UNITED STATES TAX COURT



    INTEL CORPORATION AND CONSOLIDATED SUBSIDIARIES, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent*



       Docket No. 23010-89.                    Filed July 30, 1998.



            P had deficiencies in its Federal income tax for
       the taxable years 1979 and 1980. From the taxable year
       1981, P carried back an amount of foreign tax to 1979
       and 1980. From 1982, P carried back additional foreign
       tax to 1980. R computed interest under sec. 6601,
       I.R.C. 1954, from the respective due dates of the
       returns for 1979 and 1980 until the end of 1981 for the
       deficiency amounts for 1979 and 1980, respectively,
       eliminated by the carryback from 1981. For the
       deficiency amount in 1980 eliminated by the carryback
       from 1982, R computed interest from the due date of the
       return for 1980 until the due date of the return for
       1982. P filed a motion under sec. 7481(c), I.R.C.
       1986, to redetermine interest. Held, for the years at
       issue, sec. 904(c), I.R.C. 1954, does not prevent

*
   This supplements Intel Corp. v. Commissioner, 

(1993), affd. 

(9th Cir. 1995), amended and
superseded 

(9th Cir. 1996).
                               - 2 -


     interest from being imposed on the deficiency without
     reduction by a foreign tax carryback from a subsequent
     year. Held, further, the interest on the deficiency
     amounts eliminated by the carryback from 1981 stops
     accruing as of the end of 1981, and the interest on the
     deficiency amount eliminated by the carryback from 1982
     stops accruing as of the due date of the 1982 return.
     Cf. sec. 6611(g) (now sec. 6611(f)(2)), I.R.C. 1954,
     prior to and after the Tax Equity and Fiscal
     Responsibility Act of 1982, Pub. L. 97-248, sec.
     346(c), 96 Stat. 637.



     Joel V. Williamson, Wayne S. Kaplan, Thomas L. Kittle-Kamp,

Marjorie M. Margolies, and Robert H. Perlman, for petitioner.

     Beth L. Williams and Ewan D. Purkiss, for respondent.



                      SUPPLEMENTAL OPINION

     TANNENWALD, Judge:   A decision was entered in this case on

December 9, 1993, pursuant to a stipulated computation, in

accordance with this Court's opinion, Intel Corp. v.

Commissioner, 

(1993), affd. 

(9th Cir.

1995), amended and superseded 

(9th Cir. 1996).   On

May 9, 1997, petitioner filed a motion under section 7481(c)1 and

Rule 261 to redetermine interest on the deficiencies for the 1979

and 1980 taxable years.


1
   We refer to sec. 7481(c) of the Internal Revenue Code as in
effect at the time petitioner's motion was filed. Unless
otherwise indicated, all other section references are to the
Internal Revenue Code in effect for the taxable years in issue,
and all Rule references are to the Tax Court Rules of Practice
and Procedure.
                                  - 3 -


     The parties agree that, for the taxable years 1979 and 1980,

petitioner had foreign tax carrybacks from 1981 and 1982 as

follows:

                                             Year
     Year Used         Amount             Originated

         1979        $5,015,830              1981

         1980           753,462              1981
                      4,574,958              1982

The parties disagree as to the effect, if any, of these

carrybacks on the calculation of interest on the deficiencies for

1979 and 1980.   The principal issue for decision is whether

interest accrues on the portion of a deficiency that is

eliminated by such carrybacks.     If it does accrue, when does it

end, i.e., at the close of the taxable year of the carryback or

on the due date for the filing of the tax return for that year?

We direct our attention, in the first instance, to the principal

issue.

     Section 6601(a) provides that interest shall be paid on the

amount of tax not paid on or before the last date prescribed for

payment for the period from such last date to the date paid.    The

last date prescribed for payment of income tax is generally the

due date for filing the return without regard to any extension of

time for filing.   Sec. 6601(b)(1).

