Charleston Area Medical Ctr. v. United States

United States Court of Appeals
for the Federal Circuit
______________________
CHARLESTON AREA MEDICAL CENTER, INC.,
CAMC HEALTH EDUCATION AND RESEARCH
INSTITUTE, INC., ON BEHALF OF THEMSELVES
AND ALL OTHER TAXPAYERS SIMILARLY
SITUATED,
Plaintiffs-Appellants
v.
UNITED STATES,
Defendant-Appellee
______________________
2018-2226
______________________
Appeal from the United States Court of Federal Claims
in No. 1:17-cv-01528-EDK, Judge Elaine Kaplan.
______________________
Decided: October 17, 2019
______________________
THOMAS D. SYKES, Law Offices of Thomas D. Sykes,
LLC, Lake Forest, IL, argued for plaintiffs-appellants.
JENNIFER MARIE RUBIN, Tax Division, United States
Department of Justice, Washington, DC, argued for de-
fendant-appellee. Also represented by DEBORAH K.
SNYDER, RICHARD E. ZUCKERMAN.
______________________
2 CHARLESTON AREA MEDICAL CTR. v. UNITED STATES
Before LOURIE, O’MALLEY, and CHEN, Circuit Judges.
O’MALLEY, Circuit Judge.
This case is about the interpretation of 26 U.S.C.
§ 6621(a)(1), which provides the interest rate that the In-
ternal Revenue Service (“IRS”) must use in calculating the
amount of interest owed on a tax refund. Section 6621(a)(1)
requires the IRS to apply a lower interest rate for refunds
owed to “corporations” than for refunds owed to other types
of entities. Charleston Area Medical Center, Inc. and
CAMC Health Education and Research Institute (collec-
tively, “the Taxpayers”) applied for a tax refund arguing
that they are entitled to the higher interest rate because
they are nonprofit entities and not corporations. The IRS
disagreed and applied the lower interest rate to calculate
the refund owed to the Taxpayers. The U.S. Court of Fed-
eral Claims (“Claims Court”) affirmed, reasoning that the
Taxpayers, who are incorporated under state law, are cor-
porations under § 6621(a)(1) notwithstanding their status
as nonprofit entities. Charleston Area Med. Ctr., Inc. v.
United States, 138 Fed. Cl. 626 (2018). The Taxpayers ap-
peal.
Although this is an issue of first impression for our
court, four other circuits have concluded that a nonprofit
entity that is incorporated under state law is a corporation
under § 6621(a)(1). Maimonides Med. Ctr. v. United States,
809 F.3d 85 (2d Cir. 2015) (“Second Circuit”); United States
v. Detroit Med. Ctr., 833 F.3d 671 (6th Cir. 2016) (“Sixth
Circuit”); Med. College of Wis. Affiliated Hosps. v. United
States, 854 F.3d 930 (7th Cir. 2017) (“Seventh Circuit”);
Wichita Ctr. for Graduate Med. Educ., Inc. v. United States,
917 F.3d 1221 (10th Cir. 2019) (“Tenth Circuit”). While it
is not unheard of for appellants revisiting questions previ-
ously considered by other courts to hit the circuit split jack-
pot, this is not such an instance. We agree with the
interpretative path taken by our sister circuits—not
CHARLESTON AREA MEDICAL CTR. v. UNITED STATES 3
because those decisions came first, but because they were
correct. Therefore, we affirm.
I. LEGAL BACKGROUND
The central issue in this appeal is straightforward—
does the word “corporation,” as it appears in 26 U.S.C.
§ 6621(a)(1), include nonprofit entities that are incorpo-
rated under state law. But the simplicity ends there. As is
often the case with issues involving the Internal Revenue
Code (“Code”), the parties’ arguments rely on various au-
thorities—including three provisions of the Code, two iter-
ations of a Treasury regulation, and a notice of proposed
rulemaking issued by the IRS on March 1, 2018. We detail
each below.
