Electrolux Holdings, Inc. v. U.S.

• Decision Date: 20 June 2007
• Docket Number: No. 2006-5106.,2006-5106.
• Parties: ELECTROLUX HOLDINGS, INC. and Electrolux Home Products, Inc., Plaintiffs-Appellants, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

491 F.3d 1327

ELECTROLUX HOLDINGS, INC. and Electrolux Home Products, Inc., Plaintiffs-Appellants, v. UNITED STATES, Defendant-Appellee.

No. 2006-5106.

United States Court of Appeals, Federal Circuit.

June 20, 2007.

Steven A. Friedman, Squire, Sanders & Dempsey L.L.P., of Cleveland, OH, argued for plaintiffs-appellants. With him on the brief was Terrence G. Perris.

Richard Farber, Attorney, Tax Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief were Eileen J. O'Conner, Assistant Attorney General, and Bethany B. Hauser, Attorney.

Before BRYSON, Circuit Judge, PLAGER, Senior Circuit Judge, and GAJARSA, Circuit Judge.

PLAGER, Senior Circuit Judge.

This is a taxing case. The general three-year statute of limitations for filing a federal tax refund claim is found in 26 U.S.C. § 6511(a). Subsection (d)(2)(A) of § 6511 establishes an exception to the general statute when the claim relates to an overpayment attributable to a capital loss carryback. This case involves the construction and application of this exception and presents an issue of first impression for this court.

The case arises out of a refund claim for the 1995 tax year submitted by White Consolidated Industries, Inc. ("WCI"), the predecessor-in-interest of Electrolux Holdings, Inc. and its wholly-owned subsidiary Electrolux Home Products, Inc. (collectively "Electrolux"). The Commissioner of Internal Revenue disallowed the claim on the ground that the normal three-year statute of limitations for claiming a refund had expired. Electrolux then filed a complaint in the United States Court of Federal Claims for a tax refund.

Electrolux contends that its 1995 refund claim was timely in accordance with the special limitations period in 26 U.S.C. § 6511(d)(2)(A). The trial court concluded that the special period of limitations does not apply to Electrolux's 1995 refund claim and dismissed the complaint for failure to comply with the jurisdictional prerequisite of filing a timely refund claim. Because we agree that under the correct interpretation of § 6511(d)(2)(A) the special limitations period does not apply to the 1995 claim, we affirm the judgment of the trial court.

BACKGROUND

The facts in this case are undisputed. During 1994, WCI realized a long-term capital loss of $53,821,916 due to the sale of its entire investment in Blaw Knox Construction Equipment Corporation. On its 1994 consolidated federal income tax return, WCI deducted only a part of the loss — about $8,500,000 — because it concluded the full amount was not deductible under the loss-disallowance rule in effect at the time, Treas. Reg. § 1.1502-20 (1994). The 1994 return was later audited, and the Commissioner and Electrolux entered into an agreement, pursuant to 26 U.S.C. § 6501(c)(4), to extend to December 31, 1999, the period during which the Commissioner could assess additional tax for 1994. As a result, the period for filing a tax refund claim for the 1994 tax year was extended to June 30, 2000, six months after the end of the assessment period. See 26 U.S.C. § 6511(c)(1).

Electrolux later concluded that the loss-disallowance rule was invalid, so that it was not required to limit its deduction of the Blaw Knox long-term capital loss. Electrolux thus believed it was entitled to deduct an additional long-term capital loss of about $45 million. Because Electrolux had no additional long-term capital gains for 1994 to offset any additional deduction, it did not file a refund claim for 1994. However, pursuant to 26 U.S.C. § 1212(a)(1), Electrolux was permitted to carry back¹ the unused portion of the long-term capital loss to each of the preceding three years, starting with the earliest (i.e., 1991), and then carry over² any remaining unused long-term capital loss to each of the succeeding five years, treating the loss as a short-term capital loss in each tax year.³

Because Electrolux had no additional capital gains in 1991 and 1992 against which the excess long-term capital loss could be offset, it sought to carry back the loss to 1993. For that year Electrolux was able to deduct about $27 million, the amount of capital gain that was available to absorb the loss. On December 31, 1999, Electrolux filed an amended return seeking a refund of about $4.5 million for the 1993 tax year due to the tax effect of deducting a portion of the 1994 long-term capital loss.

Electrolux carried forward the remaining amount of the 1994 loss in succession to tax years 1995, 1996, 1997, and 1998. On December 31, 1999, Electrolux filed an amended return seeking a refund of about $1.5 million for the 1995 tax year as a result of an additional deduction of about $8.4 million, the portion of the unused 1994 capital loss that could be absorbed by additional capital gains in 1995. Electrolux also filed refund claims for 1996, 1997, and 1998, using up the remaining portion of the 1994 long-term capital loss.

