Bombardier Aerospace Corp. v. United States, Civil Action No. 3:12–CV–1586–D.
| Decision Date | 20 March 2015 |
| Docket Number | Civil Action No. 3:12–CV–1586–D. |
| Citation | 94 F.Supp.3d 816 |
| Parties | BOMBARDIER AEROSPACE CORPORATION, Plaintiff-counterdefendant, v. UNITED STATES of America, Defendant-counterplaintiff. |
| Court | U.S. District Court — Northern District of Texas |
Nicholas D. Mosser, James C. Mosser, Mosser Law PLLC, Dallas, TX, Robert J. Stientjes, Stientjes & Tolu LLC, St. Louis, MO, Anthony S. Gasaway, Durango, CO, for Plaintiff-counterdefendant.
Michael D. Powell, Curtis C. Smith, U.S. Department of Justice, Dallas, TX, for Defendant-counterplaintiff.
This litigation between a provider of fractional aircraft management services and the United States of America (the “government”) presents issues that affect whether federal excise taxes (“FET”) are owed on certain fees paid to the provider. On the parties' cross-motions for summary judgment, and for the reasons that follow, the court holds that the provider lacks standing to challenge the collection of FET on certain fees, and that the Internal Revenue Service (“IRS”) is entitled to collect FET on the remaining fees at issue.
Because there are some background facts that are better set out in the context of the parties' arguments rather than in an introduction, the court defers discussing them.1 The following introduces the nature of the litigation, the parties' claims and counterclaims, the grounds on which the parties seek summary judgment, and the procedural history of the summary judgment motions.
This is a suit by plaintiff-counterdefendant Bombardier Aerospace Corporation (“BAC”) under 26 U.S.C. §§ 6511(a) and (b) and 6415 to recover and abate FET assessed by the IRS under § 4261 of the Internal Revenue Code, 26 U.S.C. § 4261 (Supp.2014), which imposes a tax on “taxable transportation.” E.g., 26 U.S.C. § 4261(a). The government as counterplaintiff asserts a counterclaim for unpaid FET, penalties, accrued, unassessed interest, and statutory additions.
BAC provides management services to aircraft owners and leaseholders of fractional interests in aircraft (collectively, “Aircraft Owners”) through its Flexjet program.2 During the tax periods in question—successive quarters beginning January 1, 2006 and ending December 31, 2007 (the “Tax Periods”)—the Aircraft Owners paid to BAC three types of fees that are pertinent to BAC's claims in this lawsuit: monthly management fees (“MMF”), variable rate fees (“VRF”), and fuel surcharge fees (“FSF”). MMF are fixed charges that cover costs associated with ownership of the aircraft, such as insurance, inspection, crew salaries, crew training, aircraft hangaring, and scheduling costs. MMF are incurred regardless of whether an aircraft is being flown. If an Aircraft Owner chooses not to fly during a billing period, it is billed for MMF, which relates to fixed costs of ownership. VRF are charged for each hour of flight time. These fees cover the direct operational costs associated with flying the aircraft (such as fuel, oil, lubricants, flight planning, and weather and communications services). FSF are fees that cover the additional costs of fuel that are not included in either MMF or VRF.
During the Tax Periods, BAC paid FET on VRF and FSF collected from the Aircraft Owners, but not on MMF. Prior to the Tax Periods, the IRS conceded in two audits of Form 720 FET Returns that FET were not owed on MMF. BAC relied on these concessions when refraining from collecting and remitting FET on MMF for the Tax Periods. Despite these concessions, the IRS audited BAC for the Tax Periods and assessed FET on MMF. BAC asserts that nothing changed factually between the prior periods (which covered 11 years) and the Tax Periods that would have warranted such disparate treatment. When BAC and the IRS were unable to resolve their dispute administratively, BAC paid a divisible portion of the FET assessment on MMF for each Tax Period and filed this lawsuit.
BAC sues the government on two claims:3 it seeks in part to recover the FET assessed and paid for the Tax Periods on VRF and FSF. It alleges that, when filing Form 720 FET Returns, and as a result of illegal assessments made by the IRS pursuant to an excise tax examination, it erroneously overpaid FET for the Tax Periods on VRF and FSF. BAC also sues for a refund of FET paid on MMF, and to otherwise abate the assessment of FET on MMF. BAC alleges that the IRS has illegally assessed FET on MMF for the Tax Periods.
The government counterclaims to recover unpaid FET for tax years 2006 and 2007, plus penalties, accrued, unassessed interest, and statutory additions.
