[00:00:03] Speaker 01:
The article four is now in session.

[00:00:07] Speaker 03:
Good morning.

[00:00:07] Speaker 03:
Please be seated once again.

[00:00:08] Speaker 03:
We've reconfigured our panel and we're back for arguments on the last two cases, first being 15-5015 Albemarle Corporation versus US.

[00:00:20] Speaker 03:
Mr. Libbon.

[00:00:22] Speaker 01:
Thank you, Your Honor.

[00:00:23] Speaker 01:
May it please the court.

[00:00:26] Speaker 01:
This is a case of statutory interpretation, and it does involve a statute of limitations.

[00:00:32] Speaker 01:
Congress in 1997 changed the statute that governed the claiming of a refund when a foreign tax credit was involved.

[00:00:43] Speaker 01:
And it was quite a change in the language, even though the title for the amendment was called Clarification, actually the entire focus of the statute was changed.

[00:00:53] Speaker 01:
because the old original statute focused on the year for which the claim was made.

[00:00:59] Speaker 01:
And the new statute, the statute involved here, focuses on the year when the taxes in question actually accrued.

[00:01:08] Speaker 03:
But under your theory of how we should be reading the statute, for purposes of statuary limitations, we would be looking at

[00:01:16] Speaker 03:
as a later date, right?

[00:01:18] Speaker 03:
Correct.

[00:01:19] Speaker 03:
But for purposes of how we calculate the offset for the foreign tax credit, we would be going back to the original returns, right?

[00:01:28] Speaker 03:
That is correct.

[00:01:30] Speaker 03:
That's a little odd, isn't it?

[00:01:31] Speaker 01:
Well, it's a case of two rules applying to the same situation.

[00:01:36] Speaker 01:
One is the rule that Congress determined when it amended the statute to say that for limitation purposes,

[00:01:44] Speaker 01:
We want to know the year in which the taxes actually accrue.

[00:01:50] Speaker 01:
But for applying the credit, we adopt a rule called the relation back rule, which says we take those taxes and we relate them back to the year for which they were originally imposed under a theory of matching of income and taxes

[00:02:10] Speaker 01:
in theory, because in many cases the matching doesn't actually occur.

[00:02:15] Speaker 01:
But that's the reason why there is a relation back for purposes of calculating the credit.

[00:02:21] Speaker 01:
But that has nothing to do with the statute of limitations for when you must file your claim.

[00:02:28] Speaker 01:
for refund if you want to claim a refund for the credit.

[00:02:32] Speaker 04:
It looks to me as if I was trying to figure out where the language actually paid or accrued may have come from.

[00:02:39] Speaker 04:
It looks to me like the best candidate, the most likely candidate is the Treasury Regulation 1-9042.

[00:02:44] Speaker 04:
Would you agree with that?

[00:02:47] Speaker 04:
That's where the language seems to have come from?

[00:02:49] Speaker 01:
Well, we don't know that for sure, but it's certainly present there and that would certainly corroborate the notion that there's a distinction between

[00:02:56] Speaker 01:
actually pay their accrued taxes and so-called deemed pay their accrued taxes.

[00:03:01] Speaker 04:
Right, and that struck me that if you look at 19042C2 or C1-2, it struck me that the distinction that is drawn in that portion of the regulation is between

[00:03:22] Speaker 04:
taxes that are called actually paid or accrued, which is a reference to the tax year versus deemed accrued taxes, which is a reference to the carryover year.

[00:03:34] Speaker 04:
And that distinction would seem to me to suggest actually accrued is a reference

[00:03:40] Speaker 04:
in contradistinction to deemed accrual to the actual year of the levy of the tax, which would seem to me to help the government in this case.

[00:03:50] Speaker 04:
Why isn't that the right way in light of the apparent derivation of actually accrued?

[00:03:56] Speaker 04:
Why isn't that the right way to read the statutory language in this case?

[00:04:00] Speaker 01:
Well, we don't know if it is the derivation.

[00:04:02] Speaker 01:
We know that the words are used.

[00:04:04] Speaker 04:
And this is preceded and is directed to the exact same subject matter as the ultimate statute.