A. Code Provisions
Section 6621(a)(1), the specific provision at issue in this
appeal, recites:
(1) OVERPAYMENT RATE The overpayment rate es-
tablished under this section shall be the sum of—
(A) the Federal short-term rate determined under
subsection (b), plus
(B) 3 percentage points (2 percentage points in the
case of a corporation).
To the extent that an overpayment of tax by a cor-
poration for any taxable period (as defined in sub-
section (c)(3), applied by substituting
“overpayment” for “underpayment”) exceeds
$10,000, subparagraph (B) shall be applied by sub-
stituting “0.5 percentage point” for “2 percentage
points”.
Id. (emphases added). Section 6621(a)(1) provides that if
the taxpayer is a corporation and its overpayment exceeds
$10,000, the first $10,000 will bear interest at the Federal
short-term rate plus two percentage points, and the
4 CHARLESTON AREA MEDICAL CTR. v. UNITED STATES
remainder will bear interest at the Federal short-term rate
plus one-half of a percentage point. If the taxpayer is not
a corporation and its overpayment exceeds $10,000, the en-
tire overpayment will bear interest at the Federal short-
term rate plus three percentage points. Id. In plain Eng-
lish, a taxpayer’s refund is greater if the IRS applies the
formula set out for noncorporations than if it applies the
formula set out for corporations.
The sentence in § 6621(a)(1) beginning with the phrase
“To the extent” is referred to as the “flush language.” The
flush language cross-references subsection (c)(3), which in
turn, provides:
(3) LARGE CORPORATE UNDERPAYMENT For pur-
poses of this subsection—
(A) IN GENERAL The term “large corporate under-
payment” means any underpayment of a tax by a C
corporation for any taxable period if the amount of
such underpayment for such period exceeds
$100,000.
(B) TAXABLE PERIOD For purposes of subparagraph
(A), the term “taxable period” means—
(i) in the case of any tax imposed by subtitle A, the
taxable year, or
(ii) in the case of any other tax, the period to which
the underpayment relates.
Id. (emphases added).
While § 6621 does not define “corporation” for purposes
of that section, § 7701(a)(3) provides a Code-wide definition
for the term:
(a) When used in this title, where not otherwise
distinctly expressed or manifestly incompatible
with the intent thereof—
***
CHARLESTON AREA MEDICAL CTR. v. UNITED STATES 5
(3) CORPORATION The term ‘corporation’ includes
associations, joint-stock companies, and insurance
companies.
Id. (emphasis added).
B. Treasury Regulations
Treasury has promulgated different versions of regula-
tions that attempt to classify various entities as corpora-
tions. The Kintner Regulations were enacted in 1960 and
remained in effect through 1996, when they were super-
seded by the modern regulations on January 1, 1997. 25
Fed. Reg. 10,928 (Nov. 17, 1960); 61 Fed. Reg. 66,584 (Dec.
18, 1996). While in effect, the Kintner Regulations “aid[ed]
in classifying business associations that were not incorpo-
rated under state incorporation statutes but that had cer-
tain characteristics common to corporations and were thus
subject to taxation as corporations under the federal tax
code.” Littriello v. United States, 484 F.3d 372, 375 (6th
Cir. 2007)). These characteristics, under the regulations,
included: “(i) [a]ssociates, (ii) an objective to carry on busi-
ness and divide the gains therefrom, (iii) continuity of life,
(iv) centralization of management, (v) liability for corporate
debts limited to corporate property, and (vi) free transfera-
bility of interests.” 25 Fed. Reg. at 10,929–30.
The modern regulations attempted to simplify the en-
tity classification rules. See 61 Fed. Reg. at 66,584 (“The
existing regulations for classifying business organizations
as associations (which are taxable as corporations under
section 7701(a)(3)) or as partnerships under section
7701(a)(2) are based on the historical differences under lo-
cal law between partnerships and corporations. Treasury
and the IRS believe that those rules have become increas-
ingly formalistic. This document replaces those rules with
a much simpler approach that generally is elective.”). Un-
der these regulations, a corporation means, inter alia, “[a]
business entity organized under a Federal or State stat-
ute . . . if the statute describes or refers to the entity as
6 CHARLESTON AREA MEDICAL CTR. v. UNITED STATES
incorporated or as a corporation, body corporate, or body
politic.” 26 C.F.R. § 301.7701-2(b)(1).
