction of § 1346(a)(1) instead of § 1346(a)(2) and is subject to the restrictions of section 7422.  The plaintiffs’ failure to exhaust administrative remedies was fatal to their claim. 

The court dismissed the government’s motion to dismiss without prejudice.  It stated: “The Government argues that 26 U.S.C. § 6428 is not a money-mandating statute because it is a tax statute.  True.  But the two are not mutually exclusive.”  It cited Pfizer for that proposition.  To put it another way, a tax statute authorizes refund claims, but it also may authorize claims that are not “tax refund claims” for purposes of § 1346(a)(1) and not subject to section 7422 but are money-mandating provisions sufficient to support a Tucker Act claim.

The Advance Premium Tax Credit under the Affordable Care Act would likely be another “non-refund claim.” As with the EIPs, it is reconciled on the taxpayer’s tax return, but it is paid in advance pursuant to a clear money-mandating statute. Michelle Drumbl points out that the U.S. at one time had an advance earned income credit and other countries currently have similar advance credits. If Congress ever enacted her proposal for a transition to periodic payments rather than when the tax return is filed, that would likely also qualify as a “non-refund claim.”

What about refundable credits that are not paid in advance? That might be a harder argument to make; it’s not clear whether there is a money-mandating provision other than section 6402(a), working with section 6401(b)(1). But “hard” doesn’t always mean “impossible.” I haven’t researched enough to know whether a taxpayer has ever tried filing suit for payment of refundable credits based on the little Tucker Act instead of § 1346(a)(1). It might be the only route for recovery for a taxpayer who filed a return claiming a refund (based on a refundable credit) more than three years after the due date. The six-year statute of limitations for a little Tucker Act suit might avoid the problem of the “look back” limitation of section 6511(b)(2). It might be worth a try if you have a client with the right facts.

After all, ten months ago we weren’t sure the government would convince a court that stand-alone overpayment interest suits are “non-refund claims” for which district court jurisdiction is only available under the little Tucker Act. Now, the government has won in the Second and Federal Circuits and seems to have momentum heading into the Eleventh Circuit.

Postscript

While I was working on this post, Jack Townsend posted on his blog concerning the Federal Circuit’s decision in Bank of America.  Jack’s observations are always worth reading.

Another Aftershock from Pfizer

Guest blogger Bob Probasco brings us a brief update on overpayment interest litigation. Christine

I have been writing here over the last year or so about concerning the issue of whether district courts have jurisdiction under 28 U.S.C. § 1346(a)(1) over standalone suits for additional interest on refunds under Section 6611. If so, there is no limit on the amount of the taxpayer’s claim. If instead jurisdiction over these suits falls under § 1346(a)(2), the “little” Tucker Act, it is limited to claims of $10,000 or less. As a result, taxpayers with significant claims would be forced to litigate in the Court of Federal Claims. The government believes these significant claims for overpayment interest should be litigated in the CFC. Some taxpayer prefers district court, often to either benefit from a favorable precedent in the applicable circuit court or to avoid an unfavorable precedent in the Federal Circuit.

Before September of this year, only one Circuit Court of Appeals had decided this issue. In E.W. Scripps Co. v. United States, 420 F.3d 589 (6th Cir. 2005), the court concluded that § 1346(a)(1) does grant jurisdiction for district courts over standalone suits for overpayment interest. Although the government (and several tax practitioners) disagree with the Scripps case, that was the majority consensus. See Bank of America Corp. v. United States, 2019 U.S. Dist. LEXIS 109238 (W.D.N.C. 2019) (collecting cases), which I discussed here. But then on September 16th this year, in Pfizer v. United States, 939 F.3d 173 (2d Cir. 2019), the court held that § 1346(a)(1) does not cover these suits. I discussed that decision here.

The Pfizer decision by the Second Circuit was a significant milestone, creating a circuit split. Pfizer also is having an impact on other courts considering the issue. In that October blog post, I mentioned that, three weeks after the Second Circuit’s decision in Pfizer, a district court followed Pfizer and decided that it did not have jurisdiction for an overpayment interest suit under § 1346(a)(1). That case was Estate of Culver v. United States, 2019 U.S. Dist. LEXIS 173235 (D. Colo. 2019), which resulted in a transfer to the Court of Federal Claims. Now the Southern District of Florida has ruled on the issue as well, in the Paresky case.