In 2001, we held that the loss-disallowance rule in Treas. Reg. § 1.1502-20 (1994) was indeed invalid. Rite Aid Corp. v. United States, 255 F.3d 1357 (Fed.Cir. 2001). In view of that decision, the Commissioner agreed that Electrolux was permitted to deduct the full amount of the Blaw Knox loss for the 1994 tax year. He granted substantially all of the refunds claimed by Electrolux for tax years 1993, 1996, 1997, and 1998 that resulted from carrying the unused portion of the 1994 loss to those years. However, he disallowed the refund claim for 1995 on the ground that the statute of limitations had expired.

When the amended returns were filed, the general three-year statute of limitations for filing a refund claim had expired for tax years 1993 and 1995 but had not yet run for tax years 1996, 1997, and 1998. See 26 U.S.C. § 6511(a) (providing that a claim for refund shall be filed within three years from the time the return was filed or two years from the time the tax was paid, whichever is later). The Government does not dispute that the special limitations period provided by 26 U.S.C. § 6511(d)(2)(A) applies to Electrolux's refund claim for taxable year 1993 because the claim "relates to an overpayment attributable to ... a capital loss carryback," i.e., the carryback of the 1994 capital loss to 1993. Under that provision,

[i]f the claim for ... refund relates to an overpayment attributable to ... a capital loss carryback, in lieu of the 3-year period of limitation prescribed in subsection (a), the period shall be that period which ends 3 years after the time prescribed by law for filing the return ... for the taxable year of the ... net capital loss which results in such carryback, or the period prescribed in subsection (c) in respect of such taxable year, whichever expires later.

Id. (emphases added). The period for filing a refund claim for the 1994 tax year had been extended to June 30, 2000, in accordance with § 6511(c) as a result of the agreement between the Commissioner and Electrolux to extend the assessment period. Since the refund claim for 1993 related to an overpayment in 1993 that was attributable to the carryback of the 1994 capital loss, the period for filing the 1993 claim ended at the same time as the period for filing a 1994 refund claim, i.e., June 30, 2000. Therefore, the December 31, 1999, filing of the refund claim for the 1993 tax year was timely.

After the Commissioner disallowed the refund claim for the 1995 tax year, Electrolux filed suit in the Court of Federal Claims seeking a refund of $1,453,848 for that year. Electrolux alleged in its complaint that the special limitations period of § 6511(d)(2)(A) applied to the 1995 tax year as well as the 1993 tax year. Following briefing and oral argument, the trial court rendered a decision in which it agreed with the Government that § 6511(d)(2)(A) does not apply to the refund claim that was based on the carryover to 1995 of the 1994 capital loss, and therefore the 1995 refund claim was not timely filed. Electrolux Holdings, Inc. v. United States, 71 Fed.Cl. 748 (2006). Accordingly, the trial court granted the Government's motion to dismiss the complaint on the ground that Electrolux had not filed a timely refund claim.

Electrolux filed a timely appeal with this court. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).

DISCUSSION

The question presented in this appeal is whether the time for filing Electrolux's refund claim for the 1995 tax year is governed by 26 U.S.C. § 6511(d)(2)(A), the special exception to the general three-year statute of limitations set forth in 26 U.S.C. § 6511(a). The special provision is available only if the overpayment in 1995 was "attributable to ... a carryback" of a net capital loss from 1994. Whether the special limitations period applies to Electrolux's 1995 claim is an issue of statutory interpretation, which we review without deference to the trial court. Strickland v. United States, 423 F.3d 1335, 1337 (Fed. Cir.2005).

Statutory interpretation begins with the language of the statute. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1579 (Fed.Cir.1990). We derive the plain meaning of the statute from its text and structure. Norfolk Dredging Co. v. United States, 375 F.3d 1106, 1110 (Fed.Cir.2004) (citing Alexander v. Sandoval, 532 U.S. 275, 288, 121 S.Ct. 1511, 149 L.Ed.2d 517 (2001)). If the language of the statute is clear and its meaning unambiguous, that is the end of our inquiry. VE Holding, 917 F.2d at 1580. The plain meaning is conclusive, and it is erroneous to explore the legislative history in pursuit of alternative meanings. Id. at 1579-80; Norfolk Dredging, 375 F.3d at 1110.

The relevant statutory language in this case is "attributable to ... a capital loss carryback." The phrase "attributable to," though it appears in many provisions of the Internal Revenue Code, is not defined anywhere in the Code and has no special technical meaning under the tax laws. Stanford v. Comm'r, 152 F.3d 450,...