CHARLESTON AREA MEDICAL CENTER, INC., CAMC HEALTH EDUCATION AND RESEARCH INSTITUTE, INC., ON BEHALF OF THEMSELVES AND ALL OTHER TAXPAYERS SIMILARLY SITUATED, Plaintiffs-Appellants
UNITED STATES, Defendant-Appellee
from the United States Court of Federal Claims in No.
1:17-cv-01528-EDK, Judge Elaine Kaplan.
D. Sykes, Law Offices of Thomas D. Sykes, LLC, Lake Forest,
IL, argued for plaintiffs-appellants.
Jennifer Marie Rubin, Tax Division, United States Department
of Justice, Washington, DC, argued for defendant-appellee.
Also represented by Deborah K. Snyder, Richard E. Zuckerman.
Lourie, O'Malley, and Chen, Circuit Judges.
O'MALLEY, CIRCUIT JUDGE
case is about the interpretation of 26 U.S.C. §
6621(a)(1), which provides the interest rate that the
Internal Revenue Service ("IRS") must use in
calculating the amount of interest owed on a tax refund.
Section 6621(a)(1) requires the IRS to apply a lower interest
rate for refunds owed to "corporations" than for
refunds owed to other types of entities. Charleston Area
Medical Center, Inc. and CAMC Health Education and Research
Institute (collectively, "the Taxpayers") applied
for a tax refund arguing that they are entitled to the higher
interest rate because they are nonprofit entities and not
corporations. The IRS disagreed and applied the lower
interest rate to calculate the refund owed to the Taxpayers.
The U.S. Court of Federal Claims ("Claims Court")
affirmed, reasoning that the Taxpayers, who are incorporated
under state law, are corporations under § 6621(a)(1)
notwithstanding their status as nonprofit entities.
Charleston Area Med. Ctr., Inc. v. United States,
138 Fed.Cl. 626 (2018). The Taxpayers appeal.
this is an issue of first impression for our court, four
other circuits have concluded that a nonprofit entity that is
incorporated under state law is a corporation under §
6621(a)(1). Maimonides Med. Ctr. v. United States,
809 F.3d 85 (2d Cir. 2015) ("Second
Circuit"); United States v. Detroit Med.
Ctr., 833 F.3d 671 (6th Cir. 2016) ("Sixth
Circuit"); Med. College of Wis. Affiliated
Hosps. v. United States, 854 F.3d 930 (7th Cir. 2017)
("Seventh Circuit"); Wichita Ctr. for
Graduate Med. Educ., Inc. v. United States, 917 F.3d
1221 (10th Cir. 2019) ("Tenth Circuit").
While it is not unheard of for appellants revisiting
questions previously considered by other courts to hit the
circuit split jackpot, this is not such an instance. We agree
with the interpretative path taken by our sister circuits-not
because those decisions came first, but because they were
correct. Therefore, we affirm.
central issue in this appeal is straightforward- does the
word "corporation," as it appears in 26 U.S.C.
§ 6621(a)(1), include nonprofit entities that are
incorporated under state law. But the simplicity ends there.
As is often the case with issues involving the Internal
Revenue Code ("Code"), the parties' arguments
rely on various authorities-including three provisions of the
Code, two iterations of a Treasury regulation, and a notice
of proposed rulemaking issued by the IRS on March 1, 2018. We
detail each below.
6621(a)(1), the specific provision at issue in this appeal,
(1) Overpayment rate The overpayment rate established under
this section shall be the sum of-
(A) the Federal short-term rate determined under subsection
(B) 3 percentage points (2 percentage points in the case of a
To the extent that an overpayment of tax by a
corporation for any taxable period (as defined in
subsection (c)(3), applied by substituting
"overpayment" for "underpayment") exceeds
$10, 000, subparagraph (B) shall be applied by substituting
"0.5 percentage point" for "2 percentage
Id. (emphases added). Section 6621(a)(1) provides
that if the taxpayer is a corporation and its overpayment
exceeds $10, 000, the first $10, 000 will bear interest at
the Federal short-term rate plus two percentage points, and
the remainder will bear interest at the Federal short-term
rate plus one-half of a percentage point. If the taxpayer is
not a corporation and its overpayment exceeds $10, 000, the
entire overpayment will bear interest at the Federal
short-term rate plus three percentage points. Id. In
plain English, a taxpayer's refund is greater if the IRS
applies the formula set out for non-corporations than if it
applies the formula set out for corporations.
sentence in § 6621(a)(1) beginning with the phrase
"To the extent" is referred to as the "flush
language." The flush language cross-references
subsection (c)(3), which in turn, provides:
(3) Large corporate underpayment For purposes of this
(A) In general The term "large corporate
underpayment" means any underpayment
of a tax by a C corporation for any taxable period
if the amount of such underpayment for such period exceeds
(B) Taxable period For purposes of subparagraph
(A), the term "taxable period" means-
(i) in the case of any tax imposed by subtitle A, the taxable