     "In general, interest liability is determined under section

6601 synchronically, looking at the period during which interest
                                - 4 -


accrues, without reference to future events, such as loss or

credit carrybacks."    BankAmerica Corp. v. Commissioner, 

, 14 (1997).    Section 6601 reflects the "use of money"

principle; "That is, the party who has the use of the money pays

interest up until the event which causes the party no longer to

have use of that money."    

   "In the absence of a clear

legislative expression to the contrary, the question of who

properly should possess the right of use of the money owed the

Government for the period it is owed must be answered in favor of

the Government."    Manning v. Seeley Tube & Box Co., 

,

566 (1950).

       In this latter connection, we are not persuaded by

petitioner's argument that we should not give any consideration

to the time-value-of-money element because that concept "can be

applied only in the presence of a legislative directive to do

so".    City of New York v. Commissioner, 

, 487 (1994),

affd. 

(D.C. Cir. 1995).      That language was used in

analyzing the applicability of time-value-of-money substantive

provisions of the Code.    Interest per se involves the time value

of money, and, if a directive is needed, it can be found in

section 6601(a).

       Section 901 allows a taxpayer who so elects a credit,

subject to the limitation of section 904, for the amounts of

certain "taxes paid or accrued during the taxable year to any
                               - 5 -


foreign country or to any possession of the United States", plus

those taxes deemed to have been paid under sections 902 and 960.

Sec. 901(a) and (b)(1).   The purpose of section 901 is to provide

relief from U.S. taxation where income already has been taxed by

another country.   Perkin-Elmer Corp. & Subs. v. Commissioner, 

, 470 (1994).   Section 904(a) provides that the amount of

the foreign tax credit "shall not exceed the same proportion of

the tax against which such credit is taken which the taxpayer's

taxable income from sources without the United States * * * bears

to his entire taxable income for the same taxable year."   This

limitation was enacted to prevent foreign tax credits from

eliminating U.S. tax on U.S.-source income.   Perkin-Elmer Corp. &

Subs. v. Commissioner, supra at 470-471.   Section 904(c) provides

for carryback and carryover of any excess foreign taxes as

follows:

          (c) Carryback and Carryover of Excess Tax Paid.--
     Any amount by which all taxes paid or accrued to
     foreign countries or possessions of the United States
     for any taxable year for which the taxpayer chooses to
     have the benefits of this subpart exceed the limitation
     under subsection (a) shall be deemed taxes paid or
     accrued to foreign countries * * * in the second
     preceding taxable year, in the first preceding taxable
     year, and in the first, second, third, fourth, or fifth
     succeeding taxable years, in that order and to the
     extent not deemed taxes paid or accrued in a prior
     taxable year, in the amount by which the limitation
     under subsection (a) for such preceding or succeeding
     taxable year exceeds the sum of the taxes paid or
     accrued to foreign countries * * * for such preceding
     or succeeding taxable year and the amount of the taxes
     for any taxable year earlier than the current taxable
                              - 6 -


     year which shall be deemed to have been paid or accrued
     in such preceding or subsequent taxable year * * *

     Petitioner argues that section 904(c) is a clear legislative

expression that interest is not imposed on tax liability "paid"

by foreign tax carrybacks, because such carrybacks are "deemed

taxes paid or accrued to foreign countries * * * in" (emphasis

added) the year to which they are carried back and no statutory

provision exists that contradicts this plain language.

Petitioner describes the various interest provisions in the

Internal Revenue Code as detailed and complex and points to the

absence of a specific interest provision concerning foreign tax

carrybacks in situations involving deficiencies as significant in

light of other provisions dealing with the question of interest

on deficiencies involving other types of carrybacks.   Respondent

urges us to preserve symmetry between the treatment of interest

on deficiencies with that of interest on overpayments in the

foreign tax carryback situation, in keeping with Manning v.

Seeley Tube & Box 

; United States v. Koppers Co., 

(1955), and the recently decided Fluor Corp. &

Affiliates v. United States, 

(Fed. Cir. 1997).