C. Treasury’s Notice
On March 1, 2018, the IRS issued a notice regarding an
entirely different section of the Code—Section
1061(c)(4)(A). Internal Revenue Service, IRS Bull. No.
2018-12 at 443, Guidance Under Section 1061, Partnership
Interests Held in Connection with Performance of Services
(Mar. 19, 2018) (hereinafter, “Notice”). Section 1061 gen-
erally concerns partnership interests held in connection
with performance of services and excludes from the term
“applicable partnership interest” “any interest in a part-
nership directly or indirectly held by a corporation.” The
Notice announces that the IRS and Treasury “intend to is-
sue regulations providing guidance on the application of
section 1061” and that “those regulations will provide that
the term ‘corporation’ for purposes of section
§ 1061(c)(4)(A) does not include an S corporation.” Id.
II. PROCEDURAL HISTORY
The Taxpayers are non-stock, not-for-profit, § 501(c)(3)
organizations incorporated in and under the laws of West
Virginia. Although generally exempt from federal income
tax, the Taxpayers are not exempt from taxes on “wages”
from “employment” under the Federal Insurance Contribu-
tions Act (“FICA”). “Employment” under FICA has a broad
definition but excepts, for example, service performed in
the employ of a school by a student who is regularly en-
rolled and attending classes at the same school. 26 U.S.C.
§ 3121(b)(10).
In 2010, the IRS administratively determined that
medical residents fall within that exception to “employ-
ment” and applied this determination retroactively. The
IRS issued tax refunds to the Taxpayers, who had paid
FICA taxes on medical residents for twenty-nine quarterly
tax periods during the 1995 to 2005 taxable years. The IRS
CHARLESTON AREA MEDICAL CTR. v. UNITED STATES 7
paid interest on these tax refunds to the Taxpayers by ap-
plying the interest rate for corporations under § 6621(a)(1).
The Taxpayers contend that, if the IRS had used the inter-
est rate for noncorporations under § 6621(a)(1), they would
have received approximately $1.9 million in additional
statutory interest. The Taxpayers now seek to recover over
$2 million in total—the $1.9 million in additional statutory
interest plus interest. J.A. 2.
A. Related Case
The Taxpayers first filed an action with a third plain-
tiff, Wichita Center for Graduate Medical Education, in the
District of Kansas on February 26, 2016. The district court
ultimately dismissed the Taxpayers’ case for lack of venue,
leaving Wichita Center as the only remaining plaintiff.
Wichita Ctr. for Graduate Med. Educ. v. United States, No.
16-1054-JTM, 2016 WL 4000934 (D. Kan. July 26, 2016).
It later granted summary judgment on the merits for the
government, ruling that the term “corporation” as it ap-
pears in § 6621(a)(1) includes nonprofit entities. Wichita
Ctr. for Graduate Med. Educ. v. United States, No. 16-1054-
JTM, 2017 WL 6055708 (D. Kan. Dec. 7, 2017). Wichita
Center appealed, and the Tenth Circuit affirmed consistent
with the decisions of the three other circuits that addressed
this issue before it. Tenth Circuit, 917 F.3d at 1227.
B. The Claims Court’s Decision
After the district court dismissed the Taxpayers’
claims, they, along with 290 similarly-situated entities,
tried again, this time by filing an action at the Claims
Court in October 2017. The government moved for judg-
ment on the pleadings on March 26, 2018, arguing that the
IRS correctly applied the lower interest rate to the Taxpay-
ers. The Taxpayers later moved for summary judgment
and class certification. The Claims Court granted the gov-
ernment’s motion for judgment on the pleadings, denied
Charleston Area’s motion for summary judgment, and
thereby denied Charleston Area’s motion for class
8 CHARLESTON AREA MEDICAL CTR. v. UNITED STATES
certification as moot. Charleston Area Med. Ctr., 138 Fed.
Cl. at 632–33.