[00:04:10] Speaker 04:
Well, but no, here we're talking about the Amgen case, I guess.

[00:04:16] Speaker 01:
Ampex case by your predecessor court, which involved a limitations question, not a calculation question.

[00:04:24] Speaker 01:
And the issue in that case was, does the statute begin to run in the year when the taxes are carried over?

[00:04:32] Speaker 01:
or in the original year for which they were imposed.

[00:04:35] Speaker 04:
But in the language of the regulation, the reference appears to be directed, using the words actually accrued, it appears to be directed to the tax year, to the year the taxes were levied, which suggests that actually... Well, no.

[00:04:52] Speaker 01:
It doesn't necessarily mean the year the taxes were levied.

[00:04:55] Speaker 01:
It means the year they were actually accrued.

[00:04:57] Speaker 01:
And that's the point.

[00:04:58] Speaker 01:
There are two kinds of situations

[00:05:01] Speaker 05:
Can I ask you about the previous statute of limitations?

[00:05:04] Speaker 05:
The language there is something like 10 years from the date prescribed by law for the year with respect to which the claim is made.

[00:05:14] Speaker 05:
How do you understand that language, the year with respect to which the claim is made?

[00:05:18] Speaker 01:
Well, that was the issue in the Ampex case.

[00:05:20] Speaker 05:
Sitting at Ampex aside, is the normal view of that the year that the taxes were levied?

[00:05:26] Speaker 01:
Now, the normal view of that would be the year for which you are seeking the refund.

[00:05:32] Speaker 01:
And if your credits are carried over,

[00:05:35] Speaker 01:
from year one to year two and applied in year two, you are seeking the refund for year two.

[00:05:42] Speaker 01:
Therefore, the claim is made with respect to year two.

[00:05:46] Speaker 01:
And that's what this court's predecessor held in the Ampex case.

[00:05:50] Speaker 01:
The government has disagreed with that.

[00:05:51] Speaker 01:
Government takes a very different position.

[00:05:54] Speaker 01:
OK, so that's dealing with the carryover issue.

[00:05:57] Speaker 05:
But setting aside that, how would this statute of limitations apply in this case?

[00:06:03] Speaker 01:
The old statute kept that language, you would have a different result than what we're seeking.

[00:06:13] Speaker 05:
So here's the issue for me then.

[00:06:16] Speaker 05:
If you look at the legislature, they've used some wording that perhaps is explained by the revenue ruling.

[00:06:23] Speaker 05:
but certainly actually accrued is not elsewhere in the tax code, I think.

[00:06:29] Speaker 05:
But if you look at the legislative history, it doesn't seem as if Congress intended a broad sweeping change to the statute of limitations of the one that you're proposing, rather

[00:06:40] Speaker 05:
They just intended to correct the Ampex decision, which allowed a, I guess, more lenient statute of limitations by allowing it to go to the carry year instead of the levy year.

[00:06:51] Speaker 05:
And Congress, very specifically in the House report, the Senate report, I think even a conference report,

[00:06:56] Speaker 05:
said, that's what we're doing.

[00:06:58] Speaker 05:
We're just correcting that.

[00:07:00] Speaker 05:
It doesn't seem to me then that if you agree the prior limitation period would fall in line with the government's view, then Congress intended to change it so dramatically in the way you're arguing.

[00:07:11] Speaker 01:
Well, they were not very expansive in their explanation.

[00:07:17] Speaker 01:
And so we do not know whether they thought about the cases of contested taxes.

[00:07:22] Speaker 01:
In the Ampex case, you had uncontested taxes.

[00:07:26] Speaker 01:
Uncontested taxes accrue in the year for which they're imposed.

[00:07:31] Speaker 01:
And therefore, if you want to have a statute that runs from the year for which they're imposed, that's what Congress should have said.

[00:07:38] Speaker 01:
They should have said, we're going to correct the Ampex case.

[00:07:42] Speaker 01:
We're going to have the statute run from the year for which the taxes were imposed.

[00:07:49] Speaker 01:
Then we wouldn't be here today.

[00:07:51] Speaker 01:
because the relation back or whatever, the taxes in our case were imposed for the earlier years.

[00:07:58] Speaker 01:
But they didn't say that.

