The Court of Federal Claims denied summary judgment on pharmaceutical corporation Pfizer Inc.’s claim that the government must pay it interest on a $500 million tax refund, finding that issues of material fact remain concerning the IRS’s claimed mailing and Pfizer’s claimed nonreceipt of six checks totaling the sum.
Facts: Pfizer was due an income tax refund from its 2008 tax return, which was filed timely on Sept. 11, 2009, four days before its extended due date. The IRS contends the refund of $499,528,449 was mailed to Pfizer at its corporate address in New York City. The refund was in the form of six individual checks that were allegedly processed on Oct. 19, 2009, and mailed the next day.
Pfizer claims it never received the checks. After multiple communications between Pfizer’s tax department and the IRS, the Service voided the checks and sent the company a wire transfer for the full amount, which Pfizer received on March 19, 2010. Pfizer filed a claim for overpayment interest under Sec. 6611(a), but the IRS refused to pay.
Pfizer’s motion for summary judgment relied on its assertion that no material facts were in dispute, that it was due a tax refund and did not receive the refund timely, and, accordingly, interest on its overpayment is due. The government filed a cross-motion seeking to open fact discovery, asserting that material facts are in dispute.
Issues: A movant for summary judgment bears the burden of proof that there are no genuine disputes as to material facts and that the party is entitled to judgment as a matter of law. A fact is material if it may affect the outcome of the case. In this case, the material facts in question were whether the IRS had issued and mailed the checks and whether they had been properly delivered to Pfizer.
Sec. 6611(a) states that interest is allowed and paid upon an overpayment with respect to any internal revenue tax. Sec. 6611(b)(2) provides that interest on refunds is calculated from the date of overpayment to a date not more than 30 days before the date of the refund check, whether or not the taxpayer accepts the check after it is tendered to the taxpayer. Sec. 6611(e) allows the IRS to avoid paying interest when the overpayment is refunded within 45 days of the (unextended) return due date or, if later, the date of the filing of the return.
Pfizer contended that its refund was not received during the prescribed period, and, accordingly, the government owes it interest under Sec. 6611(a). The IRS countered that the checks were in the mail within the 45-day period and, accordingly, Sec. 6611(e) applies, and no interest is due.
Holding: Pfizer argued that the government did not produce any evidence that the six checks were in fact mailed. However, the court noted that the IRS claimed a rebuttable presumption of delivery, and that the IRS produced evidence of Treasury’s routine refund processing and mailing procedures and evidence showing that Pfizer’s refund checks were processed according to these routine procedures. Pfizer cited contrary evidence in the record, including that an IRS manager told a company tax manager that “the checks weren’t sent.” Thus, there was a material question of fact regarding whether the checks had been issued and mailed.
The government also sought to probe further into Pfizer’s mail-handling practices, noting that an operations manager admitted in prior discovery he did not make additional inquiries to prepare for his deposition. Pfizer, in response, claimed that the operations manager would have been aware of incidents of lost mail. Thus, the court determined that a material question of fact also existed as to whether the checks had been properly delivered, which further discovery could shed light on.
Accordingly, the court denied Pfizer’s motion for summary judgment and granted the government’s cross-motion to reopen discovery.
- Pfizer Inc., No. 19-1803T (Fed. Cl. 9/14/20)
— By Mark A. McCoon, CPA, CGMA, Ph.D., associate professor, University of Wisconsin–Superior.