Regarding the merits, the Claims Court found that the
term “corporation” as it appears in § 6621(a)(1) includes
nonprofit entities like the Taxpayers here. It reasoned that
common usage, the Code’s definition of the term in
§ 7701(a)(3), the structure of § 6621(a)(1), and the use of
the term “corporation” in the Code as a whole “all indicate
that the term ‘corporation’ in . . . § 6621 plainly encom-
passes both for-profit and not-for-profit corporations.” Id.
at 631. The Claims Court also rejected the Taxpayers’
counterargument, based on the Kintner Regulations and
the IRS Notice of March 1, 2018, that the term “corpora-
tion” in § 6621(a)(1) does not include nonprofit entities.
The Taxpayers appeal the Claim Court’s determination
on the merits as well as its decision to dismiss as moot the
Taxpayers’ motion for class certification. We have jurisdic-
tion pursuant to 28 U.S.C. § 1295(a)(3).
III. DISCUSSION
We conclude that the Taxpayers are corporations under
§ 6621 and that the Claims Court properly dismissed as
moot the Taxpayers’ motion for class certification.
A. The Taxpayers are “Corporations”
under § 6621(a)(1)
As a threshold matter, we address the definition of
“corporation” contained in § 7701(a)(3). Typically, “[s]tat-
utory definitions control the meaning of statutory words.”
Burgess v. United States, 553 U.S. 124, 129 (2008). Where
a statute provides an explicit definition, we must follow
that definition even if it varies from the term’s customary
meaning. Digital Realty Tr., Inc. v. Somers, 138 S. Ct. 767,
776 (2018). Here, § 7701(a)(3) of the Code is a definitional
statute that defines “corporation” as a term that “includes
associations, joint-stock companies, and insurance compa-
nies.” Id. (emphasis added). It is undisputed that medical
CHARLESTON AREA MEDICAL CTR. v. UNITED STATES 9
centers like the Taxpayers in this case do not fall into any
of these three categories. See Sixth Circuit, 833 F.3d at
674. But, while a definition that declares what a term
“means” excludes any unstated meaning, a definition that
states what a term “includes” is open-ended. See Burgess,
553 U.S. at 130 (quoting Colautti v. Franklin, 439 U.S. 379,
392–93 n.10 (1979)). Given that § 7701(c) uses the inclu-
sive word, “includes,” the mere fact that the Taxpayers do
not fall into the enumerated categories does not foreclose
the possibility that they are corporations. And, “[i]n the
absence of a statutory definition to the contrary, [we may]
assume that Congress adopts the customary meaning of
the terms it uses.” Sixth Circuit, 833 F.3d at 674 (citing
Morissette v. United States, 342 U.S 246, 263 (1952)).
The Taxpayers argue that we may not look to the cus-
tomary meaning of “corporation,” because § 7701(a)(3) re-
solves the issue presented. First, they contend that, under
the statutory canons of noscitur a sociis and/or ejusdem
generis, 1 § 7701(a)(3) excludes nonprofits from the defini-
tion of “corporation.” Specifically, the Taxpayers contend
that, because § 7701(a)(3) enumerates categories that are
necessarily for-profit, such as “joint-stock companies[] and
insurance companies,” the definitional statute cannot be
extended to cover nonprofit entities. Indeed, “a word is
known by the company it keeps.” Yates v. United States,
135 S. Ct. 1074, 1085 (2015).
1 Both canons are related and differ only in nuanced
ways. While both “canons require identifying a common
trait that links all the words in a statutory phrase,” nosci-
tur a sociis is the doctrine applicable here. Yates v. United
States, 135 S. Ct. 1074, 1097 (2015) (Noscitur a sociis “ad-
vises that words grouped in a list be given similar mean-
ings.”). According to the Taxpayers, the common trait
among the enumerated categories here is that they are all
for profit entities.
10 CHARLESTON AREA MEDICAL CTR. v. UNITED STATES
But the Taxpayers’ argument fails because, although
certain enumerated objects in § 7701(a)(3) may be strictly
for-profit entities, the section also enumerates “associa-
tions.” Associations are not strictly for-profit entities and
the Taxpayers do not suggest otherwise. Appellants’ Br. at
12–13 (identifying only “joint-stock companies” and “insur-
ance companies” as for-profit and failing to address
whether “associations” are for-profit); see also 26 C.F.R. §
29.3797-2 (1949) (“The term ‘association’ is not used in the
Internal Revenue Code in any narrow or technical sense.
