Ford gets new US court hearing on $445M interest bid image

To resolve a long-running Ford tax dispute on whether the automaker is entitled to $445 million in interest on taxes it overpaid the U.S. Supreme Court on Monday sent it back to an appeals court for further hearings.

In a unanimous unsigned opinion, the high court ordered the U.S. Sixth Circuit Court of Appeals to hold a new hearing on whether the Dearborn automaker is entitled to $445 million in interest from overpayments of taxes dating back nearly 30 years.

The Justice Department said in briefs before the Supreme Court that the case should have been heard by the U.S. Court of Federal Claims. The high court ordered the Sixth Circuit to hold a hearing on whether the case should have been before that court.

Last year, the appeals court upheld a district court ruling in Detroit that denied the automaker the interest for taxes it owed from 1983-1989, 1992 and 1994. In 1991, 1992 and 1994, Ford made payments to the Internal Revenue Service totaling $875 million after the government said it had underpaid its taxes.

In 1994, Ford asked IRS to treat these as advance payments — rather than a cash bond — because then Ford could be entitled to interest if a court or the IRS found later it had overpaid its taxes. The IRS did later determine Ford had overpaid its taxes and agreed to pay Ford interest, but only from the date it had asked that the funds be treated as advanced payments. The IRS says taxpayers can either treat taxes as a bond — so if the taxpayer did underpay taxes, it doesn’t owe interest on the back taxes.

Ford sued in 2008 and U.S. District Judge Patrick Duggan found in 2010 that while Ford’s argument “may have some merit,” it said the IRS argument was reasonable. The issue is that federal tax law doesn’t define the date of overpayment.