United States Court of Appeals
for the Federal Circuit
__________________________
ENERGY EAST CORPORATION,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
__________________________
2010-5132
__________________________
Appeal from the United States Court of Federal
Claims in case no. 07-CV-812, Judge Mary Ellen Coster
Williams.
__________________________
Decided: June 20, 2011
__________________________
LAWRENCE T. KASS, Milbank, Tweed, Hadley &
McCloy, LLP, of New York, New York, argued for the
plaintiff-appellant. With him on the brief were JOSEPH M.
PERSINGER and BLAKE REESE; and GILBERT M. POLT, of
Washington, DC.
ELLEN PAGE DELSOLE, Attorney, Tax Division, United
States Department of Justice, of Washington, DC, argued
for defendant-appellee. With her on the brief were JOHN
A. DICICCO, Acting Assistant Attorney General, and
ENERGY EAST CORPORATION v. US 2
JONATHAN S. COHEN, Attorney. Of counsel was
FRANCESCA U. TAMAMI.
__________________________
Before LOURIE, GAJARSA, and O’MALLEY, Circuit Judges.
GAJARSA, Circuit Judge.
The issue before the court is whether a parent and its
subsidiaries, who incurred overpayments and underpay-
ments prior to consolidation, qualify as the “same tax-
payer” under Internal Revenue Code (“I.R.C.”) § 6621(d).
Energy East Corporation (“Energy East”) filed a refund
claim, seeking to offset the amount it underpaid in 1999
with amounts two of its subsidiaries overpaid from 1995-
97, even though consolidation did not occur until 2000
and 2002. The Court of Federal Claims determined that
Energy East was not the “same taxpayer” as its subsidiar-
ies under § 6621(d) and denied its claim for a refund.
Upon review of the statute and attendant case law, this
court affirms the trial court’s decision.
BACKGROUND
On September 20, 2000, Energy East acquired CMP
Group, Inc., and its subsidiary Central Main Power
Company (“CMP”). Energy East Corp. v. United States, 92
Fed. Cl. 29, 30, 31 (2010) (“CFC Op.”). Energy East then
acquired RGS Energy Group, Inc., including its subsidiary
Rochester Gas & Electric Company (“RG & E”), on July 1,
2002. Id. After the acquisition, Energy East became the
parent of CMP and RG & E, who in turn became brother
and sister subsidiaries of the parent. Energy East as-
sumed all of CMP’s and RG & E’s liabilities. Id. Subse-
quent to their respective acquisitions, CMP and RG & E
became part of Energy East’s affiliated group of corpora-
tions for filing consolidated income tax returns pursuant
to I.R.C. § 1501. Id. Although CMP and RG & E are
3 ENERGY EAST CORPORATION v. US
members of an affiliated group for income tax purposes,
they maintain their own employer identification numbers
and file other taxes individually. Id.
Prior to their acquisition, both CMP and RG & E
overpaid their federal income taxes. CMP overpaid its
income tax in the tax years 1995-97 in the amount of
$6,827,882. Id. at 30 n.1, 32-33. RG & E did the same in
the tax years 1996 and 1997 in the amount of $2,272,792.
Id. If a taxpayer overpays its taxes, the IRS owes the
taxpayer interest on that amount, which begins accruing
on the day the overpayment was made. I.R.C. § 6611(a).
Post-acquisition, CMP and RG & E received refunds of
their overpayments and the accrued interest. CFC Op. at
31-32. CMP received refunds for all three tax years on
November 20 and 21, 2001; RG & E received refunds for
both tax years on July 22, 2002. Id.
Also prior to the acquisition, Energy East underpaid
its taxes in the 1999 tax year in the amount of $2,079,827.
Id. at 33. Like the subsidiaries’ overpayments, interest
began accruing on Energy East’s underpayment on the
day the taxes were due. I.R.C. § 6601(a). Energy East
paid the amount it underpaid and its first assessment of
deficiency interest on September 23, 2002. CFC Op. at
32. It satisfied a second assessment of deficiency interest
with applied credit that posted in the 36th week of 2005.
