Government Argues Denial of Fuel Tax Credit Refunds Was Proper

AFFORDABLE BIO FEEDSTOCK, INC. and AFFORDABLE BIO FEEDSTOCK OF PORT CHARLOTTE, LLC,
Plaintiffs-Appellants
v.
UNITED STATES OF AMERICA,
Defendant-Appellee

IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT

ON APPEAL FROM THE JUDGMENT OF THE UNITED STATES
DISTRICT COURT FOR THE MIDDLE DISTRICT OF FLORIDA

CORRECTED BRIEF FOR THE APPELLEE

DAVID A. HUBBERT
Acting Assistant Attorney General

BRUCE R. ELLISEN
(202) 514-2929
MATTHEW S. JOHNSHOY
(202) 616-1908
Attorneys
Tax Division
Department of Justice
Post Office Box 502
Washington, D.C. 20044

Of Counsel:
KARIN HOPPMANN

Acting United States Attorney

 

CERTIFICATE OF INTERESTED PERSONS AND
CORPORATE DISCLOSURE STATEMENT

Pursuant to Federal Rule of Appellate Procedure 26.1 and Eleventh Circuit Rule 26.1-1, counsel for the Defendant-Appellee, United States, hereby certify that, to the best of their knowledge, information, and belief, the following persons and entities have an interest in the outcome of this appeal:

Affordable Bio Feedstock, Inc., Plaintiff-Appellant

Affordable Bio Feedstock of Port Charlotte, LLC, Plaintiff-Appellant Auchterlonie, Jennifer, Attorney, IRS Chief Counsel, Internal Revenue Service

Bever, Daniel A., Attorney, IRS Chief Counsel, Internal Revenue Service

Byron, Paul G., United States District Judge for the United States District Court for the Middle District of Florida

Christensen, Jacob E., Attorney, Tax Division, United States Department of Justice

Dunham, Frank W., Branch Chief, IRS Chief Counsel, Internal Revenue Service

Dunlap, Amanda F., Attorney, IRS Chief Counsel, Internal Revenue Service

Edwards Bennehoff, Camile L., Attorney, IRS Chief Counsel, Internal Revenue Service

Edwards, Mark, Attorney, IRS Chief Counsel, Internal Revenue Service

Ellisen, Bruce R., Attorney, Tax Division, United States Department of Justice

Freeman, Abe, owner of Plaintiffs-Appellants

Freeman, Matthew Blake, owner of Plaintiffs-Appellants Freeman, Mimi, owner of Plaintiffs-Appellants

Gerdy Zogby, Joy E., Attorney, IRS Chief Counsel, Internal Revenue Service

Hathaway, David P., Attorney for Plaintiffs-Appellants, Dean, Mead, Egerton, Bloodworth, Capouano & Bozarth, PA

Howard, Meghan M., Attorney, IRS Chief Counsel, Internal Revenue Service

Hubbert, David A., Acting Assistant Attorney General, Tax Division, United States Department of Justice

Ide, Carol K., Attorney, Tax Division, United States Department of Justice

Irick, Daniel C., United States Magistrate Judge for the United States

District Court for the Middle District of Florida

Johnshoy, Matthew S., Attorney, Tax Division, United States Department of Justice

Jones, Gregory L., Attorney, Tax Division, United States Department of Justice

Judkins, Amy L., Attorney for Plaintiffs-Appellants, Normand, PLLC

Langley, Charles J., Attorney, IRS Chief Counsel, Internal Revenue Service

Lowy, Peter A., Attorney for Plaintiffs-Appellants, Chamberlain Hrdlicka White Williams & Aughtry

Maher, Joseph T., Attorney, IRS Chief Counsel, Internal Revenue Service

May, Michael M., Attorney, Tax Division, United States Department of Justice

Paul, William M., Acting IRS Chief Counsel, Internal Revenue Service

Phillips, Jacob, Attorney for Plaintiffs-Appellants, Normand PLLC

Rettig, Charles P., Commissioner of Internal Revenue, Internal Revenue Service

Ugolini, Francesca, Chief, Appellate Section, Tax Division, United States Department of Justice

United States of America, Defendant-Appellee

Yan, Wendy C., Attorney, IRS Chief Counsel, Internal Revenue Service

This certificate of interested persons and corporate disclosure statement has been amended to add Jennifer Auchterlonie, Daniel Bever, Jacob Christensen, Frank Dunham, Amanda Dunlap, Camile Edwards Bennehoff, Mark Edwards, Bruce Ellisen, Joy Gerdy Zogby, Meghan Howard, Carol Ide, Charles Langley, Joseph Maher, and Wendy Yan, who have worked on this matter.

STATEMENT REGARDING ORAL ARGUMENT

Pursuant to 11th Cir. R. 28-1(c) and Fed. R. App. P. 34(a), counsel for the United States respectfully inform this Court that they believe oral argument would be helpful in light of the novel issue presented.

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TABLE OF CONTENTS

Certificate of Interested Persons and Corporate Disclosure Statement

Statement regarding oral argument

Table of contents

Table of citations

Statement of jurisdiction

Statement of the issues

Statement of the case

Summary of argument

Argument

The District Court correctly held that neither taxpayer is entitled to a tax refund

Conclusion

Addendum

Certificate of compliance

TABLE OF CITATIONS

Cases:

Automobile Club of Mich. v. Commissioner, 353 U.S. 180 (1957)

Batchelor-Robjohns v. United States, 788 F.3d 1280 (11th Cir. 2015)

Boggs v. Commissioner, 784 F.2d 1166 (4th Cir. 1986)

Bokum v. Commissioner, 992 F.2d 1136 (11th Cir. 1993)

Bryant v. Jones, 575 F.3d 1281 (11th Cir. 2009)

Carpenter v. United States, 495 F.2d 175 (5th Cir. 1974)

Chapter 7 Trustee v. Gate Gourmet, Inc., 683 F.3d 1249 (11th Cir. 2012)

CWT Farms, Inc. v. Commissioner, 755 F.2d 790 (11th Cir. 1985)

Dickman v. Commissioner, 465 U.S. 330 (1984)

Dixon v. United States, 381 U.S. 68 (1965)

Doe v. Moore, 410 F.3d 1337 (11th Cir. 2005)

Einhorn v. DeWitt, 618 F.2d 347 (5th Cir. 1980)

Etter Grain Co. v. United States, 462 F.2d 259 (5th Cir. 1972)

F.D.I.C. v. Harrison, 735 F.2d 408 (11th Cir. 1984)

Feldman v. Commissioner, 20 F.3d 1128 (11th Cir. 1994)

INDOPCO, Inc. v. Commissioner, 503 U.S. 79 (1992)22

Lansons, Inc. v. Commissioner, 622 F.2d 774 (5th Cir. 1980)

LeCroy Research Systems Corp. v. Commissioner, 751 F.2d 123 (2d Cir. 1984)

Lesavoy Foundation v. Commissioner, 238 F.2d 589 (3d Cir. 1956)

*Lewis v. Reynolds, 284 U.S. 281 (1932), modified, 284 U.S. 599 (1932)

Little v. T-Mobile USA, Inc., 691 F.3d 1302 (11th Cir. 2012)2

Lua v. United States, 843 F.3d 950 (Fed. Cir. 2016)

McKenny v. United States, 973 F.3d 1291 (11th Cir. 2020)

MedChem (P.R.), Inc. v. Commissioner, 295 F.3d 118 (1st Cir. 2002)

Moya v. Commissioner, 152 T.C. 182 (2019)

New Colonial Ice Co. v. Helvering, 292 U.S. 435 (1934)

*O.P.M. v. Richmond, 496 U.S. 414 (1990)

Packard v. Commissioner, 746 F.3d 1219 (11th Cir. 2014)

Randall v. Commissioner, 733 F.2d 1565 (11th Cir. 1984)

Rendon v. United States Attorney General, 927 F.3d 1252 (11th Cir. 2020)

Romano-Murphy v. Commissioner, 816 F.3d 707 (11th Cir. 2016)

Sanz v. United States Sec. Ins. Co., 328 F.3d 1314 (11th Cir. 2003)

Scott v. United States, 825 F.3d 1275 (11th Cir. 2016)

Shnier v. United States, 151 Fed. Cl. 1 (2020)

*Shuford v. Fidelity Nat'l Property & Cas. Ins. Co., 508 F.3d 1337 (11th Cir. 2007)

Smith v. United States, 478 F.2d 398 (5th Cir. 1973)

Tefel v. Reno, 180 F.3d 1286 (11th Cir. 1999)

Tovar-Alvarez v. U.S. Atty. Gen., 427 F.3d 1350 (11th Cir. 2005)

United States v. Beane, 841 F.3d 1273 (11th Cir. 2016)

United States v. Burke, 504 U.S. 229 (1992)41

United States v. McFerrin, 570 F.3d 672 (5th Cir. 2009)

