Ford loses bid to recoup $450-mn interest on overpaid taxes

A federal appeals court rejected Ford Motor Co's bid to recoup about $450 million of interest from the US government on taxes overpaid by the automaker.

The 6th US Circuit Court of Appeals in Cincinnati did not accept Ford's argument that its overpayments, dating back to 1983, were essentially a loan to the Internal Revenue Service on which it should have been able to accrue interest.

Wednesday's unanimous decision by a three-judge panel upheld a June 2010 ruling by US District Judge Patrick Duggan in Detroit, which the 6th Circuit had affirmed 2-1/2 years later.

In December 2013, the US Supreme Court vacated that affirmation and directed the appeals court to consider whether the case belonged in a different court. The appeals court decided it did not.

The case stemmed from Ford's having made about $875 million of payments to the government in the 1990s, after the Internal Revenue Service said the Dearborn, Michigan-based automaker had underpaid its taxes by nearly $2 billion in the previous decade.

Ford initially treated its payments as cash bond deposits, and later converted them into advance tax payments that would bear interest in the event of an overpayment.

But after the IRS concluded the payments were in fact overpayments for the tax years in question, it calculated interest only from when Ford designated them as advance tax payments. Ford countered that interest had begun to accrue on the deposit dates, and sued in July 2008.

Writing for the appeals court, Circuit Judge Julia Smith Gibbons said Ford's initial decision to designate its payments as cash bond deposits "demonstrates that the sole purpose of the remittances was to stop the accrual of underpayment interest," not to clear up the alleged $2 billion underpayment.

She also said Ford "may be right to criticize" the IRS for inconsistent enforcement of Internal Revenue Code provisions governing interest on underpayments and overpayments, but that it was up to the agency to reconcile that.

"No matter how we decide this case, taxpayers will have reason to complain about inconsistencies in the IRS's practices," Gibbons wrote.

Ford and its lawyer Gregory Garre did not immediately respond to requests for comment. The U.S. Department of Justice did not immediately respond to a similar request.

The case is Ford Motor Co v. United States of America, 6th U.S. Circuit Court of Appeals, No. 10-1934.

(Reporting by Jonathan Stempel in New York; editing by Gunna Dickson)