     We begin our analysis of the scope of the language of

section 904(c) mindful of our observations in Hospital Corp. of

Am. v. Commissioner, 

, 84-85 (1996):

     The language of a statute * * * cannot be viewed in
     isolation. In construing the meaning of [a] section
     * * *, it is necessary to consider all of the words of
                               - 7 -


     the statute as well as their context, the purposes of
     the law, and the circumstances under which the words
     were employed. Furthermore, we must view the statute
     in context as a whole and with a view to its place in
     the overall statutory scheme. [Citations omitted.2]

     Prior to 1942, there were no carrybacks of any kind, and

therefore there was no problem in respect of interest on any

overpayment or reduced underpayments attributable to carrybacks.

     Section 153(a) of the Revenue Act of 1942 (1942 Act), ch.

619, 56 Stat. 847, amended section 122(b) of the 1939 Code to

provide for a 2-year carryback of net operating losses.   Section

204(b) of the 1942 Act, 56 Stat. 900, amended section 710(c) of

the 1939 Code to provide a 2-year carryback of unused excess

profit tax credit.   Section 153(d) of the 1942 Act, 56 Stat. 848,

amended section 3771 by adding subsection (e) to eliminate any

interest on an "overpayment" attributable to either of such

carrybacks for the period prior to the filing of a claim for

refund for such overpayment.   There was no comparable provision

dealing with underpayments later reduced or eliminated by any




2
   As will subsequently appear, we have included, in our
historical recital of the statutory provisions dealing with
interest and carrybacks, references to legislative actions
subsequent to the time when sec. 904(c) was enacted. In so
doing, we emphasize that we have done so for the sake of
presenting a full history, recognizing that actions of subsequent
Congresses provide a "'hazardous basis for inferring the intent
of an earlier one'". Hawkins v. United States, 

,
1082 (9th Cir. 1994) (quoting United States v. Price, 

, 313 (1961)).
                                - 8 -


such carryback, nor was there any comment in the legislative

history adverting to such a situation.

     The foregoing action by Congress was the subject of

litigation culminating in Manning v. Seeley Tube & Box 

, involving the propriety of charging interest on a

deficiency which was later reduced by a net operating loss

carryback.   The Supreme Court held that the taxpayer was liable

for the interest, reasoning that the net operating loss carryback

provision did not alter the taxpayer's duty to pay the full tax

when due.    The Supreme Court found support for its conclusion in

section 3771(e) of the 1939 Code (the predecessor of section

6611(f) of the 1954 Code) which, as pointed out above,

specifically prohibited the taxpayer from receiving interest on

"any" overpayment created by the use of a net operating loss

carryback for the period prior to filing a claim for refund of

such overpayment.

     The next step in the unfolding history came with the

enactment of section 6601(d) of the 1954 Code, ch. 736, 68A Stat.

817, which codified the holding of Manning v. Seeley Tube & Box

Co., 

(1950).   At the same time, Congress enacted

section 6611(f) (now section 6611(f)(1)), which contained the

provisions prohibiting interest in respect of an overpayment.

68A Stat. 819.   Thus, symmetry was provided in respect of the

obligation for interest resulting from the use of a net operating
                                 - 9 -


carryback whether an underpayment or overpayment was involved.3

In one respect, the prior provision dealing with an overpayment

and its application to deficiencies by the Supreme Court in

Manning v. Seeley Tube & Box 

, was changed in that the

commencement of the running of interest on an overpayment was

moved to the close of the taxable year of the loss.    See infra p.

21.

      In 1955, in United States v. Koppers 

, the Supreme

Court held that relief in the form of a reduction in excess

profits tax did not release the taxpayer from the obligation to

pay interest on the original deficiency liability until the time

the reduction in tax occurred.    Although the Code contained no

specific provision dealing with interest with respect to

deficiencies abated by the excess profits tax adjustment, the

Supreme Court, as in Manning v. Seeley Tube & Box 

,

relied on the general deficiency interest provision (now section

6601(a)) and a provision prohibiting interest for the similar

period on overpayments created by such adjustment (now section

6611(f)).

      When Congress enacted section 904(c) in the Technical

Amendments Act of 1958, Pub. L. 85-866, sec. 42(a), 72 Stat.



