MARTIN-MARIETTA CORPORATION v. United States
| Decision Date | 14 November 1969 |
| Docket Number | No. 245-67.,245-67. |
| Citation | 418 F.2d 502 |
| Parties | MARTIN-MARIETTA CORPORATION v. The UNITED STATES. |
| Court | U.S. Claims Court |
Clyde Y. Morris, Baltimore, Md., attorney of record, for plaintiff. Miles & Stockbridge, Baltimore, Md., of counsel.
Edna G. Parker, Washington, D. C., with whom was Asst. Atty. Gen. Johnnie M. Walters, for defendant. Philip R. Miller, Washington, D. C., of counsel.
Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS, COLLINS, SKELTON, and NICHOLS, Judges.
This is an action to recover additional statutory interest in the amount of $1,825,585.59 for the years 1954 and 1955, and assessed interest in the amount of $23,780.10 for the year 1954. The issues presented involve the extent to which section 1481 of the Internal Revenue Code of 19541 is applicable to the instant case, and the dates at which overpayments of corporate income taxes, within the meaning of section 6611(a) and (b), occurred for the years in question. The facts are as stipulated and will be recited here only to the extent necessary to explain the basis for our decision that plaintiff is entitled to recover.
Plaintiff, Martin-Marietta Corporation, is successor by consolidation to The Martin Company, formerly The Glenn L. Martin Company. At all times material to this case, plaintiff was primarily engaged in the design, development and production of aerospace vehicles, electronics equipment, communications equipment and guided missiles. Substantially all of plaintiff's sales during ths period were to the U.S. Government or agencies thereof, and were subject to the provisions of the Renegotiation Act of 1951, 65 Stat. 7, 50 U.S.C. App. (1958 Ed.) § 1211 et seq. With respect to the tax years involved in this suit, calendar years 1951 through 1955, plaintiff kept its books and filed its tax returns on the accrual method of accounting and the calendar year basis.
Plaintiff had, for the years 1951 and 1952, net operating losses of $10,919,797.32 and $20,362,485.40, respectively, and no excessive profits under the Renegotiation Act. Accordingly, at the beginning of 1953, plaintiff had available to it a net operating loss carryover in the amount of $31,282,282.72. Since the available loss carryover far exceeded 1953 net income, plaintiff paid no Federal income tax for that year. For 1954, plaintiff paid Federal income tax of $1,042,829.10, including a tax deficiency of $140,756.20 assessed and collected in 1958, plus assessed interest on the deficiency in the amount of $23,780.10. For 1955, plaintiff paid Federal income tax of $10,744,751.72.
In April 1957, the Renegotiation Board determined that plaintiff had excessive profits for 1953 in the amount of $3,162,759. After payment to the Department of the Air Force (the contracting agency), on July 16, 1957, of the full amount of such excessive profits, plus interest at the rate of four percent as provided by the Renegotiation Act, plaintiff filed a petition for a redetermination with the U.S. Tax Court. Prior to payment, plaintiff was notified by the Internal Revenue Service that since it paid no income tax for 1953, plaintiff was not entitled to any tax credit under secton 3806(b) of the Internal Revenue Code of 1939 for that year.2 The Tax Court, in December 1964, affirmed the action of the Renegotiation Board.
On or about September 30, 1958, the Renegotiation Board determined that plaintiff had excessive profits for 1954 in the amount of $5,868,319. Pursuant to demand by the Department of the Air Force for payment of that amount, plus interest at the rate of four percent, plaintiff, in January 1959, posted a bond for the amount claimed and filed a petition for a redetermination with the U.S. Tax Court. The action of the Renegotiation Board was affirmed by the Tax Court in December 1964, and plaintiff paid the full amount of 1954 excessive profits, plus interest, to the Department of the Air Force on or about October 15, 1965. Prior to such payment, on September 24, 1965, plaintiff had been advised by the Internal Revenue Service that for 1954 it had no tax credit, under section 1481(b) of the Internal Revenue Code of 1954, to apply against the renegotiated excessive profits for that year.