Id.
In July 2006, Energy East filed a claim with the IRS,
requesting a refund of the interest it paid on its 1999
underpayment. Id. at 32. The IRS took no action on this
claim, and therefore Energy East filed suit in the Court of
Federal Claims on November 20, 2007. Id. at 32-33.
Energy East argued that it is entitled to a net interest
rate of zero on its 1999 deficiency because § 6621(d)
ENERGY EAST CORPORATION v. US 4
allows it to offset its underpayment with CMP’s and RG &
E’s overpayments. Id. at 31.
Section 6621(d) was added to the Internal Revenue
Code in 1998 and allowed a taxpayer to zero out the
interest rate on equivalent overpayments and underpay-
ments. Prior to 1998, if a corporate taxpayer had over-
payments and underpayments outstanding at the same
time, the IRS would offset those amounts and apply the
appropriate interest rate to the remaining amount, de-
pending on whether it was an overpayment or an under-
payment. H.R. Rep. 105-599, 218 (1998) (Conf. Rep.).
The IRS could not, however, offset an underpayment with
an overpayment that had been refunded, or conversely,
offset an overpayment with an underpayment that had
been satisfied. Id. Thus, taxpayers having equivalent
overpayments and underpayments would still be assessed
interest because the overpayment interest rate is less
than the underpayment interest rate for corporate tax-
payers. See id.; compare I.R.C. § 6621(a)(1) (“The over-
payment rate . . . shall be the sum of (A) the Federal
short-term rate [and] 3 percentage points (2 percentage
points in the case of a corporation).” (emphasis added))
with id. § 6621(a)(2) (“The underpayment rate . . . shall be
the sum of (A) the Federal short-term rate [and] 3 per-
centage points.”)). The difference in interest rates for
overpayments and underpayments increases with the size
of overpayment or underpayment. Compare id.
§ 6621(a)(1) (stating that the interest rate for corporate
overpayments exceeding $10,000 decreases from 2 per-
centage points to 0.5 percentage points) with id. § 6621(c)
(stating that the underpayment rate increases from 3
percentage points to 5 percentage points for large corpo-
rate underpayments).
To eliminate this discrepancy for corporate taxpayers,
Congress amended § 6621, which provides the rate of
5 ENERGY EAST CORPORATION v. US
interest for overpayments and underpayments, by adding
subsection (d), which states:
To the extent that, for any period, interest is pay-
able under subchapter A and allowable under
subchapter B on equivalent underpayments and
overpayments by the same taxpayer of tax imposed
by this title, the net rate of interest under this
section on such amounts shall be zero for such pe-
riod.
Internal Revenue Service Restructuring and Reform Act
of 1998, Pub. L. No. 105-206, § 3302, 112 Stat. 685, 741
(codified at I.R.C. § 6621(d)) (emphasis added). In other
words, when a corporate taxpayer makes equivalent
underpayments and overpayments for any period, the
interest rate is zero on those overpayments and under-
payments. The “for any period” language allows taxpay-
ers to use interest netting under this section for
overpayments that have been refunded and underpay-
ments that have been paid.
In the Court of Federal Claims, Energy East and the
Government cross-moved for summary judgment. The
sole issue was whether Energy East and its subsidiaries
are the same taxpayer under I.R.C. § 6621(d), and would
therefore be entitled to net the interest on their respective
underpayments and overpayments. CFC Op. at 33. The
trial court granted the Government’s motion, deciding
that Energy East was not the “same taxpayer” as its
subsidiaries under § 6621(d). Id. at 36. Because the
Internal Revenue Code does not define “same taxpayer,”
the trial court relied on a dictionary to determine that
“same” meant “identical” or “without addition, change, or
discontinuance.” Id. at 34 (quoting Webster’s Ninth New
Collegiate Dictionary 1040 (1985)). Using this definition,
the trial court found that “the Energy East corporation
ENERGY EAST CORPORATION v. US 6
that underpaid its taxes in 1999 is not the ‘same’ taxpayer
as either the CMP corporation that overpaid its taxes in
1995, 1996, and 1997, or as the RG & E corporation that
overpaid its taxes in 1996 and 1997.” Id. at 34 (footnote
omitted). Thus, Energy East could not net interest under
§ 6621(d) because it was not the same taxpayer as its
subsidiaries when the overpayments and underpayments
occurred, as opposed to when the claim was made. Id. at
35.
