WICHITA CENTER FOR GRADUATE MEDICAL EDUCATION, INC., on behalf of the themselves and all other taxpayers similarly situated, Plaintiff - Appellant,
UNITED STATES OF AMERICA, Defendant-Appellee.
FROM THE UNITED STATES DISTRICT COURT NO.
6:16-CV-01054-JTM-KGG FOR THE DISTRICT OF KANSAS
D. Sykes, The Law Offices of Thomas D. Sykes LLC, Lake
Forest, Illinois, for Appellant.
Deborah K. Snyder, Attorney (Richard E. Zuckerman, Principal
Deputy Assistant Attorney General, and Richard Farber,
Attorney, with her on the brief), Tax Division, Department of
Justice, Washington, D.C., for Appellee.
TYMKOVICH, Chief Judge, HOLMES, and PHILLIPS, Circuit Judges.
TYMKOVICH, CHIEF JUDGE.
Center of Graduate Medical Education is a federally qualified
charitable organization incorporated under the laws of
Kansas. In 2010, the Internal Revenue Service issued a refund
to the Center on overpaid taxes along with incorrectly
calculated interest on the refund. The IRS then sought
repayment of part of the interest. Under the Internal Revenue
Code, corporate taxpayers receive a lower refund interest
rate than other taxpayers such as individuals or
partnerships. 26 U.S.C. § 6621(a)(1). The Center claims
it is not a corporation for purposes of this section and it
should be entitled to the higher interest rate applicable to
affirm the district court's finding that the Center is a
corporation and is subject to the lower interest rate. As we
explain, the statutory text compels the conclusion that the
Center-even though it does not issue stock or generate
profit-must be treated as an ordinary corporation for
purposes of the refund statute.
Center offers training programs for medical students
alongside hospital partners. In 2010, after the IRS
determined medical students were not subject to FICA taxes,
the IRS refunded to the Center prior FICA tax payments in the
amount of $5.4 million. In 2012, the IRS also remitted $4.7
million in interest earned on the overpaid FICA taxes to the
Center. The IRS later determined it had erroneously repaid
the interest at the higher statutory rate and demanded
repayment of $2.3 million to account for the difference. The
Center complied with the IRS, but then filed the present
action in district court seeking recovery of the $2.3 million
Center argues as a non-stock, not-for-profit entity, it is
not a corporation for purposes of 26 U.S.C. § 6621(a)(1)
and thus deserves the higher interest rate. The Center
contends the applicable regulations as well as traditional
canons of statutory interpretation support this conclusion.
This argument is not new-in fact, the same arguments have
been made, and rejected, in the Second Circuit, the Sixth
Circuit, the Seventh Circuit, and the Court of Federal
Claims. The district court in this case agreed with the other
circuits, holding that the word corporation is
all-encompassing, and therefore includes non-stock,
Center argues § 6621(a)(1) should be interpreted to
allow nonstock, not-for-profit entities to receive a higher
overpayment refund rate reserved for individuals and others.
The Center argues the text is ambiguous and requires us to
look to the statute as a whole as well as other contextual
clues to understand the limited applicability of the higher
6621(a)(1) provides the interest rates applicable to
overpayments of taxes, including the employer-portion FICA
taxes at issue here. The provision identifies two types of
taxpayers-(1) corporations, and (2) all other ...