United States v. Stein, 881 F.3d 853 (11th Cir. 2018) (en banc)

United States v. Vonderau, 837 F.2d 1540 (11th Cir. 1988)

*United States v. Walcott, 972 F.2d 323 (11th Cir. 1992)

Valley Ice & Fuel Co., Inc. v. United States, 30 F.3d 635 (5th Cir. 1994)

Statutes:

26 U.S.C.:

§ 34(a)(3)

§ 101(6) (1939)

§ 501(c)(3)

§ 4041

§ 4041(a)

§ 4041(a)(2)(B)

§ 4041(b)

§ 4041(f)

§ 4041(g)

§ 4041(h)

§ 4081

§ 4081(a)(2)(A)(i)

§ 4101

*§ 6206

*§ 6426

§ 6426(a)

§ 6426(a)(2)

§ 6426(c)

*§ 6426(d)

*§ 6426(d)(1)

§ 6426(d)(2)

§ 6426(d)(2)(G)

§ 6426(e)

*§ 6427

*§ 6427(e)

*§ 6427(e)(2)

§ 6427(e)(3)

§ 6427(e)(4)

§ 6511

§ 6532(a)

§ 6532(b)

§ 6675(b)

§ 7422(a)

§ 7422(b)

§ 7803(a)(3)

§ 7803(a)(3)(A)

§ 7805(b)(8)

28 U.S.C.:

§ 1291

§ 1346(a)(1)

Protecting Americans from Tax Hikes Act of 2015, Pub. L. No. 114-113, § 192, 129 Stat. 2242 (2015)

Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, Pub. L. No. 109-59, § 11113(b), 119 Stat. 1144 (2005).

Miscellaneous:

151 Cong. Rec. S5201 (May 16, 2005)

Fed. R. App. P. 28(a)(9)(A)

IRS Notice 2006-92, 2006-43 I.R.B. 774

IRS Notice 2016-05, 2016-6 I.R.B. 302

Treasury Regulations (26 C.F.R.):

§ 48.4101-1

§ 48.4101-1(i)(3)

§ 601.201

13, 15, 47

§ 601.201(l)(5)

§ 601.201(m)

U.S. CONST. art. I, § 9, cl. 7
(the Appropriations Clause)

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STATEMENT OF JURISDICTION

Plaintiffs-Appellants, Affordable Bio Feedstock, Inc. (“ABF”) and Affordable Bio Feedstock of Port Charlotte, LLC (“ABF-PC”), (collectively “taxpayers”) appeal from the judgment of the District Court denying their claims for tax refunds. After being assessed additional tax liabilities, both taxpayers made payments as required by 28 U.S.C. § 1346(a)(1), timely filed administrative claims for refund as required by I.R.C. §§ 6511 and 7422(a), and timely filed a joint complaint in the District Court within the time period prescribed by I.R.C. § 6532(a). Therefore, the District Court had jurisdiction under 28 U.S.C. §1346(a)(1).

On March 29, 2021, the District Court entered an order granting summary judgment for the United States and then entered final judgment on March 31, 2021. (Docs. 60, 62.) On May 27, 2021, taxpayers filed a timely notice of appeal. (Doc. 65.) This Court has jurisdiction under 28 U.S.C. § 1291.

BRIEF FOR THE APPELLEE

STATEMENT OF THE ISSUES

1. Whether the District Court correctly held that the Supreme Court's decision in O.P.M. v. Richmond, 496 U.S. 414 (1990), interpreting the Appropriations Clause of the United States Constitution, art. I, § 9, cl. 7, precludes taxpayers' reliance on equitable estoppel to seek a monetary remedy not authorized by statute.

2. Whether taxpayers have identified a genuine issue of material fact such that the United States was not entitled to summary judgment.

STATEMENT OF THE CASE

(i) Course of proceedings and disposition in the court below

Taxpayers sued for a refund of payments they made after the IRS assessed each taxpayer with liabilities under I.R.C. § 6206 for receiving excess payments under I.R.C. § 6427. (Doc. 1.) The Government moved to dismiss for failure to state a claim. (Doc. 12; see also Docs. 14, 19, 24.) The District Court denied the motion to dismiss as to the tax amounts assessed (Doc. 26 at 2-3) but granted it as to penalties, which had become moot due to the abatement of the penalty assessments (Doc. 26 at 2 n.2).

After discovery, the parties filed cross-motions for summary judgment. (Docs. 42, 45.) The parties stipulated many of the relevant facts. (Docs. 30, 46.) The District Court granted summary judgment for the United States. (Doc. 60 at 21.) The District Court recognized that taxpayers had stipulated that they were not arguing “that they qualify for the claimed credits under § 6427(e) (or § 6426(d), which does not permit refunds).” (Doc. 60 at 15.) The court found that pursuant to I.R.C. § 6206 the IRS had authority to assess and collect the erroneously paid amounts. (Doc. 60 at 15-17.) The court also concluded that the Supreme Court's decision in O.P.M. v. Richmond, 496 U.S. 414 (1990), “unequivocally addressed and prohibited the application of the equitable estoppel doctrine to these circumstances.” (Doc. 60 at 18.) Thus, based on Richmond, the District Court held that “the Appropriations Clause prohibits a claim for payment of money from the Treasury that is contrary to a statutory appropriation.” (Doc. 60 at 20.)

(ii) Statement of the facts

a. Statutory background

In 2005, Congress created an alternative fuel tax credit in I.R.C. § 6426(d) that is intended to help decrease the nation's dependence on foreign oil. See 151 Cong. Rec. S5201 (May 16, 2005); Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, Pub. L. No. 109-59, § 11113(b), 119 Stat. 1144, 1947-48 (2005). In order to claim an alternative fuel tax credit, a taxpayer must first register as an alternative fueler under I.R.C. § 4101. I.R.C. § 6426(a); see IRS Notice 2006-92, § 3(b)(ii), § 5, 2006-43 I.R.B. 774. In order to register, an applicant must file a Form 637 and request a registration for a particular type of activity, which is then indicated by certain activity letters. IRS Notice 2006-92, § 5(a). Taxpayers here applied for and received “AL” registrations. (Doc. 46 at 5-6.)

After receiving Form 637, the IRS then completes an initial compliance review of the Form 637 and determines whether the taxpayer's activities meet the activity test for the applied-for activity. (Doc. 46 at 5-6.) See IRS Notice 2006-92, § 5(b). A Form 637 is approved only if the IRS determines that the taxpayer is engaged in or likely to be engaged in activities that correlate to the applied-for activity letter. (Doc. 46 at 5.) See IRS Notice 2006-92, § 5(b)(1).

The alternative fuel tax credit in I.R.C. § 6426(d) operates by allowing a taxpayer a tax credit toward excise tax liabilities imposed by I.R.C. § 4041 when the taxpayer either uses or sells an alternative fuel for certain uses.¹ I.R.C. § 6426(a)(2), (d)(1); see I.R.C. § 4041(a). The term “alternative fuel” generally includes “liquid fuel derived from biomass” (§ 6426(d)(2)(G)), but does not include “biodiesel” (§ 6426(d)(2) (last sentence)). Biodiesel may be used to qualify for a biodiesel mixture tax credit under I.R.C. § 6426(c). The amount of the alternative fuel tax credit is equal to 50 cents per gallon of “alternative fuel. . . sold by the taxpayer for use as a fuel in a motor vehicle or motorboat, sold by the taxpayer for use as a fuel in aviation, or so used by the taxpayer.” I.R.C. § 6426(d)(1). In contrast, the excise taxes imposed directly on the sales or uses of alternative fuels vary between 18.3 cents and 24.3 cents per gallon of fuel used or sold for use as a fuel (in a motor vehicle or motorboat). I.R.C. §§ 4041(a)(2)(B), 4081(a)(2)(A)(i). Thus, the alternative fuel tax credit will naturally be expected to exceed the excise tax due on each gallon of alternative fuel sold, and assuming the taxpayer does not have other excise tax liabilities, there would be a net excess amount of alternative fuel tax credits.

If a taxpayer generates excess alternative fuel tax credits under I.R.C. § 6426(d), i.e., more than the taxpayer is able to use as offsets against its I.R.C. § 4041 excise tax liability, then the taxpayer may be entitled to a direct payment of the excess amount of alternative fuel tax credits under I.R.C. § 6427(e)(2).² Pursuant to I.R.C. § 6427(e)(3), the amount payable is limited to the amount by which the credit calculated exceeds the amount allowed against the taxpayer's excise tax liability under I.R.C. § 6426. See IRS Notice 2006-92, § 3(b)(2)(D). In order to receive a payment, a taxpayer must be registered as an alternative fueler under I.R.C. § 4101. I.R.C. § 6427(e)(4).