3
   The 1954 Code provision did not include unused excess profits
tax carrybacks presumably because the excess profits tax had
expired on Jan. 1, 1954.
                              - 10 -


1639, it also enacted section 6611(g) (now section 6611(f)(2))

which provided:

     if any overpayment of tax results from a carryback of
     tax paid or accrued to foreign countries or possessions
     of the United States, such overpayment shall be deemed
     not to have been paid or accrued prior to the close of
     the taxable year under this subtitle in which such
     taxes were in fact paid or accrued.[4] [Technical
     Amendments Act of 1958, Pub. L. 85-866, sec. 42(b), 72
     Stat. 1640.]

The legislative history sheds little light on the question now

before us.   Beyond reiterating the above provisions, such history

addresses only:   (1) The purpose of section 904(c), i.e.,   to

eliminate the double taxation that could result from timing

differences between the methods of reporting income of the United

States and the foreign country and the foreign tax credit

limitations existing at that time; and (2) the mechanics of

determining the amounts of the foreign tax carryback and

carryover to be applied to the appropriate years specified in

section 904(c).   H. Rept. 775, 85th Cong., 1st Sess. (1957),

1958-3 C.B. 811, 837-838, 892-895.

     Congress did not include in the 1958 legislation a

provision, like the one it had enacted in 1954 for net operating

4
   Sec. 6611(g) was amended, effective for interest accruing
after Oct. 3, 1982, to replace "the close of the taxable year"
with "the filing date (as defined in subsection (f)(3)) for the
taxable year". Tax Equity and Fiscal Responsibility Act of 1982,
Pub. L. 97-248, sec. 346(c)(1)(D), 96 Stat. 637. Sec. 6611(f)(3)
defines "filing date" as the last date prescribed for filing the
return, without regard to extensions. See also discussion infra
pp. 22-23.
                              - 11 -


loss carrybacks,5 addressing the effect of foreign tax carrybacks

on deficiency interest.

      Between 1959 and 1982, Congress amended section 6601(d) and

section 6611(f) several times in order to deal with the impact of

various carrybacks on the running of interest on underpayments

and overpayments.   See Act of Nov. 10, 1978, Pub. L. 95-628, sec.

8(c)(2) and (c)(3)(A) and (B), 92 Stat. 3632; Tax Reduction and

Simplification Act of 1977, Pub. L. 95-30, sec. 202(d)(4)(C) and

(D), 91 Stat. 150 (employee credit carrybacks); Tax Reform Act of

1976, Pub. L. 94-455, sec. 2107(g)(2)(C) and (D), 90 Stat. 1904

(WIN credit carryback attributable to investment tax credit

carryback from subsequent year); Revenue Act of 1971, Pub. L. 92-

178, sec. 601(d)(3) and (4), 85 Stat. 559 (work incentive credit

carrybacks); Tax Reform Act of 1969, Pub. L. 91-172, sec.

512(e)(3)(C) and (4), 83 Stat. 641 (capital loss carrybacks); Act

of Dec. 27, 1967, Pub. L. 90-225, sec. 2(e) and (f), 81 Stat.

731, 732 (unused investment tax credit arising from NOL

carrybacks); Act of Sept. 2, 1964, Pub. L. 88-571, sec. 3(d) and

(e), 78 Stat. 858 (carrybacks of certain unused deductions of

life insurance companies); Revenue Act of 1962, Pub. L. 87-834,

sec. 2(e)(2) and (3), 76 Stat. 971, 972 (1962) (investment credit

carrybacks).



5
    Sec. 6601(d)(1); see supra p. 8.
                               - 12 -


     As is apparent, none of the legislative actions dealt with

foreign tax carrybacks.    In 1982, however, Congress did enact

amendments to sections 6601(d) and 6611(f) substituting "the

filing date * * * for" in place of "the last day of" or "the

close of the taxable year".    See Tax Equity and Fiscal

Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, sec.