It includes any organization, created for the transaction of
designated affairs, or the attainment of some object, which,
like a corporation, continues notwithstanding that its
members or participants change, and the affairs of which,
like corporate affairs, are conducted by a single individual,
a committee, a board, or some other group, acting in a rep-
resentative capacity.”). This indicates that the definitional
statute contemplates a broader definition of “corporation”
that is not limited to for-profit entities.
Second, the Taxpayers argue that previous versions of
§ 7701(a)(3) limited the definition of “corporation” to only
for-profit entities and that the amendment resulting in the
current version was not meant to expand the meaning to
include nonprofit entities. The language in § 7701(a)(3)
originated in the Revenue Act of 1916, 39 Stat. 756, 789.
Section 406 of that Act imposed an excise tax on “[e]very
corporation, joint-stock company or association, now or
hereafter organized in the United States for profit and hav-
ing a capital stock represented by shares, and every insur-
ance company.” Id. (emphasis added).
In the Revenue Act of 1918, Congress enacted
§ 7701(a)’s predecessor, which recited the exact same lan-
guage as the current version. Accordingly, it dropped from
Section 406 of the 1916 Act the phrase “now or hereafter
organized in the United States for profit and having a cap-
ital stock represented by shares,” and added the word “in-
cludes” before enumerating the above-discussed categories
CHARLESTON AREA MEDICAL CTR. v. UNITED STATES 11
that qualify as corporations. The Taxpayers argue that
Congress’s use of similar language from the 1916 Act in the
1918 Act demonstrates that corporations should presently
be limited to for-profit entities just as they were in the 1916
Act.
But the changes between the language in the two Acts
actually cut against the Taxpayers’ argument. Congress
removed the limiting phrase “now or hereafter organized in
the United States for profit . . .” and added the inclusive
word, “includes.” This demonstrates that Congress meant
to expand the definition of corporation in the 1918 Act. See
Second Circuit, 809 F.3d at 88 (finding that the § 7701(a)
“serve[s] to expand the federal tax law meaning of ‘corpo-
ration’ beyond entities that would ordinarily fall under the
term; it offers no hint that Congress intended to contract
the ordinary meaning of the term in any way.”). Indeed,
that the 1916 Act included language specifying that the
joint-stock companies and associations included in the sec-
tion must be for-profit indicates that such companies and
associations are not necessarily for-profit and further
weakens the Taxpayer’s reliance on the noscitur a sociis
canon of statutory interpretation.
Because the definitional statute does not resolve the
question of whether nonprofits are corporations, we next
consider if the customary meaning of the term extends to
nonprofit entities. We conclude that it does. The historical,
common law understanding of “corporation” as well as new
and old dictionaries indicate that nonprofit entities can be
corporations. The Supreme Court held in 1819 that Dart-
mouth College is a corporation. Trs. of Dartmouth Coll. v.
Woodward, 17 U.S. 518, 636 (1819) (“Being the mere crea-
ture of law, [a corporation] possesses only those properties
which the charter of its creation confers upon it, either ex-
pressly, or as incidental to its very existence.”). As the
Sixth Circuit noted, the Court’s holding in Dartmouth Col-
lege rested on so firm a foundation that “permitting a col-
lege to be treated as a corporation [] might have been called
12 CHARLESTON AREA MEDICAL CTR. v. UNITED STATES
a cliché” at that time. Sixth Circuit, 833 F.3d at 674. There
can be no doubt that the historical common law under-
standing of “corporation” extended to nonprofit entities
such as the Taxpayers at issue here. See generally id. at
674–75 (collecting views of Edward Coke (1612), Chief Jus-
tice Marshall (1819), Justice Joseph Story (1833), and Ed-
mund Seymour (1903)). Nor can there be any doubt that
new and old dictionaries similarly define “corporation.” See
generally id. at 675–76 (collecting definitions from lay dic-
tionaries, including Oxford English Dictionary (2016) and
Webster’s New Int’l Dictionary (1934), as well as legal dic-
tionaries, including the 1910 and 2014 editions of Black’s
Law Dictionary).