When I last discussed the Paresky case, the magistrate judge had issued her report and recommendation on August 30, 2019, concluding that § 1346(a)(1) does provide district court jurisdiction for that suit. The Second Circuit’s decision in Pfizer came out on September 16, 2019. And on October 21, 2019, the district court judge in the Paresky case issued her order, rejecting the magistrate judge’s recommendation and following Pfizer.

read more...

The Paresky case was originally filed in the Court of Federal Claims, which found it lacked jurisdiction because the complaint was filed too late and transferred the case to the SDF. So, instead of transferring the case as in Estate of Culver, the SDF dismissed it. The Pareskys have no forum remaining and are out of luck unless they successfully appeal the decision.

The statute states that district courts have jurisdiction of:

Any civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws.

Litigants sometimes argue over the meaning of “recovery” – is that limited to something that has been collected and the taxpayer seeks to get back? (If so, overpayment interest would not qualify, but courts have relied on alternative definitions.) But most of the argument concerns how overpayment interest might fit into one of the three categories in the statute – (1) tax erroneously or illegally assessed or collected; (2) any penalty collected without authority; or (3) any sum that was excessive or wrongfully collected. Overpayment interest is neither tax nor penalty; it is simply an amount owed by the government for its use of the taxpayer’s money.

Scripps concluded that “any sum” could include overpayment interest and that the sum was “excessive” because the government retained more of the taxpayer’s money than it should have by refunding the overpayment with no, or insufficient, interest. It supported that conclusion in part by a brief reference in Flora v. United States, 362 U.S. 145 (1960), stating that “any sum” could encompass interest. The district court in Pfizer and the magistrate judge in Paresky agreed with Scripps.

The Second Circuit disagreed with that analysis in Pfizer, calling the Scripps interpretation of “any sum alleged to have been excessive” a strained reading, and concluding that the reference in Flora was properly understood to concern deficiency interest rather than overpayment interest. (The two types of interest are treated very differently.) The district court judges in both Estate of Culver and Paresky found that more persuasive than Scripps.

As I mentioned in a previous post, most large dollar interest cases (both underpayment interest and overpayment interest), at least through 2014, were filed in the CFC rather than district court. That may have changed, as a body of precedent built up in the Federal Circuit and taxpayers tried to avoid it (as in Bank of America) or just preferred precedents in other circuits (as in Pfizer). The government is still vigorously arguing that § 1346(a)(1) does not cover standalone suits for standalone suits for additional overpayment interest. As anticipated, when the government filed its opening brief in its appeal of the Bank of America case to the Federal Circuit on November 4th, it mentioned Pfizer, Paresky, and Estate of Culver frequently.

Before Pfizer, there was an overwhelming majority consensus on this issue. But the number of cases that directly addressed it was relatively small. Sometimes an overwhelming majority can melt away quickly after just one circuit court reaches an opposite conclusion. It will be interesting to see over the next year or two if that occurs with this issue. There may be several opportunities. The Pareskys can appeal this latest ruling to the Eleventh Circuit; the Bank of America case is currently on appeal to the Federal Circuit; the Estate of Culver case might wind up in the Federal Circuit as well; and Pfizer could try to challenge the Second Circuit’s decision in the Supreme Court.

 

Overpayment Interest – Is the Tide Turning?, Part One

Today Bob Probasco returns with further updates on overpayment interest litigation, in a two-part post. We are grateful to Bob for following the issue closely and sharing his observations with us. Christine

In August, I wrote about the Bank of America case (here and here), and provided updates on the status of the Pfizer and Paresky cases, all of which addressed the question of district court jurisdiction for taxpayer suits seeking interest payable to them by the government on tax refunds.  Recently we’ve had developments in all three cases, plus one new case.  This post will cover Paresky and Pfizer.  Part Two will move on to Bank of America, speculation concerning where this issue may head next, and some general observations about jurisdiction and policy considerations.

