Exxon Mobil Corp. v. Comm'r of Internal Revenue, No. 11-2814 (2d Cir. 2012)Annotate this Case
Under 26 U.S.C. 6621(d), interest is calculated at a higher rate for corporate tax underpayments than for corporate tax overpayments. A corporate taxpayer could, therefore, owe underpayment interest even if the amount underpaid in one tax year (or set of tax years) was entirely offset by the amount by which it overpaid in another tax year (or set of tax years). Congress amended section 6621 in 1998 to include a provision for “global interest netting;” the interest rate differential is adjusted to yield a net interest rate of zero for periods of reciprocal indebtedness, during which the taxpayer’s overpayments in one set of tax years overlap and offset equivalent underpayments in another set,. Congress also adopted a statutory, uncodified, “special rule,” which makes section 6621(d) applicable under certain circumstances to periods of overlapping indebtedness that occurred prior to the 1998 effective date of the statute. The Second Circuit held that the language of the special rule is ambiguous, but that the structure of section 6621(d) as a whole, as well as its historical context and purpose, makes clear that taxpayers may benefit from retrospective global interest netting even when the limitations period for one of the legs of the overlap has expired.