Exxon Mobil Corp. & Affiliated Cos. v. Commissioner
689 F.3d 191
2d Cir.2012Background
- Exxon Mobil and affiliates challenged IRS retrospective global interest netting for overlapping periods 1975–1980.
- Tax Court held the uncodified special rule allows retrospective netting when at least one leg’s period of limitation is open.
- Commissioner argued the special rule is a sovereign-immunity waiver requiring strict construction in the government’s favor.
- Court of Appeals for the Second Circuit agreed the rule is ambiguous but favored broad application based on structure and context.
- Tax Court and the Appellate Court rejected deference to Revenue Procedure 99-43 and the Blue Book on this issue.
- Court affirmatively held retrospective global interest netting may apply when at least one limitations period remains open for overlapping periods.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is retrospective global netting permissible when only one leg remains open? | Exxon contends one open leg suffices under the special rule. | Commissioner contends both legs must be open as of 1998 for the rule to apply. | Yes; at least one leg open is sufficient. |
| Does the special rule waive sovereign immunity and require strict construction? | Exxon argues no sovereign-immunity waiver; broad remedial purpose. | Commissioner argues it is a sovereign-immunity waiver needing strict construction. | No; not a sovereign-immunity waiver requiring strict construction. |
| Are Revenue Procedure 99-43 and the Blue Book entitled to deference in interpretive matters? | Exxon would rely on guidance that supports broader netting. | Commissioner seeks deference to agency/official interpretations. | They are not entitled to Chevron deference; limited Skidmore consideration. |
| What is the proper interpretation of the structure and purpose of § 6621(d) and the special rule? | Retrospective netting aligns with remedial purpose to erase inequities. | Interpretation should be narrow due to limitations and administrative ease concerns. | Broader interpretation consistent with remedial purpose and administrative context. |
Key Cases Cited
- Fed. Nat. Mortgage Ass’n v. United States, 379 F.3d 1303 (Fed. Cir. 2004) (addressed sovereign immunity and special-rule interpretation)
- Fed. Nat’l Mortg. Ass’n v. United States, 56 Fed. Cl. 228 (2003) (predecessor opinions on Blue Book interpretation)
- United States v. Mead Corp., 533 U.S. 218 (S. Ct. 2001) (Chevron deference framework for agency interpretations)
- United States v. Merriam, 263 U.S. 179 (1923) (doubtful tax-language doubt favors taxpayer)
- Gomez-Perez v. Potter, 553 U.S. 474 (S. Ct. 2008) (solicitude re sovereign-immunity waivers and related statutes)