Setting the stage

There are two district court jurisdictional statutes at issue in these cases. This first is 28 U.S.C. § 1346(a)(1). It has no dollar limitation. That’s the statute we rely on when filing tax refund suits in district court, so I usually refer to it as “tax refund jurisdiction.” However, some taxpayers argue that this provision also covers suits for overpayment interest, although technically those are not refund suits.  The government strongly opposes that interpretation and we’ve seen a lot of litigation over the issue recently.

The second is § 1346(a)(2), which provides jurisdiction for any other claim against the United States “founded either upon the Constitution, or any Act of Congress, or any regulation of an executive department . . . .” This is commonly referred to as “Tucker Act jurisdiction” and for district courts is limited to claims of $10,000 or less. The comparable jurisdictional statute for the Court of Federal Claims, § 1491(a)(1), has no such dollar limitation.  Practitioners often refer to § 1346(a)(2) as the “little” Tucker Act.

read more...

There are also two different statutes of limitation potentially applicable. The general federal statute of limitations, § 2401 (for district courts or § 2501 for the Court of Federal Claims), requires that complaints be filed within six years after the right of action first accrues. In the Code, section 6532(a)(1) requires the taxpayer to file a refund suit no later than two years after the claim is disallowed.

A preliminary decision in Paresky

In the interest of space, I’ll just refer you back to the earlier blog post for the factual background on Paresky.  The taxpayers originally filed in the Court of Federal Claims (CFC).  That court concluded that it did not have jurisdiction over the suit because the applicable six-year statute of limitations in § 2501 began running in 2010 and had expired.  The Pareskys had previously requested that the court transfer the suit to the Southern District of Florida (SDF), in response to the government’s motion to dismiss, and the CFC agreed.  That would allow the Pareskys to try to persuade the SDF that § 1346(a)(1) covers claims for overpayment interest and that the two-year statute of limitations in section 6532(a)(1) applies.

After the transfer, the government quickly filed a motion to dismiss for lack of jurisdiction, arguing that § 1346(a)(1) did not apply and that the Pareskys’ claim exceeded the $10,000 limit for jurisdiction under the “little” Tucker Act.  On August 30, 2019, the magistrate judge issued her report and recommendation.  The report agreed with the Pareskys that § 1346(a)(1) covers claims for overpayment interest but also agreed with the government that taxpayers have to file an administrative refund claim within the time limitations set forth in the Code.  They had done so timely for the 2007 tax year but not for the earlier years.  The Pareskys argued for equitable estoppel based on the directions they had received from IRS personnel, but the judge was not convinced.  She concluded that equitable estoppel for the timely refund claim requirement is not available, based on the decision in United States v. Brockamp, 519 U.S. 347 (1997).  Technically, Brockamp involved an equitable tolling claim but the judge quoted a statement in the decision that suggested application to any equitable doctrines.

This is still a preliminary decision, not yet adopted by the district court judge in the case.  Both parties filed objections (on different grounds) to the report and recommendation on September 10, 2019; both parties filed a response to the other side’s objections on September 19, 2019; and the government then filed a reply on October 7th.  We’re still waiting to hear from the district court judge.  That decision may be complicated by the development in our next case.

A new decision in Pfizer

The IRS mailed refund checks to Pfizer within the 45-day safe harbor of section 6611(e).  The checks were never received, and the IRS eventually direct deposited a replacement approximately a year later, without overpayment interest.  The IRS takes the position that when the original refund check is issued timely but never received, the replacement refund still falls within section 6611(e).  (Some exceptions to this position are set forth in I.R.M 20.2.4.7.3.) Pfizer filed suit in the Southern District of New York (SDNY), asserting jurisdiction under § 1346(a)(1) to take advantage of the favorable Doolin v. United States, 918 F.2d 15 (2d Cir. 1990) precedent on the issue of interest on replacement refund checks. The government filed a motion to dismiss for lack of jurisdiction, arguing that district courts only have jurisdiction for standalone suits for overpayment interest under the “little” Tucker Act but the amount at issue exceeded the $10,000 limit. The court agreed with Pfizer and denied that motion to dismiss.  The court granted a second motion to dismiss, because the refund statute of limitations under section 6532(a)(1) had expired before suit was filed.  Pfizer argued that the general six-year statute of limitations in § 2401 applied.  But the court agreed with the government regarding the statute of limitations and dismissed the case.

