Sunoco, Inc. v. United States
128 Fed. Cl. 345
| Fed. Cl. | 2016Background
- Sunoco blended ethanol into fuel and claimed the alcohol fuel mixture excise tax credit under 26 U.S.C. § 6426(b); the question is whether that credit must be treated as a reduction of excise tax when computing income-tax deductions (i.e., whether taxpayers must use net excise tax after credits).
- The IRS issued inconsistent internal guidance: a 2013 Chief Counsel Advisory (non‑precedential) said similar credits were not gross income; a 2014 CCA (non‑precedential) reversed, treating the credit as reducing deductible excise tax.
- After Sunoco filed suit, the IRS issued Notice 2015‑56 (a precedential notice) siding with the 2014 CCA and requiring reduction of excise tax for income‑tax deduction purposes.
- Sunoco sought internal IRS documents to show Notice 2015‑56 should not receive Skidmore deference; the Government resisted as irrelevant and privileged.
- The Court analyzed whether Notice 2015‑56 merits Skidmore deference and whether the requested documents were necessary to resolve that question.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether IRS Notice 2015‑56 is entitled to Skidmore deference | Notice conflicts with IRS’s earlier (2013) guidance and was issued while IRS was litigating, so it lacks persuasive weight; internal documents would show lack of thoroughness | Notice is the IRS’s binding guidance and should be considered; internal documents are irrelevant or privileged | Court held Notice 2015‑56 is not entitled to Skidmore deference (timing, inconsistency, lack of supporting authority) |
| Whether Sunoco’s motion to compel IRS internal documents is justified | Documents are needed to demonstrate the Notice’s lack of persuasiveness and to support denial of deference | Documents are irrelevant to the deference question and are protected by deliberative process and attorney‑client privileges | Motion to compel denied as moot because the Court ruled the Notice lacks Skidmore deference and the documents were unnecessary |
Key Cases Cited
- Skidmore v. Swift, 323 U.S. 134 (1944) (agency interpretations may merit respect based on persuasiveness and consistency)
- Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (framework for deference when agency has rulemaking authority)
- United States v. Mead Corp., 533 U.S. 218 (2001) (scope of deference depends on agency action and authority)
- AMP Inc. v. United States, 185 F.3d 1333 (Fed. Cir. 1999) (revenue rulings issued while IRS is preparing or engaged in litigation may be self‑serving and undeserving of deference)