The alternative fuel tax credit has a history of expiring and being reauthorized. As relates to this case, the alternative fuel tax credit expired at the end of 2014, and was only reauthorized on December 18, 2015, by the Protecting Americans from Tax Hikes Act of 2015, Pub. L. No. 114-113, § 192, 129 Stat. 2242, 3075 (2015), which retroactively authorized claims for activities throughout 2015 and made the alternative fuel tax credit available through December 31, 2016. As directed, the IRS established procedures for taxpayers to submit claims for 2015. Id. at § 192(c); IRS Notice 2016-05, 2016-6 I.R.B. 302.

Section 6206 makes a taxpayer liable for the amount of any payment received under § 6427 “which constitutes an excessive amount (as defined in section 6675(b))” and provides that the IRS may “assess[ ] and collect[ ]” any excessive amount as if it were an excise tax liability under I.R.C. §§ 4041, 4081. Section 6206 further provides that the IRS has “3 years from the last date prescribed for the filing of the claim under section . . . 6427” to assess such liability. Under I.R.C. § 6675(b), the term “excessive amount” is defined to mean “the amount by which . . . the amount claimed under section . . . 6427 . . . for any period, exceeds . . . the amount allowable under such section for such period.” Thus, any taxpayer who receives a payment greater than the amount allowable under I.R.C. § 6427 is expressly liable under I.R.C. § 6206.

b. Factual background

ABF was started in 2008 in Kissimmee, Florida and was owned and operated by Abe “Bill” Freeman, his son Blake Freeman, and his daughter-in-law Mimi Freeman (collectively “the Freemans”). (Doc. 46 at 2.) A separate but similar company, ABF-PC, was also started by the Freemans in 2012. (Doc. 46 at 2.) Both companies were engaged in the business of acquiring waste grease and processing it into a product called “brown grease.” (Doc. 46 at 2.) Their brown grease product was then sold to a related party, Florida Biodiesel, which further sold the product primarily to a single biofuel broker, Green Energy (GEA) Group. (Doc. 46 at 3.)

Thus, neither taxpayer used the brown grease product during the periods at issue as fuel. (Doc. 46 at 3.) And neither taxpayer sold their brown grease product for use as a fuel in a motor vehicle or motorboat (or in aviation). (See Doc. 30 at 1; Doc. 46 at 3 (stipulating that taxpayers' only customer (Florida Biodiesel) sold their product to another broker); see also Doc. 48-1 at 2-5.) Instead, taxpayers' business model was to sell their brown grease product as a commodity (Doc. 48-1 at 3, 5), which was used for the production of biodiesel.³ (Doc. 46 at 3-4; Doc. 45-5 at 9; see also Doc. 45 at 14-15.) In addition, taxpayers were paid fees by waste grease haulers to take their grease for processing.

(Doc. 46 at 3; Doc. 45-5 at 9.) Because of their multiple revenue streams, both taxpayers were generally profitable without considering the credits (Doc. 46 at 4), and their business models were never based on receiving incentive tax credits. (Doc. 42-1 at 4; Doc. 42-4 at 2-3.)

In May and June 2013, ABF and ABF-PC each submitted a Form 637 applying for an “AL” registration as an alternative fueler that sells for use or uses alternative fuel in a motor vehicle or boat.⁴ (Doc. 46 at 5-6; Doc. 42-8; Doc. 42-9.) The IRS then conducted an initial compliance review. (Doc. 46 at 5.) As part of this review, starting at the Cincinnati Service Center, the Form 637 manager or her delegate checked that the application was complete, ran background checks on the entities and owners regarding their compliance with tax obligations, and then referred the file to the field group responsible for the area of coverage. (Doc. 46 at 5-6.) The relevant field group then toured the facilities and interviewed the owners, which resulted in both taxpayers being recommended for approval. (Doc. 46 at 6.)

In August and September 2013, taxpayers' applications were approved, and each received a registration letter granting its “AL” registration related to the alternative fuel tax credit. (Doc. 46 at 6-7; Docs. 42-6, 42-7.) After receiving their registrations, both taxpayers were then able to file claims for alternative fuel tax credits and apparently did so throughout the intervening time periods. Prior to the periods at issue, ABF was audited several times and subject to a follow-up compliance review that was completed in March 2016. (Doc. 46 at 7-9.) In each audit and compliance review, the IRS concluded that ABF was entitled to the alternative fuel tax credits it claimed and that there were no problems with its “AL” registration. (Doc. 46 at 7-9.)

In February 2016, ABF submitted a claim for payment of an amount of alternative fuel tax credits for the 2015 year by filing a Form 8849 claiming $423,315. (Doc. 46 at 9; Doc. 42-13 at 1-3.) Similarly, in March 2016, ABF-PC submitted claims on Forms 8849 for payment of amounts of alternative fuel tax credits for January 2016 of $42,112 and February 2016 of $48,128. (Doc. 46 at 9; Doc. 42-16 at 1-4.) The IRS paid the amounts claimed on March 22, 2016 (ABF) and April 19, 2016 (ABF-PC). (Doc. 46 at 9; Doc. 42-1 at 20-21, 25-27; see also Doc. 42-26 at 1; Doc. 42-27 at 1.) Taxpayers did not, however, sell the fuel for which they claimed those amounts to an entity that used the fuel in a motor vehicle or motorboat (or in aviation), and taxpayers did not use the fuel themselves. (Doc. 46 at 3; Doc. 42-3 at 18-20; see also Doc. 30 at 1.)

The IRS commenced audits of both taxpayers regarding the claims at issue in October and November 2016. (Doc. 46 at 9.) On July 20, 2017, the IRS sent letters proposing to disallow taxpayers' claims because taxpayers did not sell for use as a fuel or use their alternative fuel in a motor vehicle or motorboat; instead they sold it to their only customer (Florida Biodiesel) who sold the fuel on to others. (Doc. 42-14 at 6; Doc. 42-17 at 6; see Doc. 1 at 8; Doc. 46 at 3.) This meant that taxpayers did not qualify for the alternative fuel tax credit under I.R.C. § 6426(d) and thus the claimed credits “constitute[d] an excessive amount under IRC 6206, 4101, and 4081.” (Doc. 42-14 at 4; Doc. 42-17 at 5; see Doc. 46 at 9-10.) During the course of the audits, taxpayers asked the IRS to withdraw their “AL” registrations. (Doc. 42-1 at 19; Doc. 42-12.) On January 25, 2018, the IRS issued each taxpayer a letter revoking their “AL” registration effective as of that date. (Doc. 46 at 10; Docs. 42-10, 42-11.)

In October 2017, both taxpayers sold their assets in a combined transaction to an unrelated grease hauling company, Liquid Environmental Services, for over $7 million. (Doc. 46 at 9.)

On September 17, 2018, the IRS assessed ABF $423,315, the amount it had been paid for 2015, and assessed ABF-PC $90,240, the amount it had been paid for January and February 2016. (Doc. 42-1 at 23-24, 29-30, Docs. 42-15, 42-18; see Doc. 46 at 10.) On October 25, 2018, taxpayers each paid to the IRS a portion ($3,497.09 for ABF and $47,899.91 for ABF-PC) of the excess amounts they had received. (Doc. 46 at 10.) In March 2019, each taxpayer filed a formal claim for refund requesting the refund of its partial payments. (Doc. 46 at 10; Doc. 42-28 at 1-9, 14-19; Doc. 53-1 at 2-10.)

On September 23, 2019, taxpayers filed this suit seeking refunds of the amounts they had repaid. (Doc. 1.) After discovery, the parties filed cross-motions for summary judgment. (Docs. 42, 45; see also Docs. 45, 47, 53, 54.)

In their summary judgment briefing, taxpayers did not argue that they qualified to receive alternative fuel tax credits under the terms of the relevant statutes. Instead, taxpayers argued that they were entitled to refunds based on their interpretation of two Treasury regulations and on the principles of estoppel that they asserted were embodied in prior cases. (Doc. 45 at 2-4, 31-36; Doc. 47 at 12-18.) Taxpayers first argued that by assessing their liabilities for the excess amounts they had received the IRS had, in effect, retroactively revoked their fuel registrations in violation of two regulations: Treas. Reg. §48.4101-1 and Treas. Reg. § 601.201. (See Doc. 45 at 31-34; Doc. 47 at 12, 16.) Taxpayers further argued that what they described as the estoppel principles from Lansons, Inc. v. Commissioner, 622 F.2d 774 (5th Cir. 1980), and similar cases, restricted the IRS's right to assess their liabilities. (Doc. 45 at 3-4, 34-36; Doc. 47 at 10-11, 15-16.) Taxpayers contended that, under their arguments based on the regulations, they did not need to show detrimental reliance. (Doc. 47 at 16.) Even so, taxpayers went on to argue they had suffered detrimental reliance. (Doc. 47 at 16-18.) Finally, taxpayers argued that the Supreme Court's decision in O.P.M. v. Richmond, 496 U.S. 414 (1990), did not foreclose a theory of estoppel in this case and did not foreclose reliance on Lansons. (Doc. 45 at 35-36; Doc. 47 at 2, 10.)

