Consolidated Freightways, Inc. v. United States
| Decision Date | 16 April 1980 |
| Docket Number | No. 168-69.,168-69. |
| Citation | 620 F.2d 862 |
| Parties | CONSOLIDATED FREIGHTWAYS, INC. and Affiliates, v. The UNITED STATES. |
| Court | U.S. Claims Court |
James E. Merritt, San Francisco, Cal., attorney of record, for plaintiff. Morrison & Foerster, San Francisco, Cal., of counsel.
William A. Whitledge, Washington, D. C., with whom was Asst. Atty. Gen. M. Carr Ferguson, for defendant. Theodore D. Peyser, Jr., Robert S. Watkins and Kenneth R. Boiarsky, Washington, D. C., of counsel.
Before KASHIWA, KUNZIG and BENNETT, Judges.
Plaintiff brings this action seeking review of the report of Trial Judge Harry E. Wood, which denied plaintiff's right to an investment tax credit in certain dock facilities. For the reasons set forth below, we agree with the result of the trial judge, sustain defendant's offset and dismiss the petition.
This case arises from an offset asserted by defendant in its first amended answer to the petition. The offset placed in issue plaintiff's right to an investment tax credit (ITC) under I.R.C. § 381 for 1964 due to investments in certain dock facilities2 placed in service in plaintiff's taxable years 1962, 1963 and 1964.3 Pursuant to a March 25, 1977, stipulation of the parties, the amount in issue before the trial judge was $69,437, representing an ITC attributable to a portion of plaintiff's investment in the dock facilities at each of the 12 terminals in the total amount of $991,964. Because of limitations upon the amount of the credit allowed in any one year and the carryover provisions, all of this ITC was claimed in 1964.
Each of the relevant terminal facilities considered by the trial judge included a dock facility which will be described generally infra. Only the amounts listed below were placed in issue by defendant's offset:
Year Investment
Placed in in Dock
Terminal Facility Service Facility
Denver, Colorado 1962 $111,728
Albany, New York 1962 23,240
Salt Lake City, Utah 1962 58,632
Chicago, Illinois 1963 485,160
Louisville, Kentucky 1963 31,885
Syracuse, New York 1963 42,972
Phoenix, Arizona 1963 39,949
Rockford, Illinois 1963 25,017
Boston, Massachusetts 1964 46,675
Detroit, Michigan 1964 60,143
San Francisco, California4 1964 6,603
Fort Wayne, Indiana 1964 59,960
________
Total $991,964
During 1964, Consolidated Freightways, Inc. (plaintiff) was the common parent of an affiliated group which included Consolidated Freightways Corporation of Delaware (CFCD) and Freightways Terminal Company, a wholly owned subsidiary of CFCD. Principally through CFCD, plaintiff furnished mainly general commodities5 carrier service throughout the United States and Canada. At all relevant times, the terminal facilities listed above were owned and operated by CFCD or Freightways Terminal Company.
For the taxable years 1962, 1963 and 1964, plaintiff and its affiliated corporations filed consolidated federal income tax returns. In December 1967, defendant proposed deficiencies for the years 1963 and 1964, totaling approximately $1,070,000. In March 1968, plaintiff filed a timely protest and claimed, for the first time, that it was entitled to an additional ITC during the years 1962, 1963 and 1964 of $163,559.13, due to qualified investments in the 12 terminal facilities totaling $2,336,559.
Conferences were held between plaintiff and the Appellate Division, Internal Revenue Service, San Francisco, California. At this conference the Government obtained the assistance of a Revenue Agent Engineer, who recommended plaintiff's claim for the additional ITC of $163,559.13 to be allowed to the extent of $154,512.75 and disallowed to the extent of $9,046.38. The Revenue Agent's report referred to, inter alia, Treas.Reg. § 1.48-16 and Rev.Rul. 68-1, 1968-1 Cum.Bull. 8.
On October 24, 1968, plaintiff excluded a Form 870. The Form 870 stated that it was not a final closing agreement and that its execution and filing would preclude neither the assertion of a further deficiency, should it later be determined an additional tax was due, nor the filing by plaintiff of a timely claim for refund or credit on which suit might be brought.