[00:07:59] Speaker 01:
They said they want the statute to begin to run in the year when the taxes are actually accrued.

[00:08:05] Speaker 01:
Now, those words have meaning.

[00:08:06] Speaker 01:
They have substantive meaning because actual accrual is determined under the all events test.

[00:08:12] Speaker 01:
Well, let me ask you about that.

[00:08:14] Speaker 05:
Is the term actual accrual as opposed to accrual used anywhere in the tax code?

[00:08:20] Speaker 01:
Well, it's not used if there's one reference in a totally unrelated place.

[00:08:25] Speaker 01:
So you're arguing that the two have similar meanings.

[00:08:29] Speaker 01:
No, I'm arguing that actually accrued means you look at the all events test, which is what you use for accrual purposes, and you don't have an actual accrual until you satisfy the all events test.

[00:08:44] Speaker 01:
And that's not done in a contested tax case.

[00:08:48] Speaker 01:
until the contest ends.

[00:08:50] Speaker 01:
And the matter is determined, and the liability is fixed, and the amount is established.

[00:08:54] Speaker 05:
If Congress had met what you are arguing, why wouldn't they just use the word accrual?

[00:09:00] Speaker 01:
Because then you'd have ambiguity.

[00:09:02] Speaker 01:
Because now you have the same case that we're trying to avoid.

[00:09:05] Speaker 01:
Namely, in a carryover case, you have a deemed accrual.

[00:09:11] Speaker 01:
So if you said, well, we want the statute to run from the year of accrual,

[00:09:15] Speaker 01:
Do you mean actuarial accrual or do you mean deemed accrual?

[00:09:19] Speaker 01:
And they realized that.

[00:09:20] Speaker 01:
They said, we don't want deemed accrual.

[00:09:22] Speaker 01:
That's what we're changing.

[00:09:23] Speaker 01:
Therefore, we want to be very specific and state we wanted to begin with the year of actuarial accrual.

[00:09:31] Speaker 01:
That's how they differentiated the antibiotics.

[00:09:35] Speaker 01:
And if the actual accrual can only occur when the all events test is satisfied, which is clearly the case.

[00:09:41] Speaker 01:
I don't think anybody disputes that.

[00:09:43] Speaker 01:
Even the government acknowledges.

[00:09:45] Speaker 01:
There is no accrual here until the contest ends.

[00:09:51] Speaker 01:
Then you relay it back for calculation purposes and so on.

[00:09:54] Speaker 01:
But the statutory language is actually, when did this taxes actually accrue?

[00:10:02] Speaker 01:
And there's only one year when that happens.

[00:10:06] Speaker 01:
Now, did they intend that?

[00:10:08] Speaker 01:
They weren't very verbal in their explanation, so it cannot provide you with further support other than the statutory language and the logic of saying maybe these statutes should begin to run when people know they have a tax liability and not begin to run when they have no idea there's a tax liability.

[00:10:28] Speaker 05:
But isn't that the point of the 10-year statute of limitations?

[00:10:31] Speaker 05:
I mean, there's some reference, it's not altogether clear here either, but that the

[00:10:36] Speaker 05:
the previous three-year was extended to a ten-year for purposes of foreign tax credit just because of that situation, that it may take some time for resolution of foreign tax disputes and therefore they should get a more generous sexual limitation.

[00:10:51] Speaker 05:
If your argument is that it doesn't run until the dispute is resolved, then why would they need a ten-year sexual limitation?

[00:10:59] Speaker 05:
A three-year dispute under the old rule would seem to suffice.

[00:11:03] Speaker 01:
Well, it's a very good question, Your Honor.

[00:11:07] Speaker 01:
The situation faced by Albemarle in this case is the statute had been running for five years before they even knew they have a problem.

[00:11:15] Speaker 01:
So the idea that you have a 10-year statute is kind of a myth in a contested situation, because you don't even realize you have tax liability until the contest is finally resolved.

[00:11:27] Speaker 01:
And that could go on much longer.

[00:11:29] Speaker 01:
It might even go beyond the 10-year period.

[00:11:31] Speaker 04:
But there are so few cases in this area that it suggests that this doesn't happen very often.

