Affordable Bio Feedstock, Inc. v. United States
| Decision Date | 29 March 2021 |
| Docket Number | Case No. 6:19-cv-1835-PGB-DCI |
| Citation | 529 F.Supp.3d 1298 |
| Parties | AFFORDABLE BIO FEEDSTOCK, INC. and Affordable Bio Feedstock of Port Charlotte, LLC, Plaintiffs, v. UNITED STATES of America, Defendant. |
| Court | U.S. District Court — Middle District of Florida |
David P. Hathaway, Dean, Mead, Egerton, Bloodworth, Capouano & Bozarth, PA, Amy Lynn Judkins, Normand PLLC, Orlando, FL, Peter A. Lowy, Pro Hac Vice, Chamberlain Hrdlicka White Williams & Aughtry, Houston, TX, for Plaintiffs.
Gregory L. Jones, Matthew S. Johnshoy, Michael W. May, US Department of Justice - Tax Division, Washington, DC, for Defendant.
This cause comes before the Court on the following motions and related filings:
Upon consideration, Plaintiffs’ Motion is due to be denied, and Defendant's Motion is due to be granted.
26 U.S.C. § 4041(a)(2) imposes an excise tax against those engaged in certain activities involving alternative fuels. Section 4101(a) requires taxpayers to register for this alternative fuel excise tax in accordance with Internal Revenue Service ("IRS ") regulations.
To register, a taxpayer must submit a Form 637 Application for Registration for Certain Excise Activities ("Form 637 ") to the IRS. Treas. Reg. § 48.4101-1(e) ; (Doc. 46, ¶ 9). The Form 637 includes a list of "activity letters." (See Doc. 45-11). Each activity letter corresponds with a discrete category of conduct regulated by the alternative fuel excise tax. The applicant reports its current or future activities by selecting the pertinent "activity letter" from the list.
Upon receipt of the Form 637, an agent from the IRS's Excise Tax Group performs an Initial Compliance Review ("ICR ") to determine whether the applicant's delineated current or future activities require (or permit) registration for the alternative fuel excise tax. § 48.4101-1(c) – (e), (f)(2) ; (Doc. 46, ¶¶ 12–18). If the ICR demonstrates that the applicant qualifies for alternative fuel excise tax registration, then, after review of the agent's recommendation, the Chief of the Excise Tax Group—also known as the District Director—approves the Form 637 and registers the applicant for the specified activity letter. (Doc. 46, ¶¶ 12–22; see Docs. 45-8, 45-9).
Registration for the "AL" activity letter is essential to claim the alternative fuel excise tax credit authorized by 26 U.S.C. § 6426(d). (Doc. 45, pp. 7–10, ¶¶ 8–16; Doc. 46, ¶ 13; Doc. 54, p. 5). Section 6426(d) awards this credit to AL activity letter registrants who sell alternative fuel for use as a fuel in a motor vehicle or motorboat. The credit applies only against and to the extent of a registrant's alternative fuel excise tax liability. § 6426(a)(2) ; (Doc. 45, pp. 8–9, ¶¶ 14–15).1
AL activity letter registrants usually claim this generally non-refundable alternative fuel excise tax credit by filing a Form 720 Quarterly Federal Excise Tax Return ("Form 720 "). (Doc. 45, pp. 6, 9, ¶¶ 6, 14 n. 8; Doc. 46, ¶ 24). However, in the 2015 tax period, the IRS allowed AL activity letter registrants to claim the credit on a Form 8849 Claim for Refund of Excise Taxes ("Form 8849 "), which usually only applies to § 6427(e). (Doc. 45, pp. 6, 9, ¶¶ 6, 14 n. 8).
Section 6427(e) authorizes an alternative fuel excise tax credit for alternative fuel excise tax registrants—including AL activity letter registrants—who sell or use an alternative fuel in accordance with § 6426(d). This credit is refundable, which allows one in excess of its alternative fuel excise tax liability to receive a refund. § 6427(e)(2).
If a refund made pursuant to § 6427(e) constitutes an "excessive amount," then the IRS can assess and collect that payment as if the claiming entity was liable for the alternative fuel excise tax. § 6206. An "excessive amount" is the sum by which the claim exceeds the amount allowable. § 6675(b).
AL activity letter registration is only valid—and, accordingly, the alternative fuel tax credit, under either § 6426(d) or § 6427(e), is only available—if the Chief of the Excise Tax Group has issued the registration and has not revoked or suspended it. Treas. Reg. § 48.4101-1(a)(2). The Chief of the Excise Tax Group must revoke or suspend the AL activity letter registration if he "determines, at any time," that: (i) the registrant's alternative fuel activities do not qualify for registration, and it failed to correct the deficiencies within a reasonable period of time after notification; (ii) the registrant used the AL activity letter registration to evade, attempt to evade, postpone, interfere with, or make a fraudulent claim for credit or payment; (iii) the registrant aided or abetted another in evading, attempting to evade, postponing, interfering with, or making a fraudulent claim for credit or payment; or (iv) the registrant sold, leased, or otherwise allowed another to use its AL activity letter registration. § 48.4101-1(i)(1). "The effective date of the revocation or suspension may not be earlier than the date on which the district director notifies the registrant." § 48.4101-1(i)(3).
