U.S. v. Tate & Lyle North American Sugars, Inc.
| Decision Date | 24 August 2001 |
| Docket Number | No. 97 Civ. 9113(RMB).,97 Civ. 9113(RMB). |
| Citation | 162 F.Supp.2d 236 |
| Parties | UNITED STATES of America, Plaintiff, v. TATE & LYLE NORTH AMERICAN SUGARS, INC., Defendant. |
| Court | U.S. District Court — Southern District of New York |
Sheila M. Gowan, Ramon Reyes, U.S. Attorney's Office, New York City, for plaintiff.
Jonathan Jackel, Forbes Maner, Burt, Maner & Miller, Washington, DC, Mark Davidson, Proskaue, Rose LLP, New York City, for defendant.
Plaintiff, the United States of America ("Plaintiff" or the "IRS" or the "Government"), filed this action on or about December 10, 1997 to recover a $1,526,100.60 interest payment it erroneously made to defendant, Tate & Lyle North American Sugars, Inc. ("Defendant" or "Tate & Lyle,")1, on or about September 24, 1993. Amstar seeks summary judgment, pursuant to Federal Rule of Civil Procedure ("Fed.R.Civ.P.") 56, asserting that the payment to Amstar was proper, and, in any event, the Government's claim for recovery was asserted too late and is barred by the (two year) statute of limitations set forth in 26 U.S.C. § 6532(b).
For the reasons set forth below, Amstar's motion for summary judgment is denied.
In 1990, the Internal Revenue Service ("IRS") audited Amstar for the tax period ended August 16, 1989 (the "8908 return"). (Compl.¶ 16). To facilitate the audit, Tate & Lyle gave the IRS use of an office in the Decatur, Illinois building of A.E. Staley ("Staley"), one of the subsidiaries of Tate & Lyle. (Government's Memorandum of Law in Opposition to Defendant's Motion for Summary Judgment ("Gov't Opp.") at 2). Bill Carnie, the director of taxes for Tate & Lyle, and his assistant, Martha Hoyt, were responsible for the coordination of the audit with the IRS. (Gov't Opp. 4-5).2 Among other things, the IRS reviewed Amstar's August 1989 tax return and, on August 28, 1990, proposed a tax adjustment relating to an $18,009,489.00 net operating loss carry forward that Amstar claimed as a deduction. (Compl.¶ 17). In early November 1990, Bill Carnie appointed Jared Twenty as the new tax director for Tate & Lyle. (Gov't Opp. at 5). Though Mr. Twenty does not recall specific discussions about the proposed adjustment, Twenty said that because of his position, he "had to have participated [in the audit] in some way." (Deposition of Jared Twenty dated January 11, 2000 ("Twenty Dep.") at 69). In December 1990, Defendant agreed in writing to the IRS's proposed adjustment. (Compl.¶ 18).
On December 14, 1990, Defendant sent the IRS a letter concerning the proposed adjustment and enclosing a remittance of $6,497,710.00 ("December 1990 remittance"). . In its letter, Defendant stated that the remittance was for an (anticipated) deficiency in tax, plus interest, resulting from the IRS' adjustment.3 (Gowan Decl., Ex.25). Defendant's letter stated that "[w]e respectfully request that this deposit be identified as a cash bond in your records." (Id.) (emphasis added). Pursuant to Revenue Procedure 84-58, 1984-2 C.B. ("Rev.Proc.84-58") at 503, § 5.02, Amstar's remittance had the effect of stopping interest from accruing on any tax deficiency assessment. (Compl.¶ 21).
On December 14, 1990, in accordance with Amstar's instructions, the IRS prepared a Payment Posting Voucher, which identified the remittance as a "cash bond" and indicated that a Form 316(C)4 should be sent to Amstar. (Compl.¶ 23). In the final Payment Posting Voucher, the IRS typed the letter "X" in the box adjacent to the words "Cash Bond" and the letter "X" in the box adjacent to the words "Send 316(C)"; however, the IRS also typed the amount of the remittance, $6,497,710, beside the designation "Code 670," the code which is used by the IRS to indicate that a remittance is a "subsequent payment."5 (Declaration of Sheila M. Gowan dated October 6, 2000 ("Gowan Decl."), Ex.27).