The Government argued that this was a refund suit for the payment of tax credits, which meant taxpayers had the burden to prove they overpaid their liabilities under the Internal Revenue Code by proving they were entitled to payments of alternative fuel tax credits. (Doc. 42 at 1, 6-7.) Because taxpayers had stipulated that they could not prove they met the requirements for any alternative fuel tax credit under § 6426(d), the Government argued that what taxpayers were really seeking was an extra-statutory payment based on estoppel. (Doc. 42 at 7-8.) And under Richmond, “there can be no entitlement to recover any amount of money from the Treasury on such basis.” (Doc. 42 at 7.) The Government also argued that the assessments could not constitute an improper “claw back” of payments because assessment and collection of excess payments was authorized by I.R.C. § 6206. (Doc. 42 at 8-9.)

Next, the Government argued that, even if estoppel could apply, (i) taxpayers would still need to demonstrate detrimental reliance to prevail on an estoppel theory and (ii) taxpayers had not offered any evidence in support of detrimental reliance. (Doc. 42 at 6.) Finally, in response to taxpayers' arguments regarding Lansons, the Government argued that Lansons (and similar cases) were distinguishable and not controlling, and that even if they were applicable, taxpayers could not show they suffered the sort of inordinate adverse effect due to the IRS's actions required by Lansons. (Doc. 48 at 12-17.)

The District Court granted summary judgment for the United States. (Doc. 60 at 21.) The court interpreted taxpayers' stipulation (Doc. 30 at 1) to mean that taxpayers were not arguing “that they qualify for the claimed credits under § 6427(e) (or § 6426(d), which does not permit refunds).” (Doc. 60 at 15; see also id. at 8, 20.) The court also held that Richmond and the Appropriations Clause applied in this case, and that it could not “grant Plaintiffs refunds of alternative fuel excise tax credits that Congress has not authorized.” (Id. at 10.) The court explained that, contrary to taxpayers' arguments, the determinations the IRS made in granting fuel registrations under Treas. Reg. § 48.4101-1 did not mean that taxpayers had received determination letters under Treas. Reg. § 601.201. (Id. at 11-13.) The court also held that taxpayers' registrations were not determination letters because they “did not submit a written inquiry” for a determination letter but instead made “an application for registration.” (Id. at 13.) For this reason, I.R.C. § 601.201(l)(5) was not applicable to the registrations, and thus, Lansons, was not directly applicable to their case. (Id. at 13-14.)

The District Court also held that the IRS was specifically authorized to make assessments of excess payments under I.R.C. § 6206, and that the restriction on revoking registrations under Treas. Reg. § 48.4101-1 applied only to registrations and did not apply to assessments. (Id. at 15-17.) The court explained that a registration was only one requirement to receive a credit, a registration alone was insufficient, and that a registration could not “shield a claimant from an assessment.” (Id. at 16.)

Finally, the District Court rejected taxpayers' policy arguments why Richmond should not apply. The court explained that a “failure to apply Richmond here would render 26 U.S.C. § 6206, § 6426, and § 6427 invalid by prioritizing registrations issued under Treas. Reg. § 48.4101-1 at the expense of the statutory requirements.” (Doc. 60 at 17-18.) This would, in effect, make registrations “a license to receive payment of credits.” (Id. at 18 (quotation marks and citation omitted).) The court further explained that Richmond “establishe[d] that the Appropriations Clause prohibits a claim for payment of money from the Treasury that is contrary to a statutory appropriation.” (Id. at 20.) Thus, the court concluded that because taxpayers had not claimed to be entitled to any credit under the Internal Revenue Code, and the IRS had not acted wrongly in making its assessments, taxpayers were “not entitled to reimbursement of their protest payments.” (Id. at 20.)

(iii) Statement of the standard or scope of review

This Court reviews a district court's order granting summary judgment de novo. Scott v. United States, 825 F.3d 1275, 1278 (11th Cir. 2016). “Whether equitable estoppel should apply is a legal question that [this Court] review[s] de novo.” Tovar-Alvarez v. U.S. Atty. Gen., 427 F.3d 1350, 1353 (11th Cir. 2005) (citing United States v. Walcott, 972 F.2d 323, 325 (11th Cir. 1992)). However, “[t]he constituent elements of estoppel constitute questions of fact” that this Court reviews for clear error. Walcott, 927 F.2d at 325 (cleaned up).

SUMMARY OF ARGUMENT

1. The District Court properly granted summary judgment because neither taxpayer is entitled to a refund of any money under the Internal Revenue Code. Taxpayers have stipulated they are not attempting to prove they are entitled to any payment of an alternative fuel tax credit under the Code, and the record reflects that taxpayers did not meet all the requirements for payment. That both taxpayers had fuel registrations does not change the fact that they did not fulfill all the other requirements to earn payments of alternative fuel tax credits. Equity cannot order payments not authorized by statute.

The District Court also correctly held that the IRS's assessments of taxpayers' liabilities were not improper and were authorized by I.R.C. § 6206. This statutory authorization defeats any claim that taxpayers cannot be held liable for excess payments. Taxpayers have failed to make any argument regarding I.R.C. § 6206 in either the District Court or their opening brief, and thus, have waived any such arguments.

2. Taxpayers attempt to circumvent their lack of any legal claim to the monies they seek by asking that the Government be estopped and ordered to make payments contrary to the underlying statutes (i.e., ordered to make illegal payments). Such relief is foreclosed by the Supreme Court's decision in O.P.M. v. Richmond, 496 U.S. 414 (1990), where the Court held that under the Appropriations Clause “funds may be paid out only on the basis of a judgment based on a substantive right to compensation based on the express terms of a specific statute.” Id. at 432. Thus, the Court concluded that there could be no “estoppel against the Government by a claimant seeking public funds” because such payments would violate the Appropriations Clause and the Court “cannot estop the Constitution.” Id. at 434.

Taxpayers' argument that Richmond is not an “across-the-board renunciation of estoppel against the government in any case involving money” is contrary to both the explicit holding in Richmond and this Court's caselaw interpreting Richmond. Richmond establishes a clear rule that the judiciary cannot use equitable estoppel to order a payment of public funds that is not authorized by a specific statute because such an order would violate the Appropriations Clause. Taxpayers' various arguments seeking to avoid the effect of Richmond here lack merit.

3. Taxpayers invoke what they describe as the “estoppel principles” in Lansons, Inc. v. Commissioner, 622 F.2d 774 (5th Cir. 1980), and similar cases from other circuits, in support of a baseless policy argument that contradicts the controlling statutes. Nowhere do taxpayers explain how their policy-based argument for estoppel can overcome the express liability imposed on them by I.R.C. § 6206. And taxpayers fail to explain how the policy argument that they distill from pre-Richmond cases could still be viable after Richmond. Given that taxpayers' “estoppel principles” are contrary to both the statute and the Supreme Court's more recent caselaw, taxpayers' arguments must fail.

4. Taxpayers finally claim that there are fact issues regarding the application of Lansons that should have prevented summary judgment, but they do not identify any particular fact issues or cite to any specific evidence as creating a genuine issue of material fact. As such, this Court should deem this argument abandoned.

In any event, taxpayers have failed to put forward sufficient evidence to raise a fact question that could prevent summary judgment even if Lansons (or the so-called estoppel principles in Lansons) applied here. In Lansons, the former Fifth Circuit required not only reliance that was detrimental but that a taxpayer had suffered an “inordinate adverse effect.” 622 F.2d at 778. Taxpayers have failed to demonstrate that they suffered a detriment in reliance on their registrations, and they have never claimed or put forward any evidence that they suffered an inordinate adverse effect. As such, even if Lansons applied here, no reasonable jury could find that taxpayers suffered a detriment let alone the sort of inordinate adverse effect that Lansons required. Therefore, the Government would still be entitled to summary judgment even if Lansons applied.

This Court should, however, reject any application of Lansons to this case and hold that under Richmond there can be no estoppel. Estopping the Government in this case would not only nullify the clear statutory mandate to collect excess payments in I.R.C. § 6206, but it would award taxpayers a judgment for money not authorized by any statute in contravention of the Appropriations Clause and Richmond.

ARGUMENT

The District Court correctly held that neither taxpayer is entitled to a tax refund

A. Refund suits and tax credits

“[A] taxpayer in a refund suit has the twin burdens of showing that the government's assessment is wrong, and of establishing the correct amount of the refund due.” United States v. Stein, 881 F.3d 853, 856 (11th Cir. 2018) (en banc) (cleaned up). Because a refund suit is an action for money, “'[i]t is incumbent upon the claimant to show that the United States has money which belongs to him.'” McKenny v. United States, 973 F.3d 1291, 1296-97 (11th Cir. 2020) (quoting Lewis v. Reynolds, 284 U.S. 281, 283 (1932), modified, 284 U.S. 599 (1932)). “[T]he ultimate question presented for decision, upon a claim for refund, is whether the taxpayer has overpaid his tax,” and thus, “[a]n overpayment must appear before a refund is authorized.” Lewis, 284 U.S. at 283.

