Albemarle Corp. v. United States

• Decision Date: 20 October 2014
• Docket Number: No. 12-184T,12-184T
• Court: U.S. Claims Court
• Parties: ALBEMARLE CORPORATION & SUBSIDIARIES, Plaintiff, v. UNITED STATES, Defendant.

ALBEMARLE CORPORATION & SUBSIDIARIES, Plaintiff, v. UNITED STATES, Defendant.

No. 12-184T

United States Court of Federal Claims

Filed: September 19, 2014

October 20, 2014

Tax; Foreign Tax Credit, 26 U.S.C. § 901; Motion to Dismiss; Statute of Limitations.

Jerome B. Libin, Sutherland Asbill & Brennan LLP, Washington D.C, for the plaintiff. With him was Jeffrey N. Starkey, Sutherland Asbill & Brennan LLP, Washington D.C.

Benjamin C. King, Jr., Department of Justice, Tax Division, Court of Federal Claims Section, Washington, D.C., for the defendant. With him were David I. Pincus, Chief, Court of Federal Claims Section, and Kathryn Keneally, Assistant Attorney General, Tax Division, United States Department of Justice. Barbara A. Felker, Internal Revenue Service, Washington, D.C., of counsel.

OPINION

HORN, J.

FINDINGS OF FACT

Plaintiff, Albemarle Corporation & Subsidiaries (Albemarle), filed a complaint in the United States Court of Federal Claims, seeking a tax refund in the amount of $825,846.00, plus interest, for taxes paid in the 1997 tax year and 1998 tax year. Plaintiff alleges that the Internal Revenue Service (IRS) incorrectly disallowed plaintiff's refund claims for foreign tax credits related to its Belgian subsidiary.

On December 31, 1996, a Belgian subsidiary of Albemarle,¹ Albemarle S.A.,² issued registered debentures to Albemarle and "other members of the Albemarle Consolidated Group." The debentures provided for semi-annual interest payments at a rate of 6.8% per annum. Albemarle S.A. paid interest each year on the debentures between 1997-2001, although only 1997 and 1998 are at issue in the above captioned case. Albemarle S.A. did not pay any Belgian withholding tax with regard to the interest payments on the debentures prior to October 22, 2001 because Albemarle S.A. believed that the interest payments made on the debentures were exempt from Belgian withholding tax. Plaintiff filed its 1997 United States tax return on September 15, 1998 and its 1998 United States tax return on September 15, 1999.³ As indicated in plaintiff's complaint, "[p]laintiff paid the tax shown on each return within the time prescribed by law."

On October 22, 2001, the Belgian tax authorities issued a notice of adjustment to Albemarle S.A. for the tax years 1996 through 1998. The notice of adjustment provided that debenture interest payments made by Albemarle S.A. during 1997 and 1998 were subject to Belgian withholding tax at the statutory rate of 25%. On December 3, 2001, Albemarle S.A. submitted a written protest of the notice of adjustment. On January 31, 2002, Albemarle S.A. and the Belgian tax authorities reached an agreement pursuant to which Albemarle S.A. would pay the Belgian withholding taxes at a tax rate of 15%⁴ on the debenture interest payments it had made in 1997-2001. After the settlement agreement was finalized, Albemarle S.A. made full payment to the Belgian tax authorities in the amount of $1,416,740.00 on January 31, 2002 and August 29, 2002. That total was allocated to each of the tax years 1997-2001 as follows: $412,923.00 for 1997, $412,923.00 for 1998, $412,923.00 for 1999, $111,897.00 for 2000, and $66,074.00 for 2001.

On May 15, 2009, seven years after the Belgian withholding taxes were paid by Albemarle S.A., plaintiff filed with the United States IRS "an administrative refund claim in the form of an amended consolidated income tax return (Form 1120-X) for the 2002 tax year."⁵ Although the settlement with the Belgian tax authorities was finalized, and the taxes were paid, in 2002, plaintiff did not file protective refund claims for the tax years at issue.⁶ The tax return sought a refund in the amount of $961,841.00, plus interest, reflecting a claim for $1,416,740.00 in foreign tax credits attributable to the Belgian withholding taxes paid pursuant to the agreement with the Belgian tax authorities. After filing, plaintiff and the IRS agreed that the 2002 amended income tax return constituted claims for plaintiff's 1997, 1998, 1999, 2000, and 2001 tax years. Relevant to the above captioned case, based on the Belgian withholding tax plaintiff paid in 2002, plaintiff claimed entitlement to a foreign tax credit for the 1997 tax year in the amount of $412,923.00, and to a foreign tax credit for the 1998 tax year, also in the amount of $412,923.00.

Although permitting plaintiff's refund claims for tax years 1999, 2000, and 2001, on January 20, 2012, the IRS disallowed plaintiff's 1997 and 1998 tax refund claims because the IRS indicated that 1997 and 1998 tax refund claims were not filed within the period set forth in 26 U.S.C. § 6511(d)(3)(A) (2012) for filing a claim seeking a refund based on a foreign tax credit.⁷ The IRS determined that to be timely, plaintiff's 1997 refund claim should have been filed on or before March 15, 2008, and its 1998 refund claim should have been filed on or before March 15, 2009.