In the first motion to dismiss, Pfizer requested that the case be transferred to the Court of Federal Claims (CFC) if the motion to dismiss were granted.  That was denied when the SDNY ruled that it had jurisdiction under § 1346(a)(1).  In the second motion to dismiss, Pfizer did not make the same request for transfer.  The government also did not recommend transfer.  But on appeal, Pfizer asked that the Second Circuit, if it affirmed the decision by the SDNY, transfer the case.  That would allow the case to proceed, as suit was filed within the six-year general statute of limitations for Tucker Act claims, although the Second Circuit precedent Pfizer wanted to rely on would not be binding in the CFC.  

The government argued that if the Second Circuit concluded that § 1346(a)(1) applies to suits for overpayment interest but affirmed the SDNY because of the statute of limitations issue, it should not transfer the case because it was not timely when originally filed in the SDNY.  This struck me as over-reaching.  The CFC does not apply the Code statute of limitations to these cases and under the CFC’s jurisdictional statute (more discussion below), it would have been timely filed.   The argument that transfer would not be in the interests of justice because Pfizer had successfully resisted transfer under the first motion of dismiss might carry more weight.  In any event, the government said that it would not oppose transfer if the Second Circuit concluded that § 1346(a)(1) does not apply to suits for overpayment interest.  That is the result the government was hoping for.

On September 16, 2019, the Second Circuit ruled – and the government got exactly what it was hoping for.  The court disagreed completely with the analysis by the district court and in E.W. Scripps Co. v. United States, 420 F.3d 589 (6th Cir. 2005).  The text in § 1346(a)(1) that those decisions relied on – “a sum alleged to have been excessive or in any manner wrongfully collected” – did not apply to suits for overpayment interest.  Read in harmony with the rest of the statute, that would “plainly refer to amounts the taxpayer has previously paid to the government and which the taxpayer now seeks to recover.”  Further, “any sum alleged to have been excessive or in any manner wrongfully collected” is written in present-perfect tense, indicating that “excessive” or “wrongfully collected” occurred in the past, that is, an assessment previously paid by the taxpayer.  Finally, dicta in Flora v. United States, 362 U.S. 145 (1960), stating that “any sum” would encompass interest, was clearly referring to underpayment interest based on the context.  The Second Circuit therefore transferred the case to the CFC.

Judge Lohier filed a concurrence to point out that if the district court had jurisdiction under § 1346(a)(1), it would have been subject to the Code statute of limitations and Pfizer would have lost anyway.  He rejected Pfizer’s attempt to disassociate § 1346(a)(1) and section 7422 of the Code.  Keith and Carl had filed an amicus brief arguing that even if the filing deadline in section 6532(a) applies, it is not jurisdictional and is subject to estoppel or equitable tolling arguments.  The judge rejected equitable tolling in a footnote due to the lack of an “extraordinary circumstance” but did not mention estoppel.  But it’s a footnote in a concurrence, so this is still an open question.

I found the statutory interpretation in this decision much more persuasive than that in Scripps, although the statute may be sufficiently ambiguous that other courts could reasonably disagree.  In any event, this is a significant milestone.  Before Pfizer, Scripps was the only other Circuit Court decision to have directly ruled on this issue.  (Sunoco, Inc. v. Commissioner, 663 F.3d 181, 190 (3d Cir. 2011) suggested the same interpretation, but that was dicta.)

What effect will this have on other cases?  On October 7th, in Estate of Culver v. United States, the district court for the District of Colorado also adopted the reasoning of the Second Circuit and transferred that case to the CFC.  Even district court decisions disagreeing with Scripps have been rare, so this may also be a sign that the tide is turning.  As with Bank of America, an immediate appeal of that order would go to the Federal Circuit.

As one might expect, the government quickly brought the Pfizer decision (on September 18th) and the Culver decision (October 7th) to the attention of the SDF in the Paresky case.  If the district court judge is influenced by Pfizer and rejects the magistrate judge’s report and recommendation, the Pareskys may have to appeal to the Eleventh Circuit and hope that court agrees with Scripps

It will be a while before we see what effect, if any, Pfizer has in the Bank of America case, where there has also been a new development.  I’ll turn to that in Part Two.