346(c)(1) and (2), 96 Stat. 637.    Then, in 1984, those sections

were further amended to take into account the elimination of the

carryback of unused deductions of life insurance companies.     See

Deficit Reduction Act of 1984, Pub. L. 98-369, sec. 211(b)(26)

and (27), 98 Stat. 757.    Finally, in 1997, Congress enacted

section 6601(d)(2) in the Taxpayer Relief Act of 1997, Pub. L.

105-34, sec. 1055(a), 111 Stat. 944, effective for foreign tax

carrybacks arising in taxable years beginning after August 5,

1997.    Thus, although this provision is not applicable to the

issue now before us, it moots this issue for the future.

        The foregoing provides a background for our consideration

of petitioner's arguments and the impact of a recent decision,

Fluor Corp. & Affiliates v. United States, 

(Fed.

Cir. 1997), which involved the identical issue for decision

herein.    In that case, the Court of Appeals for the Federal

Circuit concluded that the reasoning of Manning v. Seeley Tube &

Box Co., 

(1950), and United States v. Koppers Co.,

(1955), applied and that the taxpayer was required
                                - 13 -


to pay interest on a deficiency in an amount unreduced by reason

of the carryback of foreign taxes from later years.     The

foundation of the Court of Appeals' decision was the general

principle embodied in section 6601(a) that a taxpayer must pay

interest on any deficiency, i.e., what he owes the Government,

and that “Any departures from that principle * * * would require

‘a clear legislative expression to the contrary’”.     Fluor Corp. &

Affiliates v. United 

(quoting Manning v.

Seeley Tube & Box 

). The Court of Appeals

found that the ("deemed * * * paid * * * in") language of section

904(c) did not meet this standard and that there was no other

sufficient evidence fleshing out the statutory language to

justify a different result.   In reaching its conclusion, the

Court of Appeals for the Federal Circuit found unpersuasive the

arguments advanced by petitioner herein.    It is to these

arguments that we now turn.

     Petitioner insists that the language of section 904(c) is

clear that the foreign tax carryback is deemed paid in the year

to which it is carried back not only for purposes of computing

the amount of the foreign tax credit for that year but for all

purposes, including interest.    We disagree.   The critical

language of section 904(c)(“deemed * * * paid or accrued in”)

does no more than provide for taking the carryback into account

and a methodology for calculating the amount of the carryback
                              - 14 -


which would be available.   It says nothing about any other

purpose and is thus distinguishable from Shriners Hospitals for

Crippled Children v. United States, 

, 1563 (Fed.

Cir. 1988), cited by petitioner, where it was clear that the

statute there involved was to be retroactive “for all purposes”.

The Court of Appeals for the Federal Circuit cogently made the

appropriate distinction in Fluor Corp. & Affiliates when it

observed:

     while interpreting the word “deemed” to mean “treated
     as if” answers the question of what year the credit
     will be applied to, it does not answer the question of
     when the reallocation of the foreign tax credit will be
     deemed to occur--whether in the carryback year or at
     the time the carryback was generated, one or two years
     later. * * * We are thus confronted with an ambiguity
     as to whether Congress meant the language of section
     904(c) to forbid the assessment of interest on a
     previous tax deficiency that is erased as a result of
     the foreign tax carryback. [Fluor Corp. & Affiliates
     v. United 

.]

     Thus, the phrase is ambiguous, and it is our task to

determine its meaning.   In so doing, we must find our way without

the benefit of any legislative history directed to this

ambiguity.   In this connection, we think it of some significance,

albeit tangential, that, in the Technical Changes Act of 1949,

ch. 720, 63 Stat. 891, Congress amended section 131(c) of the

Internal Revenue Code of 1939 to include a provision, reenacted

in section 905(c) of the 1954 Code, that, if a taxpayer received

a refund of foreign taxes for which credit had been claimed, the

taxpayer would have to pay interest on the deficiency thus
                               - 15 -


created only to the extent such interest was received from the

foreign government.   Petitioner seeks to draw some support for

its position herein by contending that such action shows that, at

the time of the 1958 amendments to section 904(c), Congress had

limited interest on deficiencies attributable to a foreign tax

credit.   We do not agree.   In the first place, no foreign tax

carryback was involved.   Secondly, if any inference were to be

drawn from such action, it is that Congress assumed that interest

on deficiencies involving foreign tax credits would be imposed

and that limiting such interest was necessary in order to avoid

double payment of interest on taxes paid on the same income.      See

H. Rept. 920, 81st Cong., 1st Sess. 3 (1948).    It is a far cry to

say that the objective of avoiding double payment of interest

should be considered as blessing the position of petitioner

herein, that no interest should be paid at all.

