Bombardier Aerospace Corp. v. United States

Citation831 F.3d 268
Decision Date25 July 2016
Docket NumberNo. 15-10468,15-10468
Parties Bombardier Aerospace Corporation, Plaintiff-Appellant, v. United States of America, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Nicholas Dupont Mosser, Esq., Mosser Law, P.L.L.C., Plano, TX, Anthony Scott Gasaway, Durango, CO, Robert J. Stientjes, Stientjes & Tolu, L.L.C., Saint Louis, MO, for Plaintiff-Appellant.

Julie Ciamporcero Avetta, Robert William Metzler, Washington, DC, Michael D. Powell, Dallas, TX, U.S. Department of Justice, for Defendant-Appellee.

Before BENAVIDES, DENNIS, and SOUTHWICK, Circuit Judges.

LESLIE H. SOUTHWICK

, Circuit Judge:

Bombardier Aerospace Corporation claims it is not required to remit federal excise tax on fees collected from participants in its fractional-aircraft-ownership program. The district court disagreed and ruled in favor of the Government on cross-motions for summary judgment. We AFFIRM.

FACTS AND PROCEDURAL BACKGROUND

During the successive quarterly tax periods in 2006 and 2007, which are the ones relevant here, Bombardier Aerospace Corporation operated a fractional-aircraft-ownership program called “Flexjet.” Flexjet participants bought fractional interests in aircraft, which provided them with on-demand access to a fleet of aircraft through a dry lease (i.e., the lease of a plane without a flight crew) exchange pool. Bombardier provided all of the management services necessary to support Flexjet. Such services included, but were not limited to, scheduling maintenance, securing insurance, staffing the aircraft with qualified pilots and crewmembers, and maintaining records required by the Federal Aviation Administration (“FAA”).

In exchange for its services, Bombardier assessed three types of fees against Flexjet participants:

• Monthly Management Fees (“MMFs”), or fixed charges covering costs associated with aircraft ownership regardless of whether the aircraft is flown (e.g., crew salaries, insurance, etc.);
• Variable Rate Fees (“Variable Fees”), or variable charges covering costs associated with flight time (e.g., fuel, weather services, communications services, etc.); and
• Fuel Component Adjustment (“Fuel Fees”), or charges covering fuel costs not otherwise included in the other fees (collectively, “fees”).

Under 26 U.S.C. § 4261(a)

, any “amount paid for taxable transportation” is subject to federal excise tax. “Taxable transportation” includes travel by air meeting certain geographic requirements not at issue in this case. See id. § 4262. During the relevant tax periods, Bombardier collected Section 4261 tax on Variable Fees and Fuel Fees assessed against Flexjet participants, and remitted that tax to the IRS. It did not, however, remit tax on MMFs. The IRS audited Bombardier and assessed excise tax on MMFs collected during that time. Bombardier objected, arguing it was not subject to the tax during the 11 years prior to the relevant tax periods, even though it had undergone two IRS audits, and nothing had changed about its business or the law.

In May 2012, unable to resolve the dispute administratively, Bombardier paid a portion of the MMFs assessment and filed this lawsuit. In its motion for summary judgment, Bombardier contended that, as a matter of law, it owed no Section 4261

excise tax on any of the fees collected. Because tax on Variable Fees and Fuel Fees had already been remitted, Bombardier sought a refund of taxes paid on those fees.

The Government counterclaimed for the unpaid tax on MMFs, plus penalties, unassessed interest, and statutory additions. In its cross-motion for summary judgment, the Government also argued Bombardier lacked standing to bring its refund lawsuit for taxes paid on Variable Fees and Fuel Fees. The district court held that the IRS properly assessed tax on the fees, and that Bombardier had not met the statutory requirements to seek a refund for any overpayment on Variable Fees and Fuel Fees. Bombardier timely appealed.

DISCUSSION

We review issues of statutory interpretation and summary judgment de novo . In re Lively , 717 F.3d 406, 408 (5th Cir. 2013)

(statutory interpretation); Kimbell v. United States , 371 F.3d 257, 260 (5th Cir. 2004) (summary judgment). Summary judgment is appropriate “if the movant shows 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).

