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Advanced Refining Concepts, LLC v. United States

United States District Court, D. Nevada

December 26, 2019

ADVANCED REFINING CONCEPTS, LLC, a Nevada Limited Liability Company, Plaintiff,
THE UNITED STATES OF AMERICA; DAVID J. KAUTTER, acting Commissioner of Internal Revenue, and DOES I through X, Defendants.



         Defendant, the United States of America (“the Government), moves this court for summary judgment on plaintiff's second cause of action. ECF No. 34. Plaintiff Advanced Refining Concepts, LLC (“ARC”) opposed the motion, and defendants replied. ECF Nos. 35 & 37. Because the court lacks subject matter jurisdiction, it grants the Government's motion for summary judgment.

         I. BACKGROUND

         ARC created a new fuel that combines compressed natural gas with diesel fuel-what ARC calls GDiesel. ECF No. 36 ¶ 4. Beginning in 2009, ARC applied to the IRS to be a taxable fuel registrant and was granted both a “UV” and “S” designation. Id. ¶¶ 5-8. This allowed plaintiff to claim and receive tax refunds. Id. ¶ 11.

         Based on these designations, on April 12, 2013, ARC filed a Form 8849 Claim for Refund of Excise Taxes for the quarter ending March 31, 2013, in the amount of $14, 986.78. ECF No. 34-2. The IRS disallowed the entire claimed amount. Id. On July 2, 2013 and October 7, 2013, ARC again filed Form 8849 Claims for Refund of Excise Taxes, this time for the quarters ending June 30, 2013 (for $25, 160.95), and September 30, 2013 (for $20, 063.78), respectively. ECF No. 34-4.

         The IRS paid ARC the total claimed, $45, 224.73. ECF No. 34-5. However, in 2014, IRS representative Craig Hall informed ARC that its “S” registration would be revoked and that ARC would need to repay the tax credits issued for the June and September 2013 quarters. ECF No. 36 ¶13; ECF No. 34-5.

         ARC representative and managing member, Peter Gunnerman, declared:

Mr. Hall offered to give ARC the ‘AM' classification if it agreed to give up three quarters of refunds for excise tax paid on the dyed GDiesel, which would involve paying back to the IRS certain amounts previously refunded. He further explained that this would benefit ARC because it would be able to claim the Alternative Fuel Mixtures Credit both going forward and retroactively, which, at $0.05 per gallon of GDiesel sold, would be a substantial sum.

ECF No. 36 ¶ 15. ARC therefore agreed and on February 20, 2014, it signed (1) a Form 2297 Waiver of Statutory Notification of Claim Disallowance for its claimed refund for the March 2013 quarter (ECF No. 34-3); and (2) a Form 5384 Excise Tax Examination Changes and Consent to Assessment and Collection for its claimed refunds for the June and September 2013 quarters (ECF No. 34-5). ARC then repaid the assessed taxes for the June 2013 quarter on November 23, 2015 (see ECF No. 34-6), and for the September 2013 quarter on September 28, 2016 (see ECF No. 34-7).

         ARC was issued the “AM” designation in January 2015, and filed amended tax returns for 2012 through 2014 to receive its tax credit under the new designation. ECF No. 36 ¶¶ 19-20. After review, ARC was informed that the “AM” designation was improper, and the IRS was denying ARC's claims for tax credit. Id. ¶¶ 22-23. ARC appealed this decision through the Fast Track Settlement process in October 2015. Id. ¶ 27. During the mediation, the parties reached a settlement, but ARC was later informed on November 2, 2015, that it had not been approved. Id. ¶¶ 29-33. ARC's claim was then sent to IRS Appeals in February 2016, where it was denied two months later. Id. ¶¶ 35-36.

         ARC filed this Complaint on April 17, 2018, alleging five causes of action: (1) Refund of Federal Excise Tax pursuant to 26 U.S.C. § 7422 for denial of the “AM” tax credit; (2) Refund of Federal Excise Tax pursuant to 26 U.S.C. § 7422 for revocation of the “S” designation and subsequent tax penalties; (3) declaratory relief as to ARC's registration status and qualification of “AM” tax credit designation; (4) injunctive relief to enforce the terms of the Fast Track Settlement Session Report; and (5) breach of contract for denying the settlement after the Territory Manager had approved it. See ECF No. 1. On January 2, 2019, the court dismissed plaintiff's third, fourth, and fifth claims with prejudice for lack of subject matter jurisdiction and denied plaintiff's request to amend the complaint because any amendment could not cure the jurisdictional defects. ECF No. 29. The parties filed a Joint Case Management Report on November 28, 2018 which provided:

After discussion between the parties, ARC agreed that it would withdraw its first cause of action which seeks refund of $779, 890.50 due to the alternative fuel mixture credit. To accomplish this, ARC plans to amend the complaint and replace the withdrawn cause of action with a new cause of action seeking relief on a different factual basis. If the parties cannot agree to permit the amendment, ARC will file a motion for leave to amend.

ECF No. 25 at 2. On February 25, 2019, the parties again filed a Joint Case Management Report which provided: “ARC intends to proceed with its remaining claim, its second cause of action, as efficiently as possible and no longer plan[s] to seek amendment of its complaint.” ECF No. 31 at 2. No. amended complaint nor motion were filed regarding withdrawal of plaintiff's first cause of action. However, given that plaintiff has made no argument to the contrary, the court shall treat defendant's motion for summary judgment as addressing all remaining claims in this suit, and only analyze plaintiff's second cause of action for refund of Federal Excise Tax pursuant to 26 U.S.C. § 7422 in deciding defendant's pending motion for summary judgment.

         II. ...

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