Shortly thereafter plaintiff paid an additional assessment plus interest for 1964 and then filed a claim for refund for that year in the amount of $450,391.48. This claim stated that the claimed ITC in certain terminals had been allowed in part and was not in dispute. The refund claim was disallowed.
Neither plaintiff's petition nor defendant's answer dealt with the truck terminal ITC issue. The claim for refund, however, was attached to the petition which, as stated above, asserted the truck terminal ITC issue was "not in dispute." The case was suspended pending settlement negotiations.
After discovery and further negotiations, the parties executed a stipulation wherein the defendant withdrew one offset asserted in its answer and plaintiff "withdrew its objection to defendant's motion to amend its answer in order to raise as an offset (not to exceed $69,437, plus interest) the issue of the investment credit for certain truck docking and terminal facilities." On the basis of the stipulation, defendant's motion for leave to amend its answer was allowed as to the ITC issue but otherwise denied. At this date, the statute of limitations on refund claims prevented plaintiff from claiming a refund of the $9,046.38 ITC disallowed by the Service.
Each of the dock facilities before us is part of a larger terminal facility which among other things contains an adjoining or contiguous dock office area (which is not in issue). Each dock facility except Chicago was rectangular, ranging in size from 60 by 120 feet at Louisville, Rockford and Syracuse to 100 by 312 feet at Denver.7 At most of the terminal facilities, there was a basement under the dock office area. This basement typically contained a restroom, a lunchroom, and a locker room. At some terminal facilities, there was a second story located immediately above the dock office area containing general office space. The second story of these terminal facilities was constructed in the same general manner as the dock facility (i. e., normally a pre-engineered metal structure), except that the Denver facility located the general office area at the end of the terminal facility, and was of brick veneer construction.
Generally, all of the dock facilities (except at Chicago) were constructed with rectangularly shaped platforms, consisting of a reinforced concrete slab, normally 6 inches thick, at a height of from 48 to 52 inches above the ground.8 The platforms ranged in size from approximately 40 by 60 feet to 100 by 312 feet. The platforms rested on perimeter foundation walls; the empty space beneath the slab (and within the foundation walls) was filled with dirt, compacted fill or both.
The dock facilities shared at least one common wall with the rest of the terminal facility. Except for the Albany dock facility (which was of concrete block construction), each dock facility consisted essentially of a pre-engineered metal structure atop (and anchored to the edge angles of) the above-described platform. These steel structural components were obtained from either Butler Manufacturing Company,9 Armco Steel Building or Inland Steel Building. Such components allow for the construction of a structure using prefabricated metal components of common design, generally available from inventory. The interior height was usually 13 to 14 feet. The dock facilities also had structural steel columns (normally 11 to 12 feet in height and approximately a foot wide), crossbeams at 22- to 24-foot intervals and side panels generally of steel. All the dock facilities had roofs, usually made of enameled steel panels. At some facilities skylights were inserted. At most of the dock facilities there was a roof overhang of from 5 to 10 feet beyond the edge of the dock facility.
The 22- to 24-foot intervals between the structural steel columns were called bays; each such bay was divided by a nonstructural steel column into two truck bays, into each of which a trailer could be backed for loading or unloading. Except for the Phoenix dock facility which had no overhead doors,10 each truck bay was fitted with an overhead door. These doors were installed on tracks welded to a structural steel column and a nonstructural one. Each such door could be closed and locked when there was no trailer in the truck bay. When closed and locked, the interior of the dock facility was protected both from the elements and unauthorized persons. These doors were closed when the terminal facility was closed and might be closed when rain or snow was blowing across the dock facility floor during loading or unloading operations. Also, such doors would be closed when the truck bay was in an inoperable condition. The overhead doors were required to be open, however, during the loading and unloading process. The area between the top of the overhead door and the roof of the dock facility was covered, typically with prefabricated steel panels.
The dock facilities all had electrical lighting and electrical outlets. Time clocks for the employees were in most of the dock facilities. Three dock facilities had intercom terminals, and the Chicago dock facility had telephones. No heating or air conditioning was provided within the dock facilities, and portable heaters were prohibited.
The operations of plaintiff typically were: local pickup of the shipment, delivery to the dock facility at the origination terminal facility and transfer of the shipment from the local pickup trailer to a line haul (long distance) trailer unit;...
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