Sunoco, Inc. v. United States
908 F.3d 710
| Fed. Cir. | 2018Background
- Sunoco blended ethanol with gasoline and claimed the §6426 alcohol fuel mixture credit for 2005–2008, applying it against its §4081 gasoline excise-tax liability on consolidated returns.
- After initially reducing excise-tax liability, Sunoco later sought refunds arguing it should have deducted the full excise tax as cost of goods sold and treated the mixture credit as tax-free payment/income.
- The IRS denied Sunoco’s refund claims; Sunoco sued in the Court of Federal Claims seeking recovery of over $300 million.
- The Government argued the Jobs Act created a bifurcated scheme: (1) the §6426 mixture credit reduces §4081 excise-tax liability; (2) any excess credit is paid interest-free under §6427(e); credits applied against §4081 thus become taxable to the extent they offset tax liability.
- The Court of Federal Claims granted the Government’s Rule 12(c) motion; Sunoco appealed to the Federal Circuit.
- The Federal Circuit affirmed, holding the mixture credit must first offset §4081 excise-tax liability, and only credit amounts exceeding that liability become refundable payments under §6427(e).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the §6426 alcohol fuel mixture credit is automatically a tax-free payment or must first reduce §4081 excise-tax liability | Sunoco: The mixture credit is a tax-free direct payment; excise-tax liability remains deductible as a cost of goods sold | United States: The statute requires a two-step approach — credit first offsets §4081 liability; only any excess is paid under §6427(e) | The credit is a reduction of §4081 liability; any excess is paid under §6427(e) |
| Whether applying the credit to excise-tax liability prevents double tax benefit (offset + deduction) | Sunoco: Claiming full excise-tax deduction plus keeping the credit is permitted | United States: Allowing both would permit impermissible double benefit and contradict statutory scheme | Court rejects double benefit; credit offsets liability before any refundable payment |
| Whether statutory text or legislative history supports Sunoco’s reading | Sunoco: Legislative history indicates the credit is treated as a payment at taxable event | United States: Statutory text (§6426, §6427(e), §9503) and other parts of conference report show credit reduces excise liability first | Plain statutory text and legislative history support Government’s interpretation |
| Whether IRS guidance (Notice 2015-56) is entitled to deference in resolving ambiguity | Sunoco: IRS notice supports applying credits only after excise liability determination; contested | United States: IRS position aligns with statutory structure; court may rely on textual analysis | Court interprets statute de novo and affirms the IRS reading; notice not dispositive but consistent |
Key Cases Cited
- Robinson v. Shell Oil Co., 519 U.S. 337 (statutory interpretation starts with plain text)
- United States v. Ron Pair Enters., Inc., 489 U.S. 235 (textual clarity ends inquiry)
- Conn. Nat’l Bank v. Germain, 503 U.S. 249 (statutory language controls interpretation)
- TRW Inc. v. Andrews, 534 U.S. 19 (avoid superfluous statutory language)
- Randall v. Loftsgaarden, 478 U.S. 647 (tax credit reduces taxes otherwise payable)
- Schaeffler v. United States, 889 F.3d 238 (credit vs payment distinction in tax context)
- Sharp v. United States, 580 F.3d 1234 (legislative history must show extraordinary contrary intent to overcome plain text)
- Glaxo Operations UK Ltd. v. Quigg, 894 F.2d 392 (use of legislative history limited when text is plain)