Plaintiffs Affordable Bio Feedstock, Inc. ("ABF "), and Affordable Bio Feedstock of Port Charlotte, LLC ("ABFPC "), acquired oil and food waste, or "brown grease," from restaurants and processed it for use as alternative fuel. (Doc. 46, ¶ 4). Plaintiffs’ business model contained two operational revenue streams: (1) brown grease haulers paid Plaintiffs to accept the waste, called a "tipping fee"; and (2) Plaintiffs sold the recycled brown grease product to Florida Biodiesel, who, in turn, sold the product primarily to Green Energy Group, a biofuel broker. (Id. ¶¶ 4–6).
On May 29, 2013, and June 13, 2013, Plaintiffs submitted their respective Form 637s to the IRS, requesting AL activity letter registrations. (Doc. 42-8; Doc. 42-9; Doc. 45-10; Doc. 45-11; Doc. 46, ¶¶ 11–12, 22). Subsequently, the Excise Tax Group conducted ICRs to determine whether Plaintiffs qualified as taxpayers who sell alternative fuel for use in motor vehicles or motorboats. (Doc. 46, ¶¶ 13–16, 22). Jim Wheatley, an IRS agent with 20 years of experience in the Excise Tax Group, conducted both ICRs and concluded that Plaintiffs’ activities qualified them for AL activity letter registration. (Id. ¶¶ 17, 19–22). On August 16, 2013, and September 26, 2013, respectively, Darryl Gilliam, the Chief of the Excise Tax Group, sent Plaintiffs signed letters informing them of the approval of their Form 637s’ requests for AL activity letter registrations. (Doc. 42-6; Doc. 42-7; Doc. 45-8; Doc. 45-9; Doc. 46, ¶¶ 21–23).
The AL activity letter registrations remained valid2 until 2016, when Plaintiffs filed separate Form 8849s that claimed refunds in alternative fuel excise tax credits. (Doc. 42-16; Doc. 45-24; Doc. 45-25; Doc. 46, ¶¶ 37–38). Specifically, Plaintiff ABF claimed $423,315 for 2015, and Plaintiff ABFPC claimed $42,112 for January 2016. (Doc. 46, ¶¶ 37–38). The IRS paid ABF's claim on March 22, 2016, and it paid ABFPC's claim on April 19, 2016. (Id. ). In October 2016, the IRS began auditing Plaintiffs for these claims. (Id. ¶¶ 37–38, 40).3
On January 25, 2018, Felicia Walker, the Chief of Estate, Gift, and Excise Tax Examination, sent Plaintiffs signed letters revoking their AL activity letter registrations, effective immediately. (Doc. 42-10; Doc. 42-11; Doc. 45-33; Doc. 45-34; Doc. 46, ¶ 44). On September 17, 2018, the IRS sought reimbursement of the paid alternative fuel tax credits as well as payment of interest and certain penalties. (Doc. 42-15; Doc. 42-18; Doc. 45-35; Doc. 45-36; Doc. 46, ¶ 43).
Plaintiffs—who had sold their assets to a third party in October 2017—returned, under protest, a divisible portion of the paid tax credits. (Doc. 46, ¶¶ 42, 45–46). ABF paid, under protest, $3,497.09, and then filed a Form 843 Claim for Refund and Request for Abatement ("Form 843 ") for this amount. (Doc. 42-13; Doc. 46, ¶¶ 46–47). ABFPC paid, under protest, $47,899.91, and likewise filed a Form 843 for this amount. (Doc. 46, ¶¶ 48–49). On September 23, 2019, Plaintiffs initiated this action, seeking refunds of the above sums. (Id. ¶ 50).
To prevail on a summary judgment motion, the movant must show "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a) ; see also Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The Court must "view the evidence and all factual inferences therefrom in the light most favorable to the non-moving party, and resolve all reasonable doubts about the facts in favor of the non-movant." Davila v. Gladden , 777 F.3d 1198, 1203 (11th Cir. 2015) (quoting Carter v. City of Melbourne , 731 F.3d 1161, 1166 (11th Cir. 2013) (per curiam)). Harrison v. Culliver , 746 F.3d 1288, 1298 (11th Cir. 2014). "A mere ‘scintilla’ of evidence supporting the opposing party's position will not suffice; there must be enough of a showing that the jury could reasonably find for that party." Brooks v. Cnty. Comm'n of Jefferson Cnty. , 446 F.3d 1160, 1162 (11th Cir. 2006) (quoting Walker v. Darby , 911 F.2d 1573, 1577 (11th Cir. 1990) ).
Notably, the parties stipulated that Plaintiffs’ qualifications for the alternative fuel excise tax credit is not a basis of recovery...
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Affordable Bio Feedstock, Inc. v. United States
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