I. Statutory Requirements for a Refund Lawsuit

Bombardier first seeks a refund for Section 4261

tax paid on Variable Fees and Fuel Fees it collected during the relevant tax periods because such fees are not “amount[s] paid for taxable transportation.” The district court dismissed the claim, however, concluding Bombardier had not met the statutory requirements to sue.1 Under 26 U.S.C. § 6415(a), if a collecting entity like Bombardier overpays on tax imposed by Section 4261, it may be entitled to a credit or refund if it “establishes ... that [it] has repaid the amount of such tax to the person from whom [it was] collected ..., or obtains the consent of such person to the allowance of such credit or refund.”2

Here, Bombardier does not contend that it has repaid any of the tax it collected on Variable Fees and Fuel Fees to Flexjet participants, or that it has obtained the consent of Flexjet participants to receive a refund. Instead, Bombardier argues none of that is a prerequisite to suit and can be fulfilled later in litigation. Bombardier relies largely on the text of Section 6415(a)

, which does not expressly state that a claimant must repay participants or obtain consents before it can file a lawsuit, and on two court opinions.

Bombardier cites one decision where an employer sought a refund for the employee portion of an employment tax. Chicago Milwaukee Corp. v. United States , 40 F.3d 373, 374 (Fed. Cir. 1994)

. Before the lawsuit could be filed, a regulation-compliant administrative claim had to be submitted to the IRS. Id. A Treasury Department regulation in effect at the time required the administrative claim to “include a statement that the employer has repaid the tax to such employee or has secured the written consent of such employee to allowance of the refund.” Id. at 375 (citing 26 C.F.R. § 31.6402(a)–2(a)(2) (1994) ). The employer did not fulfill either requirement before pursuing its claim. Id . The Federal Circuit, noting there was no timing requirement in the regulation, held the claim was not barred. Id. at 375–76

.

Comparing Section 6415(a)

to the Chicago Milwaukee regulation, a district court recently held that “compliance at any time before the refund issues” fulfills the purpose of the statute, i.e., “prevent[ing] a company from reaping a windfall by recovering taxes already passed on to its customers.” NetJets Large Aircraft, Inc. v. United States , 80 F.Supp.3d 743, 752 (S.D. Ohio 2015). Because Section 6415(a) does not state when these requirements must be satisfied, the NetJets court concluded that making the requirements a prerequisite to suit would “impose[ ] a harsh burden without good reason.” Id. The NetJets case involved a Bombardier competitor that operated a fractional-aircraft-ownership program. Id. at 751. Like Bombardier, the competitor denied liability for Section 4261 tax and did not repay fees collected or seek participants' consent before filing its refund lawsuit. Id.

Other cases from the Federal Circuit analyzing Section 6415(a)

, though, undermine Bombardier's dependence on Chicago Milwaukee. For example, the Federal Circuit's predecessor3 dismissed a Section 6415(a) refund claim where the claimant did not bear the economic burden of the tax itself, repay the tax to those from whom it was collected, or obtain consents. Epstein v. United States , 357 F.2d 928, 937–38 (Ct. Cl. 1966). The Court of Claims also had held that allowing a lawsuit to continue without first fulfilling the requirements would defeat the purpose of the statute “to preclude ... unjust enrichment.” Gumpert v. United States , 296 F.2d 927, 928–29 (Ct. Cl. 1961).

We agree with the district court, moreover, that Chicago Milwaukee

is not especially analogous. That case interprets a regulation that varies materially from Section 6415(a). While the Treasury regulation in Chicago Milwaukee merely requires a “statement” that the employer has repaid the tax or secured consents, the statute at issue here mandates that a claimant “establish” that it has fulfilled one of those two requirements. Compare 26 C.F.R. § 31.6402(a)–2(a)(2) (1994)with 26 U.S.C. § 6415(a). We have held that the plain language of a statute controls, “reading it as a whole and mindful of the linguistic choices made by Congress.” In re Universal Seismic Assocs., Inc. , 288 F.3d 205, 207 (5th Cir. 2002). We add that the Chicago Milwaukee dealt with requirements that must be met in filing an administrative claim that complies with regulations. See 40 F.3d at 375. Here, the question is whether repayment or consents are statutory prerequisites to civil action.4

Furthermore, our own precedent aligns with the Federal Circuit's interpretation of Section 6415(a)

. In one case, a district court had rejected a Section 6415(a) refund suit because the plaintiff “had not satisfied ... the express [statutory] requirements ... or the Court-made amelioration by showing” it had paid the tax itself. McGowan v. United States , 296 F.2d 252, 253 (5th Cir. 1961). We remanded for a new trial because the evidence was insufficient to sustain the district court's finding that the plaintiff had not borne the economic burden of the tax. Id. at 256

. The district court on remand reiterated the prerequisites rule, noting that if “it is admitted that [the plaintiff] did not make the refund ... or obtain consents” required by Section 6415(a), “that ends the suit....” McGowan v. United States , 222 F.Supp. 329, 330 (S.D. Fla. 1962). Without specifically addressing the prerequisites rule, we agreed with the district court's ruling on a subsequent appeal. McGowan v. United States , 323 F.2d 655 (5th...

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