[00:11:37] Speaker 04:
Indeed, the facts of this case, where it appears that there was just somebody dropped the ball at Albemarle on this tax issue, it has to be anomalous.

[00:11:46] Speaker 04:
So the idea that 10 years from the date of the tax levy year is not going to typically be enough seems to me probably not right.

[00:11:55] Speaker 04:
Wouldn't you agree?

[00:11:56] Speaker 01:
Well, there aren't many cases, so in many, most instances you can assume the fifth, but contests take longer and longer these days than they did back in 1954 when... But isn't there some protective measure?

[00:12:08] Speaker 03:
I don't know enough about tax law, but the government refers to the fact that the taxpayer, even if we're talking about exceeding the 10 years for some weird reason, that there's something the taxpayer can do to protect his or herself.

[00:12:20] Speaker 01:
You can file what's called a protective claim for refund, which is sort of a mythical claim because you don't have all your facts yet.

[00:12:28] Speaker 01:
You don't know exactly what you're claiming.

[00:12:30] Speaker 01:
You have no obligation to do that.

[00:12:32] Speaker 03:
And there's nothing in the internal revenue.

[00:12:35] Speaker 03:
It's a policy rationale for even if you're correct that there may be some circumstances.

[00:12:40] Speaker 01:
There may be a way to mitigate the problem, yes.

[00:12:43] Speaker 01:
But the issue here is what does this statute mean?

[00:12:47] Speaker 01:
And I don't see how it can possibly be interpreted with the words actually accrued to relate to a year where there is no actual accrual.

[00:12:59] Speaker 01:
Because the earlier years in our case, 1997 and 1998, there was no accrual of taxes because there was no fixture of liability or a determination of the amount of liability.

[00:13:14] Speaker 01:
Therefore, the taxes could not, did not, would not accrue in those years.

[00:13:20] Speaker 01:
They would not accrue until the contest ended.

[00:13:23] Speaker 01:
Therefore, I don't see how you can interpret this statute of limitations to say it began to run in 1997 or 1998, which is what the government is asking you to do, if there was no actual accrual in those years, because the statute

[00:13:42] Speaker 01:
says it runs from the year of actual accrual.

[00:13:55] Speaker 02:
Good morning.

[00:13:56] Speaker 02:
May it please the court?

[00:13:57] Speaker 02:
My name is Deborah Snyder, and with me today is Theresa McLaughlin, and we represent the United States.

[00:14:03] Speaker 02:
The Court of Federal Claims correctly dismissed Alva Marl's complaint in this case, because it filed its refund claims too late for both of them.

[00:14:10] Speaker 03:
What does the word actual mean?

[00:14:12] Speaker 02:
The word actually means not deemed.

[00:14:16] Speaker 02:
And this, I guess, taking off from what Judge Bryson was discussing earlier, when Congress amended the statute, it was attempting to rectify the situation where it was unclear when you had a carryover situation whether the statute of limitations started to run in the year of origin, or the year for which the tax was imposed, or on the other hand, in the carry year.

[00:14:41] Speaker 02:
And that was under the old statute where the deadline ran off the return for the year with respect to which the claim is made.

[00:14:50] Speaker 02:
And this court's predecessor had said the year for which the claim is made is the carry year in the Ampex case.

[00:14:58] Speaker 02:
made clear in the legislative history that what it was doing was saying no.

[00:15:03] Speaker 03:
You're putting some of us at least in maybe a little more difficult position than we'd like to be because if the language is clear, if the statutory language is clear, it seems that we're constrained at least somewhat in terms of reliance on the legislative history or whatever.

[00:15:20] Speaker 03:
I mean some Congress

[00:15:22] Speaker 03:
does something and it didn't really mean to do it, but we're left with enforcing the statutory language.

[00:15:28] Speaker 03:
So where is the ambiguity in the language itself when they say actual accrual?

[00:15:33] Speaker 03:
Why is that ambiguous?

[00:15:35] Speaker 02:
Because in the context of the foreign tax credit, the relation back concept is part of the term accrual and it's been in the jurisprudence since I think the 1950s

[00:15:47] Speaker 02:
that the accrual of a foreign tax relates back to the year for which that tax was imposed.