Finally, other circuits have held that an entity incorpo-
rated under state law, like the Taxpayers in this case, is a
corporation within the meaning of the Code. See, e.g.,
O’Neil v. United States, 410 F.2d 888, 896 (6th Cir. 1969);
United States v. Empey, 406 F.2d 157, 169–70 (10th Cir.
1969). Thus, the ordinary meaning of the word “corpora-
tion” extends to nonprofit entities.
The ordinary meaning of “corporation” is also con-
sistent with its use in the Code. As the Sixth Circuit noted,
there are “three basic types of corporations addressed in
the Code: nonprofit corporations covered by subchapter F;
certain for-profit corporations covered by subchapter C;
and certain for-profit corporations covered by subchapter
S.” Sixth Circuit., 833 F.3d at 676. This demonstrates that
Congress used the generic definition of “corporation”—
which includes both for-profit and nonprofit entities
alike—in § 6621, because in each of these three subchap-
ters, the drafters refer to the entities as “corporations.” Id.
For example, section 501, which addresses nonprofit enti-
ties that are generally exempt from federal income tax, still
refers to those nonprofit entities as “corporations.” Id. In
fact, “[t]he word ‘corporation’ is used approximately fifty
times throughout § 501.” Id. Other sections of the Code,
including sections 1381(a)(2)(A), 2522(b)(2), 12(1),
CHARLESTON AREA MEDICAL CTR. v. UNITED STATES 13
3121(h)(5), 1504(b)(1), and 1(h)(11)(B)(ii)(I), all treat these
nonprofit entities as corporations and then specifically ex-
clude them from coverage. 2 Id.
The Taxpayers raise various counterarguments—none
of which we find persuasive. They contend that the in pari
materia canon of construction and principles of symmetry
require that we read § 6621(a)(1)’s provisions governing
overpayments symmetrically with § 6621(c)(3)’s provisions
governing underpayments. As noted above, the flush lan-
guage in subsection (a)(1) begins, “[t]o the extent that an
overpayment of tax by a corporation for any taxable period
(as defined in subsection (c)(3), applied by substituting
‘overpayment’ for ‘underpayment’),” and cross-references
subsection (c)(3). Subsection (c)(3), in turn, defines the
term “large corporate underpayment” as “any underpay-
ment of a tax by a C corporation.” Id. (emphasis added).
According to the Taxpayers, this definition limits the
meaning of “corporation” in subsection (a)(1) to only C cor-
porations. In support of this argument, the Taxpayers rely
on the Second Circuit’s decision in Exxon Mobil Corp. v.
Commissioner, 689 F.3d 191, 195 n.7 (2d Cir. 2012), in
which, according to the Taxpayers, the Second Circuit held
that interest rates on overpayments must be symmetrical
with interest rates on underpayments.
But the Second Circuit in Exxon did not set out such a
broad principle; rather, it acknowledged the opposite—that
interest rates for underpayments are higher than interest
2 The Taxpayers counter that “the court ignored
hundreds of instances in which the unadorned term [corpo-
ration] encompasses only for-profit entities, such as S or C
corporations.” Appellants’ Br. at 11. But the Taxpayers do
not provide any such examples or citations and admit that
they did not “undertake[] an exhaustive survey to deter-
mine the exact number of enactments or amendments . . .
that included the term ‘corporation.’” Appellants’ Br. at 21.
14 CHARLESTON AREA MEDICAL CTR. v. UNITED STATES
rates for overpayments. Id. Regardless, principles of sym-
metry cannot override the plain text of the statute. The
other circuits that have considered this argument agree.
