Host Marriott Corp v. USA.
| Decision Date | 06 June 2001 |
| Docket Number | No. 00-2488,00-2488 |
| Citation | 267 F.3d 363 |
| Parties | (4th Cir. 2001) HOST MARRIOTT CORPORATION, Plaintiff-Appellee, v. UNITED STATES OF AMERICA, Defendant-Appellant. MANUFACTURERS ALLIANCE/MAPI INCORPORATED, Amicus Curiae. Argued: |
| Court | U.S. Court of Appeals — Fourth Circuit |
Appeal from the United States District Court for the District of Maryland, at Greenbelt. Deborah K. Chasanow, District Judge.
COUNSEL ARGUED: Edward T. Perelmuter, Tax Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellant. John Benjamin Magee, MCKEE, NELSON, ERNST & YOUNG, L.L.P., Washington, D.C., for Appellee. ON BRIEF: Claire Fallon, Acting Assistant Attorney General, Stephen M. Schenning, United States Attorney, Thomas J. Clark, Tax Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellant. Hartman E. Blanchard, Jr., MCKEE, NELSON, ERNST & YOUNG, L.L.P., Washington, D.C.; Dennis P. Bedell, Alan I. Horowitz, Shane T. Hamilton, MILLER & CHEVALIER, CHARTERED, Washington, D.C.; Richard A. Burton, Michael Slattery, HOST MARRIOTT CORPORATION, Bethesda, Maryland, for Appellee. Richard E. Zuckerman, Raymond M. Kethledge, HONIGMAN, MILLER, SCHWARTZ & COHN, L.L.P., Detroit, Michigan, for Amicus Curiae.
Before WIDENER, NIEMEYER, and LUTTIG, Circuit Judges.
Affirmed by published opinion. Judge Niemeyer wrote the opinion, in which Judge Widener and Judge Luttig joined.
This is an appeal from the district court's judgment holding that interest which accrued on a taxpayer's income tax deficiencies qualified as a "specified liability loss" under the 1991 version of 26 U.S.C. S 172(f)(1) and therefore could be carried back ten years under the 1991 version of 26 U.S.C. S 172(b)(1)(C). As a result, the district court awarded Host Marriott Corporation a tax refund in excess of $22 million.
Host Marriott ("the taxpayer") filed its income tax returns for tax years 1977, 1978, and 1979 in 1978, 1979, and 1980, respectively. The Internal Revenue Service ("IRS") began an audit of those returns in 1981, which it concluded in 1985. At the conclusion of the audit, the IRS assessed the taxpayer income tax deficiencies for the tax years 1977-79. The taxpayer challenged the assessments and settled the deficiencies with the IRS in 1991. In its 1991 tax return, the taxpayer claimed the interest that accrued on its 1977-79 tax return deficiencies as a "specified liability loss" under 26 U.S.C. S 172(f)(1) (1991). Relying on the ten-year carry back authorization for a specified liability loss, the taxpayer amended its 1984 and 1985 tax returns to claim a refund.
The IRS argues that the income tax deficiency interest is not eligible for treatment under S 172(f)(1) (1991) as a specified liability loss. Although it acknowledges that the strict language of the Tax Code supports the taxpayer, it relies principally on legislative history to support its argument. Accordingly, it contends that the taxpayer was not entitled to a refund.
On the proper interpretation of 26 U.S.C. S 172(f)(1) (1991), we are persuaded by the reasoning of the district court, and therefore, on the basis of Host Marriott Corp. v. United States, 113 F. Supp.2d 790 (D. Md. 2000), we conclude that the interest accrued on the tax deficiencies in this case was a specified liability loss that may be carried back to "each of the 10 taxable years preceding the taxable year of such loss," 26 U.S.C. S 172(b)(1)(C) (1991).
The IRS argues additionally that if we allow the specified liability loss under 26 U.S.C. S 172(f) (1991), the loss should not include interest accrued after the 1987 tax year because, under S 172(f)(1)(B)(i) (1991), the loss arising under a federal or state law is allowed only if "the act (or failure to act) giving rise to such liability occurs at least 3 years before the beginning of the taxable year." It argues...
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