[00:15:54] Speaker 04:
This is 5855, the revenue ruling?

[00:15:57] Speaker 02:
There's a revenue ruling which incorporated some of the concepts in cases such as Cuba Rail.

[00:16:02] Speaker 02:
Right, exactly.

[00:16:03] Speaker 02:
And so it's been the situation.

[00:16:06] Speaker 03:
So why is it not sufficient, though, when Congress acts in a mental statute and puts in the word actual as a modifier to accrual, sufficient to say,

[00:16:16] Speaker 03:
Yes, don't forget the relation back.

[00:16:18] Speaker 03:
We're in a new situation.

[00:16:20] Speaker 02:
Because actually doesn't mean you don't relate back.

[00:16:25] Speaker 02:
I don't think there's any inherent reason that the term actually would mean all events test, or it would mean the year a contest is resolved.

[00:16:33] Speaker 02:
I mean, that's not inherent in the term actually either.

[00:16:37] Speaker 02:
So what Congress was doing was trying to say the actually accrued

[00:16:42] Speaker 02:
That's the year of origin, the year for which the foreign tax is imposed.

[00:16:46] Speaker 02:
It's not the deemed year, like deemed as in section 904C that puts the, in order to take the foreign tax credit in the carryover year, the tax is deemed to accrue in the carry year.

[00:17:00] Speaker 02:
So Congress is saying, no, it's not the deemed year.

[00:17:04] Speaker 02:
It's the year of actual accrual, which in the context of foreign tax credit is the year of origin.

[00:17:11] Speaker 02:
So that basically there's one benchmark when you have foreign taxes, the statute of limitations runs from the year of origin.

[00:17:21] Speaker 04:
What is your best authority for the proposition that accrual is the year of origin in the relation back type situation in the foreign tax credit relation back?

[00:17:36] Speaker 02:
Well, in the contested tax situation, which is what we have here, there's a revenue ruling from 1984 that said,

[00:17:48] Speaker 02:
that a foreign tax was imposed for, I think it was 1970 or 1971, and the taxpayer contested it.

[00:17:57] Speaker 02:
It paid it in later years.

[00:17:58] Speaker 02:
I think there was a carry forward in that situation also.

[00:18:02] Speaker 02:
And the IRS made clear that the statute of limitations runs from the year of origin.

[00:18:08] Speaker 02:
And Congress, when it amended the statute, in

[00:18:13] Speaker 02:
The committee reports referred to that revenue ruling and Congress didn't explicitly talk about contested taxes, but it's obvious that Congress was aware of how the situation worked and what the IRS's interpretation was in the contested tax situation.

[00:18:30] Speaker 04:
But it seems to me a little strange in that

[00:18:35] Speaker 04:
what the IRS in the revenue rulings both the 58 and the 84 is saying seems at least facially at odds with the general rule that Dixie-Pine and the statutory rule that accrual occurs when all events have occurred and in the contested tax situation all events occur when the tax

[00:18:59] Speaker 04:
dispute is resolved so if you have a contested tax in the year of origin you don't know what

[00:19:08] Speaker 04:
the amount of tax that you're going to owe is, right?

[00:19:11] Speaker 04:
You don't know that until three years later or whatever when the contest is resolved.

[00:19:17] Speaker 04:
That is the point at which the all events test is satisfied, right?

[00:19:22] Speaker 04:
Why isn't that the natural statutory meaning of the term accrual without respect to these fictional doctrines, whether it be deemed accrual or relation back?

[00:19:34] Speaker 02:
Because the foreign tax credit works differently

[00:19:37] Speaker 02:
Congress even called it a special rule in the statute, because the foreign tax credit... With which statute?

[00:19:45] Speaker 02:
6511Z3A.

[00:19:47] Speaker 02:
Special rules relating to the foreign tax credit.

[00:19:51] Speaker 02:
And the reason is the foreign tax credit is unique, because it's intended to be a dollar-for-dollar offset against the United States tax in the year in which double taxation might occur.

[00:20:05] Speaker 02:
So the reason the rules work differently in the foreign tax credit context is because we're trying, and nothing is perfect, but I think Congress is trying to mitigate the double taxation in the right year.