See Sixth Circuit, 833 F.3d at 678 (“If the (c)(3) definition
of ‘large corporate underpayment’ returns to (a)(1), that
means the statute says: ‘To the extent that an overpayment
of tax by a C corporation over $100,000 for any taxable pe-
riod exceeds $10,000 . . . .’ Because $100,000 always ex-
ceeds $10,000, that would make the dependent clause of
the flush language in (a)(1) a needlessly confusing append-
age. Congress deserves more credit than that.”); Second
Circuit, 809 F.3d at 92 (“By asking us to read ‘C’ into sub-
section (a)(1), [the taxpayer] seeks to have the rule of in
pari materia (insofar as it applies at all) override another
canon of interpretation, namely, the rule that ‘[w]here Con-
gress includes particular language in one section of a stat-
ute but omits it in another section of the same Act, it is
generally presumed that Congress acts intentionally and
purposely in the disparate inclusion or exclusion.’” (altera-
tion in original) (quoting Russello v. United States, 464 U.S.
16, 23 (1983))); Seventh Circuit, 854 F.3d at 933 (“[T]he dis-
tinction between ‘corporation’ in subsection (a) and ‘C cor-
poration’ in subparagraph (c)(3)(A) implies a different
meaning. A presumption that a single word means the
same thing throughout a statute goes together with a pre-
sumption that different words mean different things.”).
In essence, the Taxpayers’ argument amounts to one of
policy—that a taxpayer should not have to pay a higher in-
terest rate for underpayments of taxes than the govern-
ment must pay for refunds on overpayments of taxes.
While the outcome may seem unfair, it is one mandated by
the text of the statute and thus can only be rectified by fu-
ture amendments to the statutory text. Azar v. Allina
Health Servs., 139 S. Ct. 1804, 1815 (2019) (“That leads us
to the government’s final redoubt: a policy argument. But
as the government knows well, courts aren’t free to rewrite
clear statutes under the banner of our own policy concerns.
CHARLESTON AREA MEDICAL CTR. v. UNITED STATES 15
If the government doesn’t like Congress’s notice-and-com-
ment policy choices, it must take its complaints there.”).
The Taxpayers also contend that the Kintner regula-
tions, replaced by the modern regulations in 1997, support
their contention that the term “corporation” does not con-
template nonprofit entities. As noted above, the Kintner
regulations laid out certain characteristics common to cor-
porations. Each of these characteristics, according to the
Taxpayers, necessarily excluded nonprofit entities—
“(i) [a]ssociates, (ii) an objective to carry on business and
divide the gains therefrom, (iii) continuation of life,
(iv) centralization of management, (v) liability for corpo-
rate debts limited to corporate property, and (vi) free trans-
ferability of interests.” 26 C.F.R. § 301.7701-2(b)(1). The
Taxpayers argue that this is because each of these charac-
teristics appears to contemplate generation of profits and
thus are necessarily directed to for-profit entities. Though
these regulations are no longer in effect, the Taxpayers
contend that they were the governing definition for “corpo-
ration” when Congress enacted § 6621 and thereby consti-
tute the backdrop against which Congress legislated.
The Taxpayers may very well be correct that the char-
acteristics listed in the Kintner regulations seem directed
to for-profit entities. They ignore, however, that the pur-
pose of these regulations was to aid in classifying entities
that were not incorporated under state law, but had certain
other characteristics common to corporations and were
thus still subject to taxation under the Code. Tenth Circuit,
917 F.3d at 1226–27 (citing Kintner v. United States, 107
F. Supp. 976, 979 (D. Mont. 1952), aff’d, 216 F.2d 418 (9th
Cir. 1954) (holding that an “association” under state law
could also be treated as a corporation for purposes of the
Code because the Code may be more expansive than cate-
gories enumerated under state law)); Littriello v. United
States, 484 F.3d 372, 375 (6th Cir. 2007) (“The earlier reg-
ulations had been developed to aid in classifying business
associations that were not incorporated under state
16 CHARLESTON AREA MEDICAL CTR. v. UNITED STATES
incorporation statutes but that had certain characteristics
common to corporations and were thus subject to taxation
as corporations under the federal tax code.”). Here, the
Taxpayers are incorporated under state law and thus
would have been considered a corporation even in the era
of the Kintner regulations.