     Petitioner argues that Congress' enactment of section

6611(g) (now section 6611(f)(2)), prohibiting interest on an

overpayment, i.e., a refund, created by a carryback of foreign

taxes, makes significant the failure to amend section 6601(d) to

include such a carryback among the specified carrybacks which

were not to reduce an underpayment, i.e., a deficiency, for the

purpose of determining interest due.    We decline to adopt

petitioner's position.    As the Court of Appeals for the Federal
                             - 16 -


Circuit explained in rejecting the same argument in Fluor Corp. &

Affiliates v. United 

:

          While there is some force to that argument, in the
     end we do not find it persuasive. Section 6601(d) in
     effect codifies the rule of Seeley Tube and Koppers for
     all the carryback provisions that the statute covers.
     Fluor's argument is that because Congress codified the
     rule of Seeley Tube and Koppers for other carryback
     provisions, but not for the foreign tax carryback, the
     Seeley Tube-Koppers rule does not apply to the foreign
     tax carryback. We do not accept the contention that,
     by codifying the rule for some carrybacks, Congress
     must necessarily have meant to repudiate it for any
     carryback not included in the codification.

     Nor are we prepared to reach a different conclusion because

of the failure of Congress, in the ensuing years from 1958 to

1997, to take action in respect of interest on underpayments

involving carrybacks of foreign taxes.   This position was also

advanced and rejected in Fluor Corp. & Affiliates; the Court of

Appeals for the Federal Circuit declared that Congress knew about

Manning v. Seeley Tube & Box 

, and United States v.

Koppers 

, and that since the rule of those cases:

     did not depend on specific legislation imposing
     deficiency interest, Congress had no need to legislate
     in order to ensure that deficiency interest would be
     imposed. Indeed, the contrary was true: In light of
     Seeley Tube and Koppers, an informed Congress would
     have assumed that specific legislation would be
     required if it intended deficiency interest not to
     accrue when a carryback eliminated a deficiency in the
     carryback year. [Fluor Corp. & Affiliates v. United
     

-1405.]

     Beyond the foregoing analysis, we again observe, see supra

note 2, that, as a general rule, actions by subsequent Congresses
                              - 17 -


carry minimal weight.   We think this is especially the case where

the attempt to use the record of legislative action, upon which

petitioner relies, is directed to turning a legislative silence

into an inferred relief from the overriding rule of section

6601(a) that interest is due on taxes owed to the Government.

Our view in this regard is reinforced by the fact that when the

rule of no reduction in computing an underpayment by virtue of a

carryback of excess foreign taxes was enacted in 1997, see supra

p. 12, the legislative history makes clear that it was intended

to overrule the decision of the Court of Federal Claims in Fluor

Corp. & Affiliates v. United States, 

(1996),

which allowed a foreign tax carryback to reduce an underpayment

for purposes of computing interest, and that the Congress

believed that the rule should be the same for both underpayments

and overpayments.   See H. Conf. Rept. 105-220, 575-576 (1997); S.

Rept. 105-33, 178-179 (1997); H. Rept. 105-148, 551-552 (1997).6

The committee reports specifically comment that no inference is

to be drawn under prior law as to the proper computation of

interest on an underpayment when there is a carryback of excess

foreign taxes.

     One final element in the more than 50 years of history is

involved in resolving the principal issue before us.   Petitioner

6
   The 1997 legislation was enacted before Fluor Corp. &
Affiliates v. United States, 

(1997), revg. 