[00:20:18] Speaker 02:
So that's why you have relation back of the accrual.

[00:20:21] Speaker 02:
And Dixie Pine, of course, applies to a deduction, not to a credit and not to the foreign tax credit.

[00:20:32] Speaker 02:
And to get back to your other question about not knowing what the amount is until the contest is resolved, as Judge Hughes observed earlier, that's why Congress gave taxpayers 10 years.

[00:20:46] Speaker 02:
And when you think about it, Congress had good reason to do that, because Congress recognized that foreign countries might take a while to make adjustments.

[00:20:53] Speaker 02:
There might be issues about the adjustments.

[00:20:55] Speaker 02:
So it was reasonable for Congress to extend the normal three-year period to 10 years.

[00:21:01] Speaker 02:
But there's no reason, and Albemarle has not put forward any reason, why Congress would have set a 10-year statute of limitations that doesn't even start to run until everything about the foreign tax liability is completely fixed.

[00:21:16] Speaker 02:
That's the rule that they're asking for, that everything runs its course in the foreign country.

[00:21:22] Speaker 02:
Everything is completely resolved.

[00:21:24] Speaker 02:
And from that point, you have 10 years.

[00:21:28] Speaker 02:
to file your claim.

[00:21:30] Speaker 02:
And that doesn't make sense.

[00:21:31] Speaker 02:
And I think Albemarle doesn't even argue that Congress intended that.

[00:21:35] Speaker 02:
What Albemarle says is that the result it asks for here is an unintended consequence of the amendment.

[00:21:42] Speaker 02:
But in fact, it's not a consequence of the amendment at all.

[00:21:45] Speaker 02:
The amendment was not overruling the longstanding relation back rule that applies in the context of foreign taxes and to contested foreign taxes.

[00:21:57] Speaker 04:
I don't think the concept of accrual does not include the deemed notion, but it does include relation back.

[00:22:07] Speaker 04:
I think that's the gist of what you said earlier.

[00:22:10] Speaker 02:
Yeah, in the context of contested foreign taxes.

[00:22:13] Speaker 02:
I mean, what Congress was trying to do when it said actually accrued, it was trying to say not deemed.

[00:22:18] Speaker 02:
Not deemed.

[00:22:18] Speaker 02:
Not deemed.

[00:22:19] Speaker 04:
But related back.

[00:22:21] Speaker 02:
But related back.

[00:22:21] Speaker 04:
Included, incorporated within the concept of accrual.

[00:22:24] Speaker 02:
It's incorporated in the concept of accrual for the purpose of the foreign tax credit.

[00:22:29] Speaker 04:
All right.

[00:22:29] Speaker 04:
Let me ask you the same question I asked Mr. Liman.

[00:22:31] Speaker 04:
which is with respect to the treasury regulation 904-2 and section C, it struck me as potentially important that the regulation refers to

[00:22:50] Speaker 04:
taxes basically, actually paid or accrued to the foreign country in the excess limitation year.

[00:22:58] Speaker 04:
We're talking about excess limitation issues here.

[00:23:01] Speaker 04:
And the actually paid or accrued in the excess limitation year would presumably be all taxes that were paid for attributable to that year.

[00:23:17] Speaker 04:
Is that the way you would read that language?

[00:23:19] Speaker 04:
uh... unfortunately i don't have that in front of me actually but the blueberry page fifty here uh...

[00:23:48] Speaker 04:
58, there we go.

[00:23:54] Speaker 04:
It's on 58.

[00:23:57] Speaker 04:
And the portion I'm looking at is the 2a in the excess limitation here.

[00:24:12] Speaker 04:
This is 2 Romanet 2

[00:24:15] Speaker 02:
The access limitation year being the year of origin.

[00:24:18] Speaker 02:
I take it that's the year of origin.

[00:24:20] Speaker 02:
That's what it looks like.

[00:24:21] Speaker 04:
So if we're talking about accrual, our actual accrual being in the year of origin in all cases, which is what this is, that would seem to support the view that actual accrual references the year of origin, not a different year.

[00:24:38] Speaker 04:
Yes it would.

