Sunoco, Inc. v. United States, No. 17-1402 (Fed. Cir. 2018)Annotate this Case
Sunoco blends ethanol with gasoline to create alcohol fuel mixtures. Sunoco filed consolidated tax returns, 2004-2009, claiming the Mixture Credit under 26 U.S.C. 6426 as a credit against its gasoline excise tax liability for the years 2005-2008. In 2013, Sunoco changed its tax position by submitting both informal and formal claims with the IRS to recover over $300 million based on excise-tax expenses for the years 2005-2008, claiming that it erroneously reduced its gasoline excise tax by the amount of Mixture Credit it received, which had the effect of including the Mixture Credit in its gross income. In its view, Sunoco was entitled to deduct the full amount of the gasoline excise tax under section 4081— without regard to the Mixture Credit—and keep the Mixture Credit as tax-free income. In 2015, the IRS issued a statutory notice of disallowance denying Sunoco’s claims. Sunoco filed a refund suit. The Federal Circuit affirmed the Claims Court in upholding the disallowance. The alcohol fuel mixture credit must first be applied to reduce a taxpayer’s gasoline excise-tax liability, with any remaining credit amount treated as a tax-free payment.