In September 1993, the IRS issued a Revenue Agent's Report ("RAR"), concluding its audit of the 8908 return. The IRS determined that, as a result of other adjustments in Amstar's favor, Amstar's correct tax liability for the period at issue was less than the amount originally shown in Amstar's tax return and, consequently, also less than the approximately $10 million tax payment that Amstar had made when it filed its return. (Compl.¶ 25). The IRS concluded that Amstar had overpaid its taxes by $173,336.00. (Gowan Decl., Ex.31). In calculating Amstar's correct tax liability (and overpayment), the IRS did not take into account Amstar's December 1990 remittance. (Compl.¶ 26).
On September 24, 1993, the IRS sent Amstar $8,240,206.34 including: (i) the $173,336.00 refund (minus $7,956.61 which was credited to other tax liabilities owed by Amstar), together with interest in the amount of $51,016.35; and (ii) the December 1990 remittance (i.e., $6,497,710.00) together with interest thereon in the amount (at issue here) of $1,526,100.60. .
On January 25, 1996, Rosie Williams, a case manager at the IRS, met with Annie Harris, the Tate & Lyle tax director,6 and informed Harris that the IRS had mistakenly paid interest on the "cash bond." (Gowan Decl., Ex. 37; Gov't Opp. at 14).7 The IRS contended that the $1,526,100.60 interest payment that it made to Amstar (relating to the December 1990 remittance) was a mistake, i.e., the result of a processing error, because the remittance was made as a cash bond. . By letter dated March 14, 1996, Defendant advised the IRS that it would not return the $1,526,100.60. (Gowan Decl., Ex.40).8
By Decision and Order dated September 13, 1999 ("Decision and Order"), this Court denied Defendant's motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), and held that "the circumstances surrounding [Amstar's] December 1990 remittance need to be explored further" and "[d]iscovery concerning the ... remittance is appropriate." (Decision and Order at 9). In the instant motion for summary judgment Defendant argues that, among other things, it made a "payment"—not a cash bond—to the I.R.S. on December 14, 1990, and was, therefore entitled to the interest that the Government paid when that payment was refunded on September 28, 1993.
The standard for granting summary judgment is well established. Summary judgment may not be granted unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Gallo v. Prudential Residential Servs., Ltd. P'ship, 22 F.3d 1219, 1223 (2d Cir. 1994).
The moving party bears the initial burden of "informing the district court of the basis for its motion" and identifying the matter that "it believes demonstrate[s] the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The burden then shifts to the non-moving party which "must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (quoting Fed. R.Civ.P. 56(e)); accord Brass v. American Film Technologies, Inc., 987 F.2d 142 (2d Cir.1993). The substantive law governing the case will identify those facts which are material and "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962)); see also Gallo, 22 F.3d at 1223.
The IRS has a procedure outlining how it will treat remittances from taxpayers. See Rev.Proc. 84-58. Interest runs on tax liabilities from the time they are due until they are paid. 26 U.S.C. § 6601. Taxpayers are permitted to make (advance) deposits in the nature of a "cash bond" for the purpose of tolling the accrual of interest and penalties on potential tax deficiencies. See Rev.Proc. 84-58 at 501, § 1. A taxpayer is not normally entitled to recover interest on a deposit in the nature of a cash bond. See Rev.Proc. at 503, § 5.04 (); see also Busser v. United States, 130 F.2d 537, 538 (3d Cir.1942) ().9 A taxpayer may choose to remit a cash bond "even if [it] means forfeiting the right to interest on an overpayment—in order to preserve jurisdiction in the Tax Court [to challenge an assessment], which depends on the existence of a deficiency [citation omitted], a deficiency that would be wiped out by treatment of the remittance as a payment." Baral v. United States, 528 U.S. 431, 439 n. 2, 120 S.Ct. 1006, 145 L.Ed.2d 949 (2000).
This case turns on the nature of the December 1990 remittance. Amstar contends that under the "facts and circumstances" test outlined by the U.S. Court of Appeals for the Second Circuit in Ertman v. United States, 165 F.3d 204, 208-09 (2d Cir.1999), the remittance made by Amstar was a payment, not a deposit in the nature of a cash bond. (Def.Mem. at 3-15). Applying the same "facts and circumstances" analysis, the IRS asserts that the 1993 payment was a deposit in the nature of a cash bond. (Gov't Opp. at 23-28).
The distinction between an (advance) deposit of tax...
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