Tax “[d]eductions and credits are matters of legislative grace and are not allowable unless Congress specifically provides for them.” Packard v. Commissioner, 746 F.3d 1219, 1222 (11th Cir. 2014) (citing INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); Randall v. Commissioner, 733 F.2d 1565, 1567 (11th Cir. 1984)). As such, tax deductions and credits are to be narrowly construed, United States v. McFerrin, 570 F.3d 672, 675 (5th Cir. 2009), and the burden is on the taxpayer to “show that he comes within [the statute's] terms.” New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934) (“[A] taxpayer seeking a deduction must be able to point to an applicable statute and show that he comes within its terms.”). Ambiguities in a statute granting a deduction or credit are not construed in favor of the taxpayer. MedChem (P.R.), Inc. v. Commissioner, 295 F.3d 118, 123 n.6 (1st Cir. 2002).

B. Neither taxpayer is entitled to a refund because neither taxpayer is entitled to any payment under I.R.C. § 6427(e)(2) of any amount of alternative fuel tax credits under I.R.C. § 6426(d)(1)

The District Court properly granted summary judgment for the Government because neither taxpayer is entitled to a refund of any amount under the Internal Revenue Code. Taxpayers entered a stipulation that they are not claiming that their activities qualified for any alternative fuel tax credit under I.R.C. § 6426(d). (Doc. 30 at 1.) This stipulation alone means that taxpayers do not qualify for any refund. In addition, the record reflects that neither taxpayer used or sold an alternative fuel for use as a fuel in either a motor vehicle or motorboat (or in aviation) as is required to be allowed a credit under § 6426(d)(1) that would support a payment under I.R.C. § 6427(e)(2). (See Doc. 46 at 3.) Taxpayers only sold their brown grease product to a related party, Florida Biodiesel, who did not use the brown grease product but instead merely sold it on to another fuel broker. (Doc. 46 a 3.) In fact, both taxpayers' business model was to sell their brown grease product so that it could be used as a feedstock for the production of biodiesel. (Doc. 46 at 3; Doc. 45-5 at 9; see also Doc. 45 at 14-15.)

Put simply, taxpayers do not qualify (and have stipulated they do not qualify) for any alternative fuel tax credit because they did not meet all of the statutory requirements. The fact that both taxpayers were registered, as required by I.R.C. § 6426(a) and I.R.C. § 6427(e)(4), does not change the fact they did not meet the other requirements. Equity cannot be used to order payments not authorized by statute. See Valley Ice & Fuel Co., Inc. v. United States, 30 F.3d 635, 639 n.8 (5th Cir. 1994) (citing O.P.M. v. Richmond, 496 U.S. 414, 425-26(1990)) (holding in a case regarding payments under I.R.C. § 6427 that equitable estoppel cannot “justif[y] depriving the Treasury of funds for which the relevant statutes do not authorize disbursement”); see also Batchelor-Robjohns v. United States, 788 F.3d 1280, 1296-97 (11th Cir. 2015) (explaining that “equities” cannot trump the applicable tax statutes, particularly in matters of legislative grace, such as tax deductions).

The District Court also held that the IRS's assessments were not improper and were authorized by I.R.C. § 6206. (Doc. 60 at 15-17, 20.)

Section 6206 makes taxpayers liable to repay any portion of any payment made under § 6427 that constitutes an “excessive amount” as defined in I.R.C. § 6675(b), meaning more than was allowable under the Code. Given I.R.C. § 6206, there is simply no basis in law for a court to now order the return of the amounts that taxpayers paid to the IRS: taxpayers have only repaid amounts they legally owed. Section 6206 defeats any estoppel-based theory that taxpayers cannot be held liable for the excess payments they received.

Taxpayers have persistently ignored I.R.C. § 6206. As the District Court recognized, taxpayers “d[id] not discuss” § 6206 in their briefing below. (Doc. 60 at 15.) Similarly, although the District Court relied on §6206 in ruling against them (id. at 15-17), taxpayers do not address § 6206 in their opening brief. Because taxpayers have failed to raise any argument regarding § 6206 in the District Court or in their opening brief on appeal, taxpayers have waived any such arguments. See Little v. T-Mobile USA, Inc., 691 F.3d 1302, 1306-07 (11th Cir. 2012); Bryant v. Jones, 575 F.3d 1281, 1296 (11th Cir. 2009).

Moreover, because taxpayers owed the amounts they repaid, see I.R.C. § 6206, taxpayers cannot meet the second of their twin burdens to prove they are owed any amount under the Code, i.e., that they have made an overpayment. Fundamentally, there have been no overpayments, and thus, no refunds are owed. Lewis, 284 U.S. at 283.

C. In Richmond, the Supreme Court held that the Appropriations Clause prevents courts from granting monetary remedies not authorized by statute

Taxpayers attempt to circumvent their lack of any legal claim to the monies they seek by asking that the Government be estopped and ordered to make payments contrary to the underlying statutes (i.e., ordered to make illegal payments). The District Court correctly held that such relief is foreclosed by the Supreme Court's decision in O.P.M. v. Richmond, 496 U.S. 414 (1990). (Doc. 60 at 9-10, 17-20.)

In Richmond, a former Navy employee asked the Supreme Court to apply equitable estoppel to allow him payments of public funds in a situation where he relied on erroneous government advice and thereby became ineligible for certain statutory payments. 496 U.S. at 416-19. The Supreme Court held “that payments of money from the Federal Treasury are limited to those authorized by statute.” Id. at 416. The Court explained that its ruling was rooted in the Appropriations Clause of the Constitution, art. I, § 9, cl. 7 (“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law[.]”), which the Court held provided “an explicit rule of decision,” Id. at 424. The Court held that under the Appropriations Clause:

Money may be paid out only through an appropriation made by law; in other words, the payment of money from the Treasury must be authorized by a statute. . . . The benefits respondent claims were not “provided by” the relevant provision of the subchapter [of the benefit's statute at issue]; rather, they were specifically, denied. It follows that Congress has appropriated no money for the payment of the benefits respondents seeks, and the Constitution prohibits any money 'be drawn from the Treasury' to pay him.

Id. at 424. The Appropriations Clause thus also means that “judicial use of the equitable doctrine of estoppel cannot grant . . . a money remedy that Congress has not authorized.” Id. at 426.

In Richmond, the Court also made clear that a statute creating a judgment fund did not suffice to provide judicial power to grant a monetary remedy. Id. at 432. The Court reasoned that a judgment fund is merely “the source of funds” which the Court cautioned “is not to be confused with the conditions prescribed for their payment.” Id. at 432. “Rather, funds may be paid out only on the basis of a judgment based on a substantive right to compensation based on the express terms of a specific statute.” Id. at 432; see also id. at 424. Thus, the Court concluded that there could be no “estoppel against the Government by a claimant seeking public funds” because such payments would violate the Appropriations Clause and the Court “cannot estop the Constitution.” Id. at 434.

This Court has held that Richmond prevents estoppel against the Government when the Government is seeking to recover public funds. Walcott, 972 F.2d at 327 (citing Richmond, 496 U.S. at 426, 428). This Court has also applied Richmond to prevent parties from being able to estop the Government when seeking payment of public funds not authorized by statute. Shuford v. Fidelity Nat'l Property & Cas. Ins. Co., 508 F.3d 1337, 1342-43 (11th Cir. 2007) (holding that Richmond applies and thus equitable estoppel is not available in a suit for federal funds as estoppel would “alter the requirements for the disbursal of federal funds.”); see also Sanz v. United States Sec. Ins. Co., 328 F.3d 1314, 1318-20 (11th Cir. 2003).

The relief taxpayers are seeking in this case is directly analogous to the relief denied in Richmond (and denied by this Court in Shuford) where the Court was asked to order payments “contrary to the statutory terms.” 496 U.S. at 416; see Shuford, 508 F.3d at 1342-43. Similarly, taxpayers are asking this Court to order that they are entitled to refunds based on payments of tax credits to which they are not actually entitled under the Internal Revenue Code. The District Court correctly held that Richmond, and its interpretation of the Appropriations Clause, apply to this case and negate taxpayers' estoppel arguments. (Doc. 60 at 9-10, 17-20.) As such, the District Court correctly granted summary judgment for the United States.

