FedEx Vs US Government - Introduction
FedEx Corporation, having previously succeeded in a significant legal battle concerning foreign tax credits, is now urging the US District Court for the Western District of Tennessee to confirm the refund amount due.
This development follows after the government halted discussions on a joint judgment proposal, prompting FedEx to take legal action.
Motion for Judgment
On 8 March 2024, FedEx filed a motion for judgment to finalise the refund amount. This action was taken in response to the government's withdrawal from negotiations and its indication that it would oppose FedEx's motion with a novel argument based on the "Haircut Rule".
The Government's "Haircut Rule" Argument
The government's new stance involves Treasury Regulation Section 1.965-5(c)(1)(i), which potentially limits foreign tax credits related to withholding taxes paid to foreign jurisdictions.
FedEx contests this argument on several grounds, including the applicability of the rule when withholding taxes are not claimed, procedural deficiencies under the Administrative Procedure Act, and the belated introduction of this argument in the litigation process.
FedEx Vs US Government - Practical Point
The government's late introduction of the "Haircut Rule" argument may face judicial resistance, especially considering the advanced stage of the litigation.
The transparency of the government's strategy during the litigation and its decision to withhold this argument until a critical juncture could impact the court's receptivity to the new claim.
Implications for Litigants
The FedEx case underscores the importance of timely presenting arguments in legal disputes.
Waiting until late in the litigation process to introduce new claims can lead to challenges in persuading the court to consider those arguments, with potential consequences including rejection due to delay.
FedEx Vs US Government - Conclusion
As FedEx moves forward with its motion for judgment, the legal community watches closely.
The outcome may provide further guidance on the strategic considerations and challenges of introducing new arguments in ongoing litigation, particularly in complex tax law disputes.
Final thoughts
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