[00:24:39] Speaker 04:
And the follow-up paragraph that talks about

[00:24:43] Speaker 04:
taxes deemed paid or accrued deals with taxes coming from a different year.

[00:24:51] Speaker 02:
Right, and that's consistent with what Congress said it was doing, which is addressing the situation that arises under Section 904 when you have carried forwards.

[00:25:02] Speaker 02:
That it was trying to distinguish the year of origin from the deemed year and to have the statute of limitations key off the year of origin.

[00:25:12] Speaker 04:
So the excess limitation year would not be a year other than, as you understand this language, would not be a year other than the year of origin, even if they were a tax contest?

[00:25:25] Speaker 02:
No, I don't think it would.

[00:25:26] Speaker 02:
OK.

[00:25:27] Speaker 02:
All right.

[00:25:32] Speaker 02:
So I'd also like to step back for a minute to talk about the 1997 tax year, because we haven't really

[00:25:40] Speaker 02:
address that so far today and I think it might help to step back and to just clarify that Albemarle has conceded that if the former statute applies to its 1997 tax year, it loses that year.

[00:25:58] Speaker 03:
The pre-amendment statute... So let me just see if I understand.

[00:26:01] Speaker 03:
Your argument is if we lose on the argument we've been making thus far, then we should still prevail on the 97 tax because the statute wasn't retroactive?

[00:26:10] Speaker 02:
Right, that's true.

[00:26:12] Speaker 02:
But I guess the statute clearly wasn't retroactive because it was effective for

[00:26:22] Speaker 02:
taxes in tax years that began after the date of enactment, which was in August of 97.

[00:26:27] Speaker 02:
So for Albemarle's 97 tax year, the pre-amendment statute applies.

[00:26:33] Speaker 02:
So that was the statute that ran off the date prescribed by law for filing the return for the year with respect to which the claim is made.

[00:26:41] Speaker 04:
He uses that nasty word, accrued again, the effective date statute, right?

[00:26:46] Speaker 02:
But it doesn't use the word actually, and their case depends upon the word actually.

[00:26:58] Speaker 04:
has to mean something different from the word actual.

[00:27:02] Speaker 04:
I mean, the word actually accrued has to mean something different from accrued.

[00:27:06] Speaker 02:
Well, that's what they're saying.

[00:27:09] Speaker 02:
That the word accrued means kind of the opposite from what actually accrued means.

[00:27:13] Speaker 02:
And that's what's sort of interesting about this case.

[00:27:15] Speaker 04:
You mean the word accrued as it was used in the pre-97 version of the statute where actually, no, I guess it didn't show up in the pre-97.

[00:27:24] Speaker 04:
It was 901 and 904 that used the term accrued.

[00:27:27] Speaker 02:
Right, and interestingly, they agree that the taxes accrued in 97 and 98 because they are claiming the foreign tax credit for 97 and 98.

[00:27:38] Speaker 02:
So they agree that for purposes of claiming the foreign tax credit,

[00:27:42] Speaker 02:
the contested foreign taxes, the same ones that issue here, accrued in the year of origin, which is 97 or 98.

[00:27:49] Speaker 02:
But they're saying, well, the word actually makes a difference.

[00:27:53] Speaker 02:
And so the taxes accrued in one year for purposes of claiming the tax credit, but they actually accrued later for purposes of running the statute.

[00:28:01] Speaker 02:
Now, obviously, the government's position is that that's not correct, but even if it's

[00:28:06] Speaker 02:
were correct they would still lose 97 because in 97 the word actually didn't appear in the statute and Albemarle has not argued at all that they would win under the old pre-amendment statute.

[00:28:22] Speaker 02:
They're just saying that the effective date provision is interpreted differently from how the government thinks it should be interpreted.

[00:28:29] Speaker 02:
But they've never argued that they win 97 under the old statute.

[00:28:33] Speaker 02:
They're just saying that the new statute applies to both years.

[00:28:37] Speaker 02:
And so if the court were to reject that argument, they would lose 97 either way, even if a crude didn't incorporate relation back, which of course in our view it does.

[00:28:52] Speaker 02:
I see that my time is running out.