At times in their brief, taxpayers misconstrue the relief they are seeking in this case as merely asking to retain the amounts that they were paid. In so doing, taxpayers suggest that they only made these payments “under protest” (Br. 3, 21, 24, 28) or “with reservation of rights” (Br. 24, 28). These disclaimers are red herrings. Such statements do nothing to change the law or entitle taxpayers to a tax refund. See I.R.C. § 7422(b) (stating that a refund suit “may be maintained whether or not such tax, penalty, or sum has been paid under protest or duress”). Nor has the Government counterclaimed and put any other amounts at issue. Thus, the only amounts at issue are the amounts each taxpayer paid back into the Treasury, which they are now asking to be paid (a second time). As this is a refund suit, taxpayers can only be entitled to a judgment in their favor to the extent they have made an overpayment under the Internal Revenue Code. Lewis, 284 U.S. at 283. And, under Richmond, taxpayers cannot use estoppel to obtain that judgment.

D. Richmond precludes taxpayers' estoppel arguments and their attempts to distinguish Richmond fail

Taxpayers argue that this Court should find that Richmond does not bar the relief they seek because Richmond is not an “across-the-board renunciation of equitable estoppel against the government in any case involving a claim for money[.]” (Br. 24.) This argument is, however, contrary to both the explicit holding in Richmond and this Court's caselaw interpreting Richmond.

Richmond establishes a clear rule that a court cannot use equitable estoppel to order the payment of public funds not authorized by a specific statute because such an order would violate the Appropriations Clause. See Richmond, 496 U.S. at 424, 432, 434. Since Richmond is rooted in the Appropriations Clause, it necessarily applies in all cases. Richmond also explicitly creates an across-the-aboard prohibition on courts issuing estoppel judgments for monetary remedies against the Government. See Richmond, 496 U.S. at 426 (“[W]e decline today to accept the Solicitor General's argument for an across-the-board no-estoppel rule. But this makes it all the more important to state the law and to settle the matter of estoppel as a basis for money claims against the Government.”); id. at 434 (“In this context there can be no estoppel, for courts cannot estop the Constitution.”). This Court has acknowledged this broad holding in its own opinions. See Walcott, 972 F.2d at 327-38 (“[E]quitable estoppel cannot apply against the United States in a suit to recover 'public funds.'”); Shuford, 508 F.3d at 1342-43 (“[E]quitable estoppel is unavailable in a claim against the government for funds from the public treasury.”).

Under Richmond, the payment of funds can only be awarded “on the basis of a judgment based on a substantive right to compensation based on the express terms of a specific statute.” Richmond, 496 U.S. at 432; see also id. at 416 (“payments of money from the Federal Treasury are limited to those authorized by statute”). Because no statute entitles taxpayers to any money, and taxpayers were liable to repay the monies they received, taxpayers have not made overpayments, and consequently, their refund claims must fail.

1. Richmond interprets the Appropriations Clause as restricting Government actions at all levels and is not limited to low-level or unofficial actions

Taxpayers attempt to distinguish Richmond by arguing that this case involves “official-agency advice” and that Richmond only applies to cases involving lower-level or unofficial advice. (Br. 25-27.) Taxpayers misread Richmond. As the District Court correctly held, the Supreme Court's decision in Richmond “refers to government agents generally and without regard to their 'level.'” (Doc. 60 at 19 (quoting Richmond, 496 U.S. at 433-34).) In fact, rather than being focused on low-level employees, if anything, Richmond is focused on the high-level clash between the three branches of government.

For instance, the Richmond opinion was most concerned that executive actions backed by judicial decisions would impinge on the Congressional power of the purse. See 496 U.S. at 425 (“Any exercise of a power granted by the Constitution to one of the other branches of Government is limited by a valid reservation of congressional control over funds in the Treasury.”). The Court discussed the hypothetical problem of the “President or Executive Branch officials” seeking to “evade” the laws, and thus, hypothesized that “agency officials” might provide purposefully erroneous advice, which estoppel would then give “the practical force of law.” Id. at 428. Richmond, with its lengthy discussion of possible inter-branch conflicts (id. at 425-31, 433), does not support taxpayers' contentions that Richmond should be limited to the improper actions of lower-level employees or that Richmond does not apply to official executive actions. Thus, the District Court was correct to conclude that “[r]egardless of the agent's position in the IRS hierarchy, the IRS cannot waive statutory requirements — and thereby essentially amend a statute — under the Appropriations Clause.” (Doc. 60 at 19.)

2. The assessments of taxpayers' liabilities under I.R.C. § 6206 are not retroactive revocations of their registrations

As part of their argument that Richmond should not apply here, taxpayers assert that their fuel registrations can only be prospectively revoked, and argue that, consequently, the IRS was not allowed to assess their liabilities for the excess payments that they received under § 6427. (Br. 26 & n.7.) Taxpayers rely on Treas. Reg. § 48.4101-1(i)(3), which provides that where the IRS revokes a registration, the effective date of the revocation “may not be earlier than the date on which the district director notifies the registrant.” Taxpayers argue that allowing the assessments “renders meaningless the prohibition against retroactively revoking registration determinations,” which they say means that the fact “that the registration determination itself cannot be revoked is of no use or benefit or effect.” (Br. 26 n.7.) Taxpayers further contend that the “extensive audit and testing by the IRS” that accompanied their registrations also “presents more, not less, of a reason to rely on the IRS's written determinations, and thus more, not less, of a reason to proscribe retroactive revocation.” (Br. 26.)

In making these arguments, taxpayers misconstrue the nature of the fuel registrations they received. As the District Court held, “[r]egistration is one of the requirements to claim the alternative fuel tax credit — it is not dispositive, alone, of a claimant's entitlement to the credit.” (Doc. 60 at 15-16.) Section 6426(a) allows the fuel credits provided in § 6426(d) “against the tax imposed by section 4041,” but it expressly limits such credits to taxpayers who are “registered under section 4101.” I.R.C. § 6426(a); see also I.R.C. § 6427(e)(4) (requiring registration under I.R.C. § 4101 to receive payments of credit amounts). Registration is thus one prerequisite for a credit, but it is not the only one. First and foremost, to be entitled to an alternative fuel tax credit (and by extension the payment of any such amount), a taxpayer is required to use or sell an alternative fuel for use in a motor vehicle or motorboat (or in aviation). I.R.C. §§ 6426(d)(1), 6427(e)(2). The District Court correctly concluded that a registration is not (and cannot be) a license to receive payments of credits in contradiction to the underlying statutes. (Doc. 60 at 18.)

Taxpayers' argument also ignores I.R.C. § 6206, which allows the IRS to assess and collect any excess payment that a taxpayer received as an alternative fuel tax credit under § 6427. Taxpayers are in effect seeking to use Treas. Reg. § 48.4101-1 to nullify I.R.C. § 6206 without even acknowledging that I.R.C. § 6206 exists. The District Court correctly rejected taxpayers' “impermissible” interpretation of Treas. Reg. § 48.4101-1 because “[t]he IRS does not have the power to supplant Congress' statutory mandate.” (Doc. 60 at 16 (citing Romano-Murphy v. Commissioner, 816 F.3d 707, 717 (11th Cir. 2016)).) And, the District Court correctly concluded that any limitation on revoking a registration “has no bearing on the IRS's ability to assess and collect excessive payments under § 6206.” (Doc. 60 at 15.)

Taxpayers also cite to (Br. 26) I.R.C. § 7805(b)(8), which provides: “The Secretary may prescribe the extent, if any, to which any ruling (including any judicial decision or any administrative determination other than by regulation) relating to the internal revenue laws shall be applied without retroactive effect.” This statute does not authorize the relief taxpayers seek here. While the IRS has administrative discretion to choose not to collect certain liabilities, it cannot be an abuse of discretion to correctly apply and enforce the law. There is also a logical and important difference between paying out funds not authorized by statute and having the discretion to choose not to collect additional liabilities. The issue in this case is whether the District Court can order the payment of monies not authorized by statute. Richmond forecloses any suggestion that a court has any authority to order the United States to pay out monies contrary to the “conditions prescribed for their payment” because Richmond makes clear such payments may only be “based on the express terms of a specific statute.” 496 U.S. at 432.

3. Taxpayers' arguments that this case is about retention of monies and that Richmond does not apply to retention cases are incorrect and unsupported by this Circuit's caselaw

Taxpayers' arguments that this case is about the retention of monies and that Richmond does not apply to such cases (Br. 28-30) is incorrect. This case is not about retention of monies. This is a refund suit in which the funds that taxpayers repaid to the IRS are the only amounts at issue. Those funds are now in the Treasury, and taxpayers must now prove they have made an overpayment to receive a refund. Lewis, 284 U.S. at 283 (“An overpayment must appear before refund is authorized.”). The Government has not filed a counterclaim seeking to recover the other amounts that were incorrectly paid to taxpayers under § 6427.