After the IRS disallowed the 1997 and 1998 tax refund claims, plaintiff timely filed suit in this court, seeking a refund of $825,846.00, plus interest for taxes paid for its1997 tax year and 1998 tax year. Specifically, plaintiff seeks a refund in the amount of $412,923.00 for the 1997 tax year, and a refund for the 1998 tax year in the amount of $412,923.00. Plaintiff argues that, although the Belgian taxes actually accrued in 2002, they should be deemed to have accrued in 1997 and 1998 for the purposes of claiming the foreign tax credit. Therefore, plaintiff contends that "Albemarle's 1997 and 1998 refund claims were timely filed within the period of limitations prescribed by section 6511(d)(3)(A). Accordingly, this Court has jurisdiction over the complaint filed in this case." In response, defendant filed a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(6) (2014) of the Rules of the United States Court of Federal Claims (RCFC). In the government's motion to dismiss, the defendant states that the "[d]efendant's motion is based on the facts alleged in the complaint. Defendant contends that even if those alleged facts are true, they do not establish that this Court has subject matter jurisdiction over the claims in issue."⁸ Defendant alleges that this court lacks subject matter jurisdiction "because the refund claims for 1997 and 1998, based on credits for foreign taxes that accrued in those years, were filed beyond the period in 26 U.S.C. § 6511(d)(3) for filing a claim for refund based on a foreign tax credit." Defendant argues that "a contested foreign tax accrues in the tax year to which the tax relates, not in the year when the contest is resolved and the foreign tax is paid," (citing Revenue Ruling 84-125) and because the refund claims relate back to the 1997 and 1998 tax years, by filing its claim for refund on May 15, 2009, plaintiff's claims were untimely.

DISCUSSION

It is well established that "'subject-matter jurisdiction, because it involves a court's power to hear a case, can never be forfeited or waived.'" Arbaugh v. Y & H Corp., 546 U.S. 500, 514 (2012) (quoting United States v. Cotton, 535 U.S. 625, 630 (2002)). "[F]ederal courts have an independent obligation to ensure that they do not exceed the scope of their jurisdiction, and therefore they must raise and decide jurisdictional questions that the parties either overlook or elect not to press." Henderson ex rel. Henderson v. Shinseki, 131 S. Ct. 1197, 1202 (2011); see also Hertz Corp. v. Friend, 559 U.S. 77, 94 (2010) ("Courts have an independent obligation to determine whether subject-matter jurisdiction exists, even when no party challenges it." (citing Arbaugh v. Y & H Corp., 546 U.S. at 514)); Special Devices, Inc. v. OEA, Inc., 269 F.3d 1340, 1342 (Fed. Cir. 2001) ("[A] court has a duty to inquire into its jurisdiction to hear and decide a case." (citing Johannsen v. Pay Less Drug Stores N.W., Inc., 918 F.2d 160, 161 (Fed. Cir. 1990))); View Eng'g, Inc. v. Robotic Vision Sys., Inc., 115 F.3d 962, 963 (Fed. Cir. 1997) ("[C]ourts must always look to their jurisdiction, whether the parties raise the issue or not."). "The objection that a federal court lacks subject-matter jurisdiction . . . may be raised by a party, or by a court on its own initiative, at any stage in the litigation, even after trial and the entry of judgment." Arbaugh v. Y & H Corp., 546U.S. at 506; see also Cent. Pines Land Co., L.L.C. v. United States, 697 F.3d 1360, 1364 n.1 (Fed. Cir. 2012) ("An objection to a court's subject matter jurisdiction can be raised by any party or the court at any stage of litigation, including after trial and the entry of judgment." (citing Arbaugh v. Y & H Corp., 546 U.S. at 506)); Rick's Mushroom Serv., Inc. v. United States, 521 F.3d 1338, 1346 (Fed. Cir. 2008) ("[A]ny party may challenge, or the court may raise sua sponte, subject matter jurisdiction at any time." (citing Arbaugh v. Y & H Corp., 546 U.S. at 506; Folden v. United States, 379 F.3d 1344, 1354 (Fed. Cir.), reh'g and reh'g en banc denied (Fed. Cir. 2004), cert. denied, 545 U.S. 1127 (2005); and Fanning, Phillips & Molnar v. West, 160 F.3d 717, 720 (Fed. Cir. 1998))); Mata v. United States, No. 09-796C, 2014 WL 4380046, at *3 (Fed. Cl. Sept. 3, 2014). In fact, "[s]ubject matter jurisdiction is an inquiry that this court must raise sua sponte, even where . . . neither party has raised this issue." Metabolite Labs., Inc. v. Lab. Corp. of Am. Holdings, 370 F.3d 1354, 1369 (Fed. Cir.) (citing Textile Prods., Inc. v. Mead Corp., 134 F.3d 1481, 1485 (Fed. Cir.), reh'g denied and en banc suggestion declined (Fed. Cir.), cert. denied, 525 U.S. 826 (1998)), reh'g and reh'g en banc denied (Fed. Cir. 2004), cert. granted in part sub. nom Lab. Corp. of Am. Holdings v. Metabolite Labs., Inc., 546 U.S. 975 (2005), cert. dismissed as improvidently granted, 548 U.S. 124 (2006).

Pursuant to the RCFC and the Federal Rules of Civil Procedure, a plaintiff need only state in the complaint "a short and plain statement of the grounds for the court's...