Energy East timely appealed. This court has jurisdic-
tion pursuant to 28 U.S.C. § 1295(a)(3).
DISCUSSION
This court reviews a grant of summary judgment from
the Court of Federal Claims de novo. Salman Ranch Ltd.
v. United States, 573 F.3d 1362, 1370 (Fed. Cir. 2009).
This court also reviews statutory interpretation de novo.
Grapevine Imports Ltd. v. United States, 636 F.3d 1368,
1375 (Fed. Cir. 2011) (citation omitted).
The parties do not dispute that Energy East, CMP,
and RG & E were not the “same taxpayer,” under any
definition, when their respective underpayments and
overpayments were made. Rather, they dispute the point
in time at which the party requesting the refund must be
the “same taxpayer” to avail itself of interest netting
under § 6621(d). The trial court held that § 6621(d)
requires taxpayers to be the same when the overpayments
and underpayments were made. This court agrees.
Whether Energy East may net interest under
§ 6621(d) depends on the proper construction of the stat-
ute. When interpreting a statute, “[t]he starting point . . .
is the language itself.” Santa Fe Indus., Inc. v. Green, 430
U.S. 462, 472 (1977) (quotation marks omitted). Section
6621(d) states, “[t]o the extent that . . . interest is payable
7 ENERGY EAST CORPORATION v. US
. . . on equivalent underpayments and overpayments by
the same taxpayer,” interest may be netted. I.R.C.
§ 6621(d) (emphasis added). Under the last antecedent
rule, a limiting clause or phrase “should ordinarily be
read as modifying only the noun or phrase that it imme-
diately follows.” Barnhart v. Thomas, 540 U.S. 20, 26
(2003) (citation omitted). Here, “by the same taxpayer”
immediately follows and therefore refers to “equivalent
overpayments and underpayments.” Thus, the statute
provides an identified point in time at which the taxpayer
must be the same, i.e., when the overpayments and un-
derpayments are made.
Energy East, however, chooses to ignore the plain
language of the statute, claiming that it provides no
“point in history” that taxpayers must be the “same” prior
to filing a netting claim. Appellant’s Br. 18-19. Instead,
Energy East claims that a “reasonable” interpretation of
the statute would allow interest netting if the parent and
subsidiary file consolidated returns at the time the net-
ting claim is made. Id.
The interpretation suggested by Energy East rests on
a limited reading of the statute and unnecessary reliance
on the legislative history. Section 6621(d) clearly requires
that the underpayments and overpayments be made “by
the same taxpayer.” It does not include the words “file” or
“claim,” making it difficult to understand how the filing of
a netting claim could possibly be the relevant time period
to determine “same taxpayer.” This court cannot simply
add phrases or words that do not appear in the statute;
doing so would be phantom legislative action by this
court. Had Congress wanted to adopt Energy East’s
interpretation, it could have drafted language to effectu-
ate that result. United States v. Locke, 471 U.S. 84, 95
(1985) (“Congress[] typically vote[s] on the language of a
bill, [and] generally [the court] assume[s] that the legisla-
ENERGY EAST CORPORATION v. US 8
tive purpose is expressed by the ordinary meaning of the
words used.” (internal quotation marks and citation
omitted)). Congress did not include the language sug-
gested by Energy East, and therefore, this court must rely
on the plain language of the statute as enacted by Con-
gress. Jones v. Bock, 549 U.S. 199, 217 (2007) (“Given
that the [statute] does not itself require plaintiffs to plead
exhaustion, such a result ‘must be obtained by the process
of amending the Federal Rules, and not by judicial inter-
pretation.’” (quoting Leatherman v. Tarrant Cty. Narcot-
ics Intelligence & Coordination Unit, 507 U.S. 163, 168
(1993))).
