Martin Marietta Corp. v. United States

• Citation: 572 F.2d 839
• Decision Date: 22 March 1978
• Docket Number: No. 325-76.,325-76.
• Parties: MARTIN MARIETTA CORPORATION v. The UNITED STATES.
• Court: Court of Federal Claims

572 F.2d 839

MARTIN MARIETTA CORPORATION v. The UNITED STATES.

No. 325-76.

United States Court of Claims.

March 22, 1978.

Everett L. Jassy, New York City, attorney of record, for plaintiff; John B. Burguieres, Jr., and Dewey, Ballantine, Bushby, Palmer & Wood, New York City, of counsel.

George L. Squires, Washington, D.C., with whom was Asst. Atty. Gen., M. Carr Ferguson, Washington, D.C., for defendant; Robert S. Watkins, Washington, D.C., of counsel.

Before DAVIS, KASHIWA and KUNZIG, Judges.

ON PLAINTIFF'S MOTION FOR JUDGMENT ON THE PLEADINGS OR FOR SUMMARY JUDGMENT AND DEFENDANT'S CROSS MOTION FOR JUDGMENT ON THE PLEADINGS

KASHIWA, Judge:

This is a suit for additional statutory interest in the amount of $59,249 on an overpayment of corporate income tax for calendar year 1968. The sole issue is whether the Internal Revenue Service correctly computed the statutory interest on an overpayment of tax for calendar year 1968.

The case is before this court on plaintiff's motion for judgment on the pleadings or for summary judgment and defendant's cross motion for judgment on the pleadings. The case was submitted without oral argument. After careful consideration of the briefs, we grant defendant's cross motion for judgment on the pleadings.

Plaintiff files its federal income tax returns on a calendar year basis. Prior to March 17, 1969, the due date for filing plaintiff's 1968 return, plaintiff had made payments of estimated taxes in the amount of $17,600,000 in respect of its 1968 income tax liability. On March 17, 1969, plaintiff timely filed with the District Director of Internal Revenue, Manhattan District, a Form 7004 ("Application for Automatic Extension of Time to File U.S. Corporation Income Tax Return"), which extended the period of time for filing its 1968 return until June 16, 1969. Upon the filing of such Form 7004, plaintiff reported tentative additional taxes for 1968 in two installments. Plaintiff made the first installment payment in respect of such additional taxes on March 17, 1969, in the amount of $6,200,000.

On June 16, 1969, plaintiff made the final installment payment in the amount of $6,100,000 in respect of its tentative additional taxes for 1968; and plaintiff received from the District Director, Manhattan District, a further extension of time until September 15, 1969, in which to file its 1968 return. As of June 16, 1969, plaintiff had timely paid $29,955,162 (through estimated tax payments of $17,600,000, installment payments of $12,300,000, and a "nonhighway gas and lube oil" credit of $55,162) in respect of its 1968 taxes.

On September 15, 1969, plaintiff filed its U.S. Corporation Income Tax Return, Form 1120, for the year 1968, showing a total tax liability for that year of $25,961,463 and an overpayment of taxes in the amount of $3,993,699 (the difference between the $29,955,162 previously paid in estimated taxes, installment payments, and credits and the $25,961,463 total tax liability shown on plaintiff's return). Plaintiff elected on the return to have such overpayment credited against its estimated taxes for 1969, and, accordingly, plaintiff reduced the amount of its 1969 estimated tax payment, due on September 15, 1969, by $3,993,699.

As a result of a subsequent audit by the Internal Revenue Service, it was determined that plaintiff's actual total tax liability for 1968 was $19,190,375.97 and that plaintiff had overpaid its 1968 taxes by an additional $6,771,087.03 (the difference between the $25,961,463 total tax liability shown on plaintiff's 1968 return and the $19,190,375.97 total tax liability determined on audit).

On March 12, 1974, the Internal Revenue Service paid to plaintiff a refund of 1968 taxes in the amount of $6,512,223.31. The amount of such refund was computed by subtracting from the $6,771,087.03 additional overpayment the amount of $258,863.72 to cover a deficiency determined to be owed by plaintiff in respect of its federal income taxes for 1967. The Internal Revenue Service determined that the total amount of interest due to plaintiff on the $6,512,223.31 net overpayment of 1968 taxes equaled $1,859,070.56 and that plaintiff owed an interest charge of $15,574.38 with respect to the 1967 deficiency of $258,863.72. Thus, the total payment made to plaintiff by the Internal Revenue Service on March 12, 1974, equaled $8,355,719.49 ($6,512,223.31 of net tax overpayment plus $1,859,070.56 of interest less $15,574.38 of 1967 interest charge).

In computing the amount of interest due to plaintiff, the Internal Revenue Service treated the overpayment reported on plaintiff's 1968 return ($3,993,699), which had been credited against plaintiff's 1969 estimated taxes on the 1968 return, as being attributable to plaintiff's March 1969 installment payment of 1968 income taxes. The effect of this was to reduce the amount of overpayment made by plaintiff in March by $3,993,699 and the amount of statutory interest due plaintiff on the March 17, 1969, overpayment. Correspondingly, the June 16, 1969, installment overpayment was increased by $3,993,699 and the interest due plaintiff on the June 1969 overpayment was increased.¹

Plaintiff contends this was improper. Plaintiff maintains the overpayment shown on the completed 1968 return was due to the June 1969 installment payment of taxes under Treas.Reg. § 301.6611-1(b) (1957), because the income tax liability as shown on the 1968 return was first satisfied by the June installment. Further, it was on the basis of the facts shown on the 1968 return as filed by plaintiff that plaintiff made the irrevocable election to credit the $3,993,699 to its 1969 estimated tax liabilities. Since that election is irrevocably binding upon both the plaintiff and the Internal Revenue Service, the Internal Revenue Service cannot later change the facts upon which the election was made (the date of overpayment based upon a subsequent audit which shows a larger overpayment) in computing statutory interest on a subsequently discovered larger overpayment. In the petition plaintiff also seeks to recover statutory interest on the additional statutory interest it contends it is owed.

Internal Revenue Code² § 6611(a) allows taxpayers statutory interest upon any overpayment of Internal Revenue tax. I.R.C. § 6403 states that installments paid in excess of the correct amount of taxes due are overpayments. Treas.Reg. § 301.6611-1(b) (1957) defines the point in time when an overpayment occurs:

* * * there can be no overpayment of tax until the entire tax liability has been satisfied. Therefore, the dates of overpayment of any tax are the date of payment of the first amount which (when added to previous payments) is in excess of the tax liability (including any interest, addition to tax, or additional amount) and the dates of payment of all amounts

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