Even if this case were about whether taxpayers could retain the monies they were incorrectly paid, Richmond would still apply. This Court has held that under Richmond, “equitable estoppel cannot apply against the United States in a suit to recover 'public funds.'” Walcott, 972 F.2d at 327 (allowing Government suit against guarantor of Small Business Administration loan and rejecting guarantor's estoppel defense). In Walcott, this Court explained that the “[d]enial of equitable estoppel claims in [cases involving public funds] is 'to assure that public funds will be spent according to the letter of the difficult judgments reached by Congress as to the common good, and not according to the individual favor of Government agents or the individual pleas of litigants.'” 972 F.2d at 327 (quoting Richmond, 496 U.S. at 428). As to whether Richmond would apply if this case were truly one in which the Government was affirmatively seeking to recover public funds (and a private party seeking to retain them), the answer in Walcott is yes.

Because the Government is not seeking to recover any funds from taxpayers in this case, taxpayers' suggestion that the general two-year limitation period under I.R.C. § 6532(b) on a suit to recover an erroneous refund is relevant here (Br. 29-30) is wide of the mark. Moreover, I.R.C. § 6206 provides a three-year period for making an assessment to collect excess payments under I.R.C. § 6427. Taxpayers have not disputed that the September 17, 2018 assessments (Doc. 42-1 at 23-24, 29-30, Docs. 42-15, 42-18) were timely.

4. Richmond's reasoning and the Appropriations Clause apply to all matters

Taxpayers argue that this Court should not extend Richmond to tax matters, and they attempt to offer a parade of horribles that might result. (Br. 30-33.) This argument is fundamentally mistaken because the reasoning in Richmond applies to all cases in which plaintiffs seek a monetary remedy against the United States. See Walcott, 972 F.2d at 327-38; Shuford, 508 F.3d at 1342-43.

Taxpayers contend that if the Government prevails based on Richmond such a decision “will render a litany of statutes and regulations invalid, and important tools in tax administration impotent.” (Br. 30.) Taxpayers do not identify any such statutes or regulations that actually apply in this case.⁵ In making this argument, taxpayers fail to acknowledge that, fundamentally, they are seeking payments that are not authorized by statute and that, as a result, they had no right to retain. Failing to allow the Government to retain the instant payments would nullify I.R.C. § 6206.

Taxpayers next suggest that applying Richmond will upset “taxpayer rights to be informed.” (Br. 31.) Taxpayers invoke the “Taxpayer Bill of Rights” of I.R.C. § 7803(a)(3), which provides that the Commissioner shall ensure that IRS employees act in accord with taxpayer rights, including “the right to be informed” (§ 7803(a)(3)(A)). The Taxpayer Bill of Rights does not “override the text of the tax code” and does not “'create new rights, but provides organizing principles — a framework — for statutory rights.'” Shnier v. United States, 151 Fed. Cl. 1, 20 (2020) (quoting Moya v. Commissioner, 152 T.C. 182, 196 (2019)). Thus, § 7803(a)(3)(A) cannot be the basis for any recovery.

Taxpayers assert that applying Richmond here will upset settled expectations by rendering the IRS's guidance less reliable. (Br. 31-32.) This argument is premised on the taxpayers' mistaken belief that erroneous guidance that is contrary to a statute should be given effect. But as Richmond demonstrates, that is simply not true. The former Fifth Circuit, addressed a similar argument regarding the ability to rely on erroneous IRS written guidance as follows:

We do not fault the Treasury Department for trying to provide guidelines for taxpayers confronted with the bewildering maze of our tax laws, and we sympathize with the taxpayer who in fact relies upon what he accepts as an authoritative interpretation of the laws, and of the Treasury publications. But nonetheless it is for Congress and the courts and not the Treasury to declare the law applicable to a given situation.

Carpenter v. United States, 495 F.2d 175, 184 (5th Cir. 1974) (emphasis added); cf. United States v. Burke, 504 U.S. 229, 245-46 (1992) (Scalia, J., concurring) (citing Richmond, 496 U.S. at 427-28) (explaining that the Secretary of the Treasury does not have the power to “repeal taxes that the Congress enacts”). The same reasoning refutes taxpayers' arguments here.

Finally, taxpayers suggest that this Court should not construe Richmond as foreclosing estoppel in tax cases because Richmond did not absolutely bar equitable estoppel against the Government in all circumstances. (Br. 32-33.) But, while Richmond did not bar all possible estoppel claims against the Government, it did hold that there could be no estoppel for public funds or for any monetary remedy not authorized by statute. See Richmond, 496 U.S. at 426, 432, 434. In support of their argument, taxpayers cite two tax cases from this Circuit that discussed estoppel against the Government but did not grant estoppel. (Br. 32 (citing United States v. Beane, 841 F.3d 1273, 1286 (11th Cir. 2016); Bokum v. Commissioner, 992 F.2d 1136, 1140-41 (11th Cir. 1993).) In those two cases, this Court concluded that estoppel would not lie because taxpayers could not meet even the traditional private law elements for estoppel. See Beane, 841 F.3d at 1286-87 (holding that taxpayers were not entitled to equitable estoppel because they did not show the traditional elements were met or show affirmative misconduct); Bokum, 992 F.2d at 1141 (holding that taxpayers were not entitled to equitable estoppel under the traditional elements because they could not prove detrimental reliance); see also Feldman v. Commissioner, 20 F.3d 1128, 1134 (11th Cir. 1994) (taxpayers failed to show the traditional elements of estoppel); Lua v. United States, 843 F.3d 950, 956 (Fed. Cir. 2016) (estoppel could not be invoked against the Government because there was no showing of affirmative misconduct). While a finding that the traditional elements were not met was sufficient to deny the estoppel claims in Bokum and Beane, that does not mean that estoppel would have been available if the traditional elements had been met.

Under this Court's own precedents more is required for estoppel to lie against the Government. This Court has held that not only must the traditional elements of estoppel be met, but also two additional Government-specific requirements must be met: (1) “the Government must have been acting in its private or proprietary capacity as opposed to its public or sovereign capacity”; and (2) “the Government's agent must have been acting within the scope of his or her authority.” Walcott, 972 F.2d at 325 (quoting United States v. Vonderau, 837 F.2d 1540, 1541 (11th Cir. 1988) (emphasis omitted) (citing F.D.I.C. v. Harrison, 735 F.2d 408, 410 (11th Cir. 1984))).⁶ These two additional requirements suggest that estoppel can never apply in a tax case since the Government is always acting in its public and sovereign capacity in the area of taxation. See Harrison, 735 F.2d at 411 (“Characteristic 'sovereign' activities include interpretation of tax statutes[.]”). Nor could estoppel apply in a case such as this since the IRS would be acting beyond the scope of its statutory authority by making erroneous payments. See Richmond, 496 U.S. at 424, 432; see also I.R.C. § 6206.

Thus, these two additional requirements foreclose estoppel in tax cases generally and in this case specifically. As such, taxpayers' attempt to estop the Government in this case is contrary to this Court's own precedents, which taxpayers do not acknowledge.

In summary, this Court should hold that based on Richmond, and this Court's own precedents, there can be no estoppel against the Government in this case.

E. Taxpayers' arguments regarding Lansons lack merit

Taxpayers cite Lansons, Inc. v. Commissioner, 622 F.2d 774 (5th Cir. 1980), and similar cases from other circuits (Lesavoy Foundation v. Commissioner, 238 F.2d 589 (3d Cir. 1956); Boggs v. Commissioner, 784 F.2d 1166 (4th Cir. 1986)), in support of a baseless policy argument that contradicts the controlling statutes. (Br. 33-34.) Taxpayers do not argue that Lansons or any other case cited are directly applicable based on the facts here. Instead, they argue that what they term “[t]he estoppel principles at work in Lansons” and other cases “reflect an important underlying policy that prevents the IRS from pulling the rug out from under taxpayers who in good faith rely on the IRS's expertise and assurance about the tax treatment that will be accorded to contemplated activities.” (Br. 34.) Based on these principles, taxpayers argue that “[g]iving the IRS the unfettered right to claw back [an] incentive . . . would undermine Congress' ability to use tax credits to incentivize behaviors.” (Br. 34-35.)

But nowhere do taxpayers explain how their policy-based argument for estoppel can overcome the express liability imposed on them by I.R.C. § 6206 for their receipt of excess amounts of payments under I.R.C. § 6427. Nor do taxpayers acknowledge that Congress has given the IRS the so-called “right to claw back” excess payments in I.R.C. § 6206. And taxpayers fail to explain how the policy argument that they distill from pre-Richmond cases could still be viable after Richmond. See Richmond, 496 U.S. at 432 (“[F]unds may be paid out only on the basis of a judgment based on a substantive right to compensation based on the express terms of a specific statute.”). Given that taxpayers' policy argument is contrary to both the statute and the Supreme Court's more recent precedent, their argument must fail.