[00:28:54] Speaker 02:
Does the court have any further questions?

[00:28:57] Speaker 02:
Thank you.

[00:28:58] Speaker 02:
We ask for firmance.

[00:28:59] Speaker 02:
Thank you.

[00:29:06] Speaker 01:
Several points around.

[00:29:07] Speaker 01:
Number one, when a foreign tax is imposed, the taxpayer has a choice to claim a credit or a deduction.

[00:29:17] Speaker 01:
You claim a deduction in the year the tax accrues.

[00:29:22] Speaker 01:
And in this case, because of the contest, if the taxpayer had wanted to claim a deduction, it would have had to claim it in the year 2002.

[00:29:30] Speaker 01:
That's the only year it could have claimed the deduction.

[00:29:34] Speaker 01:
That's the only year in which the tax accrued.

[00:29:38] Speaker 01:
Relation back, the idea that you carry it back, essentially it's a carry back to an earlier year for other purposes, is not relevant to the question when the tax accrues.

[00:29:52] Speaker 01:
That's the point, I think, of distinction between accrual as a rule and relation back as a concept that affects how you calculate the crime.

[00:30:04] Speaker 01:
But accrual is accrual.

[00:30:07] Speaker 04:
Well, accrual has many meanings in the law.

[00:30:09] Speaker 04:
It's always struck me as more of a conclusion than a rule.

[00:30:12] Speaker 01:
No, it's a rule in the tax law because the all-events test stipulated in section 461 tells you when you accrue a tax.

[00:30:21] Speaker 01:
And that is when all the events have been met.

[00:30:24] Speaker 01:
Namely, the liability is fixed and the amount's been determined.

[00:30:30] Speaker 01:
Now, there is a question under these regulations, Judge Bryce, and it seemed to be a discussion about whether the wording of this regulation you focused on suggests the excess limitation year and the year of origin are the same.

[00:30:46] Speaker 01:
Actually, the way I read these words are two different years.

[00:30:49] Speaker 01:
So there may be some confusion in how this regulation is being applied.

[00:30:56] Speaker 01:
The regulation says the excess limitation for any taxable year here and after called the excess limitation year, that's one year, with respect to an unused foreign tax and respect of all foreign countries and possessions for another taxable year here and after called the year of origin.

[00:31:16] Speaker 01:
That's a different year.

[00:31:18] Speaker 01:
So I don't think this regulation should be read as if those two were, those two terms apply to the same year.

[00:31:29] Speaker 01:
The Congress looked at the situation after the Ampex case and they said, we want to change the rule.

[00:31:37] Speaker 01:
We want the statute of limitations to run from the year of actually when taxes are actually paid or accrued.

[00:31:44] Speaker 01:
And by the way, for cash method taxpayers, they completely changed the rule.

[00:31:49] Speaker 01:
to the year when the tax was actually paid.

[00:31:51] Speaker 01:
You had 10 years from then, no matter what anybody thinks about anything else, because there's no relation back for cash method taxpayers.

[00:32:00] Speaker 01:
So there was a brand new 10-year statute for cash method taxpayers.

[00:32:04] Speaker 01:
And hard to believe they would have a distinction between cash and accrual in that regard.

[00:32:12] Speaker 01:
But the idea was they wanted the statute to run from the year when taxes actually were paid or accrued.

[00:32:19] Speaker 01:
not deemed paid or accrued or considered or some fictional treatment.

[00:32:25] Speaker 01:
But what the government's position here is that you should start the statute with the fictional year when the relation back occurs.

[00:32:32] Speaker 01:
And the Redding and Bates case in the Court of Federal Acclaims here is a classic example of how that is simply not the case.

[00:32:39] Speaker 01:
You have two separate accruals.

[00:32:41] Speaker 01:
You have the accrual when the contest ends, and you have a relation back, sort of a deemed accrual, for purposes of calculating the credit.

[00:32:50] Speaker 01:
And our position is that the actual accrual is what the statute of limitations is for our type of situation.

[00:32:57] Speaker 01:
And that's how the statute has to be applied.

[00:33:01] Speaker 01:
Thank you.

[00:33:01] Speaker 03:
Thank you, counsel, and the court to submit it.