In simple terms, 26 U.S.C. § 4261(a) imposes a tax on “taxable transportation.” E.g., 26 U.S.C. § 4261(a). “Taxable transportation” means certain transportation by air. E.g., 26 U.S.C. § 4262(a). Generally, the tax “shall be paid by the person making the payment subject to the tax,” 26 U.S.C. § 4261(d), and “every person receiving any payment for ... services on which a tax is imposed ... shall collect the amount of the tax from the person making such payment,” 26 U.S.C. § 4291. If, however, the tax is not paid at the time payment for transportation is made, then, to the extent that the tax is not otherwise collected, it must be paid by the carrier providing the initial segment of such transportation that begins or ends in the United States. 26 U.S.C. § 4263(c).4
BAC and the government both move for summary judgment. The government maintains that BAC lacks standing to bring this refund action with respect to the FET that it collected from the Aircraft Owners in its Flexjet program for VRF, FSF, and some MMF; that BAC provided “taxable transportation” to the Aircraft Owners in its Flexjet program during 2006 and 2007; that the VRF, FSF, MMF, and lease payments BAC collected from the Aircraft Owners in its Flexjet program were payments for “taxable transportation”; and that BAC is liable for the additional FET assessed for the calendar quarters in tax years 2006 and 2007, as asserted in the government's counterclaim.
BAC contends that it is entitled to summary judgment because FET cannot legally be imposed on flights conducted by fractional aircraft owners who utilize BAC's management services, and because BAC's obligation to collect and remit FET on MMF was vague and speculative and violated Central Illinois Public Service Co. v. United States, 435 U.S. 21, 98 S.Ct. 917, 55 L.Ed.2d 82 (1978).
After the court heard oral argument on the motions, the United States District Court for the Southern District of Ohio decided NetJets Large Aircraft, Inc. v. United States, 80 F.Supp.3d 743 (S.D.Ohio 2015). NetJets addresses several of the issues presented in the instant case, and it is related to another case—Executive Jet Aviation v. United States, 125 F.3d 1463 (Fed.Cir.1997) —that is discussed extensively in the briefing. The court directed the parties to submit supplemental briefs stating their positions regarding whether this court should follow NetJets, and, if so, how NetJets affects the disposition of the parties' summary judgment motions. The supplemental briefs and responses have been filed,5 and the parties' cross-motions for summary judgment are ripe for decision.
Each party's summary judgment burden depends on whether it is addressing a claim or defense for which it will have the burden of proof at trial. To be entitled to summary judgment on a claim on which the nonmovant will bear the burden of proof at trial, the moving party can meet its summary judgment obligation by pointing the court to the absence of admissible evidence to support the nonmovant's claim. See Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party does so, the nonmovant must go beyond its pleadings and designate specific facts showing there is a genuine issue for trial. See id. at 324, 106 S.Ct. 2548 ; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (en banc) (per curiam). An issue is genuine if the evidence is such that a reasonable jury could return a verdict in the nonmovant's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The nonmovant's failure to produce proof as to any essential element of a claim renders all other facts immaterial. See Trugreen Landcare, L.L.C. v. Scott, 512 F.Supp.2d 613, 623 (N.D.Tex.2007) (Fitzwater, J.). Summary judgment is mandatory if the nonmovant fails to meet this burden. Little, 37 F.3d at 1076.
To be entitled to summary judgment on a claim or defense on which the party moving for summary judgment will have the burden of proof at trial, the party “must establish ‘beyond peradventure all of the essential elements of the claim or defense.’ ” Bank One, Tex., N.A. v. Prudential Ins. Co. of Am., 878 F.Supp. 943, 962 (N.D.Tex.1995) (Fitzwater, J.) (quoting Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir.1986) ). This means that the moving party must demonstrate that there are no genuine and material fact disputes and that the party is entitled to summary judgment as a matter of law. See Martin v. Alamo Cmty. Coll. Dist., 353 F.3d 409, 412 (5th Cir.2003). “The court has noted that the ‘beyond peradventure’ standard is ‘heavy.’ ” Carolina Cas. Ins. Co. v. Sowell, 603 F.Supp.2d 914, 923–24 (N.D.Tex.2009) (Fitzwater, C.J.) (quoting Cont'l Cas. Co. v. St. Paul Fire & Marine Ins. Co., 2007 WL 2403656, at *10 (N.D.Tex. Aug. 23, 2007) (Fitzwater, J.)).
There are special presumptions and proof burdens that apply in tax cases, and the court discusses them below.
The court turns first to BAC's claim for FET that it collected and paid on VRF and FSF charged to Aircraft Owners. The government challenges BAC's standing to recover on this claim.6
The government contends that an entity that collects taxes imposed by § 4261 lacks standing to seek a refund unless it establishes that it has repaid the amount of the taxes to the person from whom it collected them, or it has obtained the...
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