Furthermore, nothing in the legislative history sup-
ports Energy East’s interpretation. The legislative his-
tory states that “[t]he Committee believes that taxpayers
should be charged interest only on the amount they
actually owe, taking into account overpayments and
underpayments from all open years.” S. Rep. 105-174, 61
(1998). This statement simply reflects Congress’ desire to
eliminate the previous unfairness that allowed collection
of interest even where the overpayment and underpay-
ment amounts were equal. It does not, as Energy East
asserts, alter the plain language of the statute and allow
interest netting for any corporation that files a consoli-
dated return. See St. Martin Evangelical Lutheran
Church v. South Dakota, 451 U.S. 772, 787-88 (1981)
(“[I]ndefinite congressional expressions cannot negate
plain statutory language . . . .”). Indeed, “[g]oing behind
the plain language of a statute in search of a possibly
contrary congressional intent is a step to be taken cau-
tiously even under the best of circumstances.” Locke, 471
U.S. at 95-96 (quoting Am. Tobacco Co. v. Patterson, 456
U.S. 63, 75 (1982) (internal quotation marks and citation
omitted)). The plain language of the statute here controls
and there is no need to seek a contrary legislative intent.
9 ENERGY EAST CORPORATION v. US
In the alternative, Energy East argues that § 6621(d)
allows interest netting for the period when the corpora-
tions file consolidated returns and interest is accruing on
their respective overpayments and underpayments. To
support this interpretation, Energy East argues that the
statute should be interpreted to read: “[t]o the extent
that, for any period, interest is payable . . . by the same
taxpayer,” interest netting is allowed on equivalent over-
payments and underpayments. Again, this interpretation
ignores the plain language of the statute. As explained
above, “by the same taxpayer” modifies “underpayments
and overpayments”—the phrase it follows—not “for any
period, interest is payable”—from which it is separated by
three other phrases.
Energy East claims that the trial court erroneously
rejected this interpretation because it “confuse[d]” over-
payments and underpayments, which are allegedly period
specific, with remittances, payments, offsets, and/or
credits, which occur on a particular date. According to
Energy East, because the “period” of its underpayment
overlapped with the “period” of its subsidiaries’ overpay-
ment after consolidation, § 6621(d) allows interest net-
ting.
In reality, it is Energy East that is advocating an er-
roneous interpretation. Overpayments and underpay-
ments are attributable to a particular date, whereas
interest accrues over a period of time. Section 6601(a)
explains that
[i]f any amount of tax imposed by this title . . . is
not paid on or before the last date prescribed for
payment, interest on such amount at the under-
payment rate established under section 6621 shall
be paid for the period from such last date to the
date paid.
ENERGY EAST CORPORATION v. US 10
I.R.C. § 6601(a) (emphases added). Similarly, interest on
overpayments is “allowed and paid” “from the date of the
overpayment” if a credit or refund is claimed. Id.
§ 6611(b). Thus, underpayments and overpayments are
attributable to a “date” and interest generally accrues
from that date until the amount due is paid in full by the
taxpayer or the IRS. Energy East’s assertions to the
contrary reflect a misunderstanding of the Internal Reve-
nue Code.
Under the proper interpretation of the statute, En-
ergy East cannot net the interest from its underpayment
with the interest from its subsidiaries’ overpayments
because it was not the same taxpayer as its subsidiaries
at the time the payments were made. CMP’s and RG &
E’s overpayments were made in 1995-97 and Energy
East’s underpayment was made in 1999—all of which
occurred prior to Energy East’s acquisition of CMP and
RG & E. These underpayments and overpayments were
not made by the “same taxpayer,” and therefore cannot be
attributed to Energy East. Thus, Energy East is not
entitled to interest netting pursuant to § 6621(d), and the
trial court was correct in granting the Government’s
motion for summary judgment.
CONCLUSION
For the foregoing reasons, we affirm the decision of
the Court of Federal Claims.
AFFIRMED
COSTS
Costs are awarded to the United States.