(1996).
                             - 18 -


suggests on brief, but without any evidentiary support, that

respondent adopted the interpretation advanced by petitioner and

administratively reduced deficiencies by carrybacks of excess

foreign taxes for the purpose of computing interest.    Presumably,

petitioner seeks to establish an administrative practice which

could be taken into account in interpreting an ambiguous statute.

See BankAmerica Corp. v. Commissioner, 

(citing

Hanover Bank v. Commissioner, 

, 686 (1962)).    A

similar argument was made by the taxpayer in Fluor Corp. and

rejected by the Court of Appeals for the Federal Circuit.    See

Fluor Corp. & Affiliates v. United 

.

     We have traveled a complicated path in an effort to discern

an answer to the choice before us.    That choice is whether:   (1)

We should hold for petitioner on the ground that there is a

loophole which we should leave to Congress to close (as it has

done for the future), or (2) we should hold for respondent on the

ground that there is at most a "glitch" in the statutory

framework and that the statutory provisions are sufficiently

"elastic" (United States v. Koppers 

), to

accord, as the Court of Appeals for the Federal Circuit has done

in Fluor, compelling effect to section 6601(a) and continued

vitality to Seeley Tube & Box Co. and Koppers Co. so as to hold

that an underpayment, i.e., deficiency, is not reduced by a

carryback of foreign taxes for the purpose of computing interest.
                               - 19 -


     We have been unable to perceive any persuasive reasons why

carrybacks of excess foreign taxes should be treated differently

where an underpayment rather than an overpayment is concerned.

Petitioner has argued that, unlike other carrybacks, such as a

net operating loss carryback, a "matching" rather than an

"averaging" principle is involved.      We are unimpressed.   Such

"matching" stemmed, according to petitioner, from a desire to

mitigate distortions arising from differences in taxable years

and accounting methods between the United States and foreign tax

systems.   We are not persuaded that such "matching" element

dictates that we provide petitioner with the relief sought

herein.    The same matching principle, if applicable, would

dictate that a taxpayer was entitled to interest on an

overpayment as well as relief from interest on an unreduced

underpayment.   Again, a similar argument was made by the taxpayer

in Fluor Corp. & Affiliates and rejected by the Court of Appeals

for the Federal Circuit which stated:

     Even if that [matching] were the sole purpose behind
     section 904(c), however, it would not answer the
     question whether foreign tax carrybacks cancel the
     deficiency interest that would be due on any deficiency
     eliminated by the carryback. The fact that Congress
     wanted to allow some room for matching foreign tax
     credits with the recognition of corresponding income
     under the U.S. tax system does not mean that Congress
     wanted to allow taxpayers to use foreign tax carrybacks
     to avoid the normal consequences of tax underpayments
     in prior years. * * * [Fluor Corp. & Affiliates v.
     United 

.]
                              - 20 -


     The same rationale applies to other situations pointed to by

petitioner where foreign tax credits are involved, e.g., a 10-

year statute of limitations for refunds of such credits, the

inapplicability of "quickie" refunds, and the relation back of

deductions in respect of disputed foreign taxes.

     The long and the short of the matter is that we think that

the statutory provisions are not so explicit as to require us to

conclude that Congress intended that interest be denied to a

taxpayer on overpayments due to carrybacks of foreign taxes but

that a taxpayer who fails to pay his taxes when due is relieved

of interest on the ground that such carrybacks reduce his

underpayment.   This result would be "eccentric" if not "absurd",

adjectives that should be avoided when dealing with actions by

the legislature.   See Dunn Trust v. Commissioner, 

,

755 (1986).

     As we see it, the principle of symmetry in respect of the

obligation for interest owed to or by the Government is mandated

by the historical development of legislative and judicial action.

Such development has continued to reflect the continued vitality

of Seeley Tube & Box Co. and Koppers Co..   We hold, as did the

Court of Appeals for the Federal Circuit in Fluor Corp. &

Affiliates, that an underpayment, i.e., a deficiency, is not

reduced by a carryback of foreign taxes for purposes of computing

interest.
                               - 21 -


     This leaves us with the question of when the interest stops

accruing on the portion of the reductions of the deficiencies

attributable to the foreign tax carrybacks.   In the Tax Equity

and Fiscal Responsibility Act of 1982, Pub. L. 97-248, sec.