Finally, the Taxpayers argue that the Notice supports
its interpretation of the statute. As stated above, the IRS
issued a notice on March 1, 2018, which “announces that
the [Treasury Department] and the [IRS] intend to issue
regulations providing guidance on the application of sec-
tion 1061 [of the Internal Revenue Code . . . [and] further
announces that the Treasury Department and the IRS in-
tend that those regulations will provide that the term ‘cor-
poration’ for purposes of section 1061(c)(4)(A) does not
include an S corporation.” J.A. at 169. The Taxpayers
characterize this Notice as “formal administrative guid-
ance” that “holds that the term ‘corporation’ does not . . .
encompass S corporations but instead means ‘C corpora-
tion.’” Appellant’s Br. at 39. According to the Taxpayers,
the notice shows that “corporation” does not have a broad
meaning.
But, the Notice’s exclusion of an S corporation from the
definition of “corporation” would be “for purposes of” §
1061; the Notice does not purport to alter the meaning of
“corporation” as it appears in § 6621. While we question
whether the regulations described in the Notice, if codified,
would be proper in view of the government’s position in this
case that the Code incorporates the broad, common law
meaning of “corporation,” we leave that issue for another
day. Indeed, the Notice is just that—a Notice regarding
regulations that do not yet, and may never, exist. The
Claims Court declined “to express any views on whether
the approach of some as-yet-to-be issued regulations is in-
consistent with the government’s arguments in this case.”
J.A. 9. We do the same here.
CHARLESTON AREA MEDICAL CTR. v. UNITED STATES 17
B. The Motion for Class Certification is Moot
The Taxpayers also argue that the Claims Court erred
in denying its motion for class certification as moot. But
we addressed this issue in Greenlee County v. United
States, 487 F.3d 871 (Fed. Cir. 2007). There, we noted that
this court has “repeatedly found on appeal that issues re-
lated to class certification were moot in light of our resolu-
tion against the plaintiff of a motion to dismiss or for
summary judgment.” Id. at 880 (citing Christopher Vill.,
L.P. v. United States, 360 F.3d 1319, 1337–38 (Fed. Cir.
2004); Gollehon Farming v. United States, 207 F.3d 1373,
1382 (Fed. Cir. 2000), overruled on other grounds by Fisher
v. United States, 402 F.3d 1167 (Fed. Cir. 2005); Greenbrier
v. United States, 193 F.3d 1348, 1360 (Fed. Cir. 1999)). Ac-
cordingly, we saw no reason to apply a different rule when
it is the Claims Court that finds the issue moot. Id.
We also noted that “[n]othing in the Supreme Court’s
decision in Eisen v. Carlisle & Jacquelin, 417 U.S. 156
(1974), which held that the merits of the plaintiff’s claim
should not be considered in ruling on class certification[,]
requires that class certification be addressed before ruling
on a motion to dismiss.” Id. We reasoned that the “weight
of authority after Eisen supports our conclusion that it was
within the discretion of the Court of Federal Claims to find
the class certification motion moot.” Id. at 880–81. (cit-
ing Kehoe v. Fid. Fed. Bank & Tr., 421 F.3d 1209, 1211 n.1
(11th Cir. 2005) (finding no error in grant of summary judg-
ment without resolving class certification); Curtin v.
United Airlines, Inc., 275 F.3d 88, 92 (D.C. Cir. 2001)
(same); Schweizer v. Trans Union Corp., 136 F.3d 233, 239
(2d Cir. 1998) (“There is nothing in [Fed. R. Civ. P.] 23
[which governs class certification] which precludes the
court from examining the merits of plaintiff’s claims on a
proper Rule 12 motion to dismiss or Rule 56 motion for
summary judgment simply because such a motion precedes
resolution of the issue of class certification.”). Thus, we
18 CHARLESTON AREA MEDICAL CTR. v. UNITED STATES
find that the Claims Court did not err in denying the Tax-
payers’ motion for class certification as moot.
CONCLUSION
For the reasons stated above, we affirm the decision of
the Claims Court.
AFFIRMED
COSTS
Costs to appellee.