## Facts

- Marsh & McLennan Companies, Inc. overpaid its 1985 federal income tax by $275,139 and its 1986 tax by $3,412,083.
- Marsh later overpaid its 1987 tax by $12,694,216 and elected to apply that overpayment to its 1988 tax (a credit-elect overpayment).
- Marsh also overpaid its 1988 tax by $28,336,308 and elected to apply that overpayment to its 1989 tax (a credit-elect overpayment).
- The IRS credited the 1985 overpayment and part of the 1986 overpayment to Marsh’s 1987 account, and credited the remainder of the 1986 overpayment to Marsh’s 1988 account.
- The IRS ceased paying overpayment interest on the 1985 and 1986 overpayments as of the due dates of the 1987 and 1988 returns (using later dates because of an internal processing error).
- Marsh sought additional interest on the 1985 and 1986 overpayments for periods after the 1987 and 1988 return due dates, arguing that later non-interest-bearing credit-elect overpayments effectively funded the later-year liabilities and should delay the interest cutoff.
- The Court of Federal Claims granted summary judgment for the United States; Marsh appealed on a legal question.

## Issues

1. Whether 26 U.S.C. § 6611 and Treas. Reg. § 301.6611-1(b) permit overpayment interest on prior-year overpayments to continue after the due date of the year to which those overpayments are credited, based on the presence of later credit-elect overpayments.
2. Whether credit-elect overpayments, which do not bear interest, can extend the interest-accrual period on earlier overpayments credited forward.

## Decision

- The Federal Circuit affirmed summary judgment for the United States.
- Interest on the 1985 and 1986 overpayments stopped at the due dates of the 1987 and 1988 liabilities to which those overpayments were credited, as defined by the governing statute and regulation.
- Later credit-elect overpayments for 1987 and 1988 did not earn interest and could not extend interest on the earlier overpayments.
- Equitable “use-of-money” reasoning could not override the statutory and regulatory endpoint for overpayment interest.

## Legal Principles

- Under 26 U.S.C. § 6611(b)(2), when an overpayment is credited against another year’s tax, interest runs only until the “due date of the amount against which the credit is taken.”
- Treas. Reg. § 301.6611-1(b) defines the relevant “due date” as the last date fixed for payment of the tax, without regard to extensions.
- Credit-elect overpayments applied to a succeeding year’s estimated tax under 26 U.S.C. § 6402(b) are non-interest-bearing and do not affect the § 6611 interest cutoff for separate, earlier overpayments.
- Courts will not extend overpayment interest based on account-balance mechanics or equitable “use-of-money” theories when the statute and regulation supply a fixed termination date.

## Conclusion

The court held that overpayment interest on amounts credited forward ends on the credited year’s statutory due date, and later non-interest-bearing credit-elect overpayments cannot be used to prolong interest on earlier overpayments.


Marsh & McLennan Cos. v. United States, 302 F.3d 1369 (Fed. Cir. 2002)