United States v. ConocoPhillips Company

The Internal Revenue Service and several oil companies agreed to settle a tax dispute over a jointly-developed pipeline system in a closing agreement. After entering the agreement, Phillips Petroleum Company (now ConocoPhillips Company) acquired Arco Transportation (one of the original signatories to the agreement). In 2000 and 2001, Conoco revisited the tax implications of its acquisition and claimed "going-forward" and "basis-increase" deductions on its amended consolidated tax returns. The IRS refunded Conoco's 2000 going-forward deductions, but disputed the remaining deductions. The parties took the dispute to federal district court, where the district court decided the issue on cross-motions for summary judgment. The court rejected Conoco's position and granted summary judgment to the IRS. Conoco appealed. After its review, the Tenth Circuit concluded that "going-forward" deductions were impermissible for interests that Arco Transportation did not own as of July 1, 1977, and "basis-increase" deductions were impermissible because the Closing Agreement did not fix the amount of a liability or exempt that liability from section 461(h) of the Internal Revenue Code. Thus, the Court held that Conoco was not entitled to the going-forward or basis-increase deductions. View "United States v. ConocoPhillips Company" on Justia Law