In August 1959, the Renegotiation Board determined that plaintiff had excessive profits for 1955 in the amount of $2,979,747. Pursuant to demand by the Department of the Air Force for payment of that amount, plus interest at the rate of four percent, plaintiff, on or about December 3, 1959, posted a bond for the amount claimed and filed a petition for a redetermination with the U.S. Tax Court. Plaintiff was advised by the Internal Revenue Service on October 16, 1959 and again on September 24, 1965, after the Tax Court had affirmed the action of the Renegotiation Board, that for 1955 plaintiff had a tax credit, under section 1481(b), of $1,549,468.19 to apply against the renegotiated excessive profits for that year. Plaintiff had, however, already paid the principal amount of $1,430,278.81 ($2,979,747 of 1955 excessive profits less the tax credit of $1,549,468.19), plus interest, to the Department of the Air Force on or about June 9, 1965.
The excessive profits determination for 1953 by the Renegotiation Board had the effect of reducing plaintiff's net income for that year by the amount of the determination ($3,162,759) and, correspondingly, increasing to $22,087,145.87 the net operating loss carryover available to plaintiff for 1954. Since plaintiff's net income for 1954 before (1) taking into account the net operating loss deduction available from previous years and (2) renegotiation for 1954, was $21,025,076.48, plaintiff overpaid its income tax for 1954 by $1,042,829.10, the entire amount of tax paid by plaintiff for that year.
Similarly, the excessive profits determination for 1954 by the Renegotiation Board reduced plaintiff's net income for that year by the amount of the determination ($5,868,319), and increased to $6,930,388.39 the net operating loss carryover available to plaintiff for 1955. Plaintiff's net income for 1955, again before (1) taking into account the net operating loss deduction from previous years and (2) renegotiation for 1955, was $20,751,501.10. Plaintiff's net income for 1955, after the net operating loss deduction, but before renegotiation, was $13,821,112.71 on which the tax payable was $7,164,081.47. Consequently, plaintiff overpaid its Federal income tax for 1955 in the amount of $3,580,670.25.
On or about June 24, 1966, the Internal Revenue Service notified plaintiff of overassessments of taxes for 1954 and 1955 in the amounts of $1,042,829.10 and $3,580,670, respectively, and refunded those amounts to plaintiff. Statutory interest of $558,770.69 was allowed on the refund of 1954 tax for the period from July 16, 1957, to June 21, 1966. Statutory interest of $439,871.89 was allowed on the refund of 1955 tax, in part for the period from July 16, 1957 to June 21, 1966, and in part from October 15, 1965 to June 21, 1966. The date of July 16, 1957 is the date on which plaintiff paid its excessive profits for the year 1953, and October 15, 1965 is the date on which plaintiff paid its excessive profits for the year 1954. The Internal Revenue Service did not refund the $23,780.10 assessed interest which had been paid on account of the tax deficiency asserted against plaintiff for 1954. No statutory interest was allowed, moreover, for the period from the respective dates of payment of 1954 and 1955 taxes, to the respective dates of payment of 1953 and 1954 renegotiated excessive profits. These amounts of assessed and statutory interest retained by the government constitute the basis of the present suit.
Section 6611 provides with respect to interest on overpayments, in parts pertinent to this suit, that:
The applicable Treasury Regulations specify, moreover, with respect to the computation of interest on an overpayment, that:
* * * 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 * * * and the rate of payment of all amounts subsequently paid with respect to such tax liability. Treasury Regulations on Procedure and Administration (Internal Revenue Code of 1954), § 301.6611-1(b).
Plaintiff's theory for recovery is that absent some specific statutory exception to the above-quoted Code provision, the general interest rules of section 6611 are controlling, whereby plaintiff is entitled to statutory interest on the refunded taxes from their respective dates of overpayment. Plaintiff considers these dates to have been the original dates of payment of the refunded taxes. Defendant's opposition arises from its belief that the tax refunds for 1954 and 1955 had their roots in section 1481, which provides for tax adjustments to earlier years after renegotiation. But for the effect of section 1481, defendant urges, there would have been no adjustments to trigger the resultant overpayments. Accordingly, defendant maintains that section 1481 alone is controlling whereby plaintiff is entitled to no interest, except perhaps as specifically limited by section 1481(b) (3), for the periods prior to repayment of its renegotiated excessive profits. Defendant alternatively...
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Brown & Williamson, Ltd. v. United States
...have refused to adopt the expansive reading of the Seeley dictum which the government espouses. E.g., Martin-Marietta Corp. v. United States, 189 Ct.Cl. 291, 418 F.2d 502 (1969). C. Finally, the government makes several arguments based upon the 1980 treaty which, it asserts, requires the de......