In addition, Lansons and the other cases cited by taxpayers are readily distinguishable, as the District Court concluded. (Doc. 60 at 14.) Lansons and Boggs both involved challenges to income tax deficiencies that resulted from the IRS's revocations of determination letters. The IRS had first held that profit-sharing trusts qualified for favorable tax treatment; the later revocation of those letters generated additional tax liabilities. Lansons, 622 F.2d at 774-76, 778; Boggs, 784 F.2d at 1167-68. Similarly, in Lesavoy, the IRS had granted a certificate of tax exemption to an organization under what was then I.R.C. § 101(6) (1939), and is now I.R.C. § 501(c)(3), and the loss of exempt status generated additional tax liabilities. 238 F.2d at 590 & n.1. In each of these cases, the taxpayer would be liable for additional taxes if the IRS was allowed to revoke the prior administrative determination of its status. In each case, the courts held that the IRS abused its discretion in retroactively revoking the administrative determination that granted the tax status on which the taxpayer relied. Lansons, 622 F.2d at 778; Boggs, 784 F.2d at 1171; Lesavoy, 238 F.2d at 594.

Taxpayers suggest this case is similar because Treas. Reg. § 48.4101-1(i)(3) restricts the IRS's ability to retroactively revoke their registrations. (Br. 35.) But the liability in each of those other cases hinged only on the tax status the IRS had granted to the taxpayer. Taxpayers in this case are not being denied the payments they seek because the IRS retroactively revoked their fuel registrations — the revocations were in fact not retroactive. (See Doc. 60 at 14 (finding that the revocations “only applied prospectively”).) Nor is the IRS claiming that taxpayers were not properly registered during the relevant time periods. Instead, taxpayers' claims for refund fail because their activities did not meet all the requirements for the payments of credits under the relevant statutes. Taxpayers simply did not qualify for the payments they claimed and received (and now seek a second time). Indeed, because there is no dispute that taxpayers did not qualify to receive any alternative fuel tax credits, their assertion that the District Court's decision, that they cannot recover payments to which they were never entitled, “would undermine Congress' ability to use tax credits to incentivize behaviors” (Br. 35) makes no sense.

Lansons is also distinguishable because it involved a mistake of fact (see 622 F.2d at 775) and not a mistake of law.⁷ The IRS may have understood the actual facts of taxpayers' activities here, but even if it did, the mistake would have been one of law, namely, that taxpayers' activities qualified for the alternative fuel tax credit. The IRS does not abuse its discretion when it corrects a mistake of law, even when such a correction has a retroactive effect on a taxpayer who relied on the IRS to its detriment. Dickman v. Commissioner, 465 U.S. 330, 343 (1984) (holding that “the Commissioner may change an earlier interpretation of law, even if such change is made retroactive in effect” and “[t]his rule applies even though a taxpayer may have relied to his detriment upon the Commissioner's prior position”); Dixon v. United States, 381 U.S. 68, 72-75 (1965); Automobile Club of Mich. v. Commissioner, 353 U.S. 180, 183-84 (1957); see also Etter Grain Co. v. United States, 462 F.2d 259, 265 (5th Cir. 1972).

Taxpayers also rely (Br. 35-36) on LeCroy Research Systems Corp. v. Commissioner, 751 F.2d 123, 128 (2d Cir. 1984). LeCroy involved the question whether a new Treasury regulation could (or should) be given retroactive effect, and the Second Circuit held that statements from an IRS Handbook barred the IRS from applying the otherwise valid regulation. Id. at 127-28. This decision is an outlier. Shortly after LeCroy was issued, this Court rejected LeCroy and announced that it was contrary to the “accepted law among the circuits that publications are not binding.” CWT Farms, Inc. v. Commissioner, 755 F.2d 790, 803-04 (11th Cir. 1985). This Court also explained that LeCroy was based on a misinterpretation of the former Fifth Circuit's Carpenter opinion, which actually stood for the opposite proposition. See CWT, 755 F.2d at 803 (quoting Carpenter, 495 F.2d at 184) (“'[I]t is for Congress and the courts and not the Treasury to declare the law applicable to a given situation.'”). Thus, LeCroy has no precedential value in this Circuit, and the principles it espoused were flawed.

Lansons and other authorities cited by taxpayers do not control the outcome here. Under Richmond, Courts may not issue judgments or order monetary remedies not authorized by the underlying statutes. 496 U.S. at 432, 434. As such, Lansons cannot provide taxpayers a right to a refund of the excess amount they have repaid because any such refund would violate the Appropriations Clause and Richmond.

F. Taxpayers have failed to identify any genuine issue of material fact

Finally, taxpayers assert in the heading to the final section of their Argument that “genuine issues of material fact remain as to [Lansons] application.” (Br. 33.) Beyond the reference in the heading, taxpayers' argument regarding the existence of genuine issues of material fact is limited to a single sentence on the last page of their brief. (Br. 37 (“genuine issues of material fact exist for a jury to find that the IRS should be estopped from assessing amounts contrary to the underlying determinations in its Section 4101 registration approval letters”).) Taxpayers do not identify what the fact issues are that remain as to the application of Lansons or cite any evidence that creates a genuine issue of material fact. As such, this Court should deem this argument abandoned. See Doe v. Moore, 410 F.3d 1337, 1349 n.10 (11th Cir. 2005) (quoting Fed. R. App. P. 28(a)(9)(A) (“On appeal we require appellants to not only state their contentions to us, but also to give 'the reasons for them, with citations to the authorities and parts of the record on which the appellant relies.'”)).

Taxpayer also erroneously suggest that whether the Government should be estopped is a question for a jury. (Br. 37.) While the “constituent elements of estoppel constitute questions of fact,” whether equitable estoppel should apply based on the facts of any given case is a “question of law.” Walcott, 972 F.2d at 325. Thus, whether estoppel will lie is ultimately a legal question to be answered by the court.

In any event, even if Lansons is applicable here, taxpayers have failed to put forward sufficient evidence to raise a fact question that could prevent summary judgment. Lansons held that “when a taxpayer has put substantial good faith reliance upon an IRS determination of its tax position and when a retroactive revocation of that determination will produce an inordinate adverse effect, the Commissioner's failure to abide strictly by his own regulations limiting retroactive revocation of a favorable ruling amounts to an abuse of discretion.” 622 F.2d at 778. Thus, even if Lansons (or the so-called estoppel principles in Lansons) could apply to this case, taxpayers would need to demonstrate not only detrimental reliance but an inordinate adverse effect.

Taxpayers have not made a sufficient record to create a genuine issue of fact that they suffered a detriment in reliance on their registrations. And taxpayer have never claimed they suffered an inordinate adverse effect, nor could they demonstrate an inordinate adverse effect on this record. The only concrete evidence of any possible detrimental reliance in any relevant time period appears to be equipment purchases by ABF in 2016 for which it obtained loans and might have also used some money from tax credits. (Doc. 45-22; see Doc. 48-1 at 8-11; Doc. 42-22 at 1-6; Br. 15.) But these assets were all sold in 2017, and there is no evidence they were sold at a loss (as opposed to a profit). (Doc. 46 at 4 (taxpayers sold their combined assets “for more than $7 million”).) The evidence shows that because of their multiple revenue streams, both taxpayers “were generally profitable without considering the credits” (Doc. 46 at 4), and their business models were never based on receiving incentive tax credits. (Doc. 42-1 at 4; Doc. 42-4 at 2-3.) Thus, taxpayers cannot prove they actually relied on the payments of tax credits or on their registrations to their detriment. And there is no evidence that taxpayers suffered an inordinate adverse effect due to the IRS's assessments of their I.R.C. § 6206 liabilities. As such, even if Lansons is applicable here, no reasonable jury could find that taxpayer suffered a detriment let alone the sort of inordinate adverse effect that Lansons required. Therefore, the Government would still be entitled to summary judgment even if Lansons applied. See Chapter 7 Trustee v. Gate Gourmet, Inc., 683 F.3d 1249, 1254 (11th Cir. 2012) (“A genuine issue of material fact exists when a reasonable jury could return a verdict for the nonmoving party.”) (cleaned up).

This Court should, however, reject any application of Lansons (or the so-called estoppel principles in Lansons) to this case and hold that under Richmond there can be no estoppel against the Government that would entitle taxpayers to payments of tax credits that are not authorized under the Internal Revenue Code. Granting estoppel in this case would not only nullify the clear statutory mandate to collect excess payments in I.R.C. § 6206, but it would award taxpayers a judgment for money not authorized by any statute in contravention of the Appropriations Clause and Richmond.

CONCLUSION

The judgment of the District Court should be affirmed.

Respectfully submitted,

DAVID A. HUBBERT
Acting Assistant Attorney General

Matthew S. Johnshoy

BRUCE R. ELLISEN
(202) 514-2929
MATTHEW S. JOHNSHOY
(202) 616-1908
Attorneys
Tax Division
Department of Justice
Post Office Box 502
Washington, D.C. 20044
Appellate.TaxCivil@usdoj.gov
Matthew.S.Johnshoy@usdoj.gov

Of Counsel:
KARIN HOPPMAN
Acting United States Attorney

OCTOBER 25, 2021