346(c), 96 Stat. 637, Congress changed the effective dates of

carryback credits in all of the carryback interest provisions for

both overpayments and deficiencies from the last day of the

taxable year in which the credit arose to the due date for filing

the return for that year.   This change was effective for interest

accruing after October 3, 1982.

     In Fluor Corp. & Affiliates v. United 

, the

taxpayer used a foreign tax carryback from 1984 to offset a

deficiency in its 1982 tax.   The Court of Appeals for the Federal

Circuit held that the accrual of interest on the amount of the

1982 deficiency represented by the carryback ended as of the

close of the taxable year in which the carryback became

available, not on the due date of the taxpayer's return for that

year.   

  It selected the close of the taxable year,

because that was the date in the interest provisions as they

existed in 1958, when the foreign tax carryback and carryover

provision (section 904(c)) was enacted.   The Court of Appeals

reasoned:

          Although Congress in 1982 changed the timing rules
     for interest on carrybacks covered by section 6601(d),
     * * * , we decline the government's invitation to treat
     that legislative change as if it changed the period for
                             - 22 -


     calculating interest under the non-statutory deficiency
     interest rule applicable to foreign tax carryovers.
     There was no statutory change made in 1982 with respect
     to the foreign tax carryover, so we cannot attribute to
     Congress the intention to have the foreign tax
     carryover timing rules follow the 1982 legislative
     change in the rules applicable to other carryovers.
     * * * [

]

     We find this approach difficult to understand.   Having

previously held that the absence of a specific statutory

treatment did not preclude symmetrical treatment of interest on

underpayments and overpayments, as articulated by Manning v.

Seeley Tube & Box 

, and United States v. Koppers 

, a ruling that a deficiency for one year was not reduced by

a foreign tax carryback from a later year for purposes of

calculating interest due, the Court of Appeals for the Federal

Circuit then proceeds to adopt an asymmetrical approach to the

issue of when interest on the amount of the deficiency offset by

the carryback ceases to accrue.   In so doing, the Court of

Appeals for the Federal Circuit considered the specific provision

of section 6611(g) (now section 6611(f)(2)), dealing with

cessation of interest in respect of foreign tax carrybacks where

an overpayment was involved (see supra p. 9), a barrier to

recognizing the filing date of the return rather than the close

of the taxable year in which the carryback arose as the critical

date where an underpayment was involved and there was no

applicable specific statutory provision.
                               - 23 -


     We are not persuaded that the absence of a specific

statutory counterpart to section 6611(g) dealing with interest on

overpayments (which was specifically amended by TEFRA) provides a

sufficient basis for reaching the opposite result in respect of

the applicable date when an underpayment is involved.    Such a

consequence, at the very least, suggests eccentric action by the

Congress, a concept we are not prepared to adopt under the

circumstances herein.    See J.C. Penney Co. v. Commissioner, 

, 68 (2d Cir. 1962), affg. 

(1962).     In short,

with all due respect to the Court of Appeals for the Federal

Circuit, we opt for the same symmetrical disposition of the

cutoff date in respect of interest as was accorded the obligation

to pay interest where an excess foreign tax carryback is

involved.

     Petitioner has excess foreign tax carrybacks from 1981 and

1982 to reduce its deficiencies for 1979 and 1980.   The interest

on the 1981 carryback is not affected by the TEFRA amendments.

The carryback from 1981 became effective as of the last day of

the taxable year 1981 (December 31, 1981), and the carryback from

1982 became effective as of the due date of the return for that

year (March 15, 1983).    We hold that the interest accrues until

such dates as computed by respondent.
                              - 24 -


     In keeping with the above holdings,

                                           An appropriate order

                                   will be entered denying

                                   petitioner's motion.

     Reviewed by the Court.

     COHEN, CHABOT, SWIFