Ford Motor Company v. United States
132 Fed. Cl. 104
| Fed. Cl. | 2017Background
- Ford Motor Company (Ford) formed and wholly owned Ford Export Services B.V. (Export), a Netherlands corporation that elected treatment as a Foreign Sales Corporation (FSC) and conducted export-related functions to obtain statutory tax benefits.
- Between 1990–1998 Export underpaid U.S. income taxes (all years except 1994); Ford overpaid in 1992. Ford paid Export’s tax liabilities to the IRS and prepared Export’s returns; IRS later credited Ford’s 1992 overpayment in June 2008 without applying interest netting under I.R.C. § 6621(d).
- Ford sought administrative relief requesting that § 6621(d)’s global interest netting apply because Ford and Export were the “same taxpayer”; the IRS denied two claims, finding they were separate taxpayers when the payments were made.
- Ford sued in the Court of Federal Claims seeking additional interest under I.R.C. § 6611 on the ground that § 6621(d) requires netting when overpayments and underpayments are by the same taxpayer.
- The dispositive legal question: whether Ford and Export were the “same taxpayer” under § 6621(d) for the period when the overpayment/underpayments occurred, such that the net interest rate would be zero.
- The court granted summary judgment to the government, holding Export had economic substance and a legitimate FSC purpose, and Ford/Export were separate taxpayers for § 6621(d) purposes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ford and Export are the "same taxpayer" under I.R.C. § 6621(d) | Ford: Export was a mere tax-favored "fiction"/extension of Ford (no independent economic substance); therefore netting should apply | U.S.: Export was a valid, substantive FSC that filed separate returns and should be respected as a separate taxpayer | Held: Ford and Export are separate taxpayers; § 6621(d) netting not available to Ford for Export's underpayments |
| Whether legislative purpose or remedial nature of § 6621(d) supports treating Export as Ford | Ford: remedial aim of § 6621(d) and policy favoring substance-over-form justify disregarding Export's corporate form | U.S.: Allowing Ford to reverse positions would undermine congressional FSC scheme and tax rules requiring separate treatment | Held: Legislative purpose does not override requirement to respect separate FSC entity; Ford cannot collaterally repudiate the FSC status it relied on |
| Whether precedent supports disregarding the corporate form here | Ford: cites exceptions where form may be ignored (sham, agency, owner-equivalence) | U.S.: Precedents (Moline, National Carbide) require substance and respect for corporate form absent sham; Energy East/Wells Fargo require identity at time of payments | Held: Precedents support treating Export as separate (not sham); identity at time of payments controls |
| Whether administrative actions/IRS internal memos bind result | Ford: IRS administrative handling (credits, abatement) indicates Ford effectively bore Export's liabilities; IRS memos support combined-liability view | U.S.: IRS practice and internal memos are not binding legal authority; credits were administrative corrections, not legal concessions | Held: IRS actions/memos do not change legal analysis; they do not establish that Ford and Export were the same taxpayer |
Key Cases Cited
- Boeing Co. v. United States, 537 U.S. 437 (2003) (background on DISC/FSC regimes)
- Energy E. Corp. v. United States, 645 F.3d 1358 (2011) (same-taxpayer inquiry focuses on identity at time of payments)
- Wells Fargo & Co. v. United States, 827 F.3d 1026 (2016) (Federal Circuit construing § 6621(d); merger/identity rules and remedial purpose)
- Moline Properties, Inc. v. Commissioner, 319 U.S. 436 (1943) (general rule respecting separate corporate entity; exceptions for sham or when statute requires disregard)
- National Carbide Corp. v. Commissioner, 336 U.S. 422 (1949) (reinforcing separate-tax-entity treatment of parent and subsidiary)
- Gregory v. Helvering, 293 U.S. 465 (1935) (substance-over-form principles in tax law)
- Commissioner v. Bollinger, 485 U.S. 340 (1988) (agency principles can, in limited circumstances, affect separate-entity tax treatment)
- Commissioner v. National Alfalfa Dehydrating & Milling Co., 417 U.S. 134 (1974) (taxpayer must accept tax consequences of chosen form)
- Addison Int’l, Inc. v. Commissioner, 887 F.2d 660 (6th Cir. 1989) (Congress intended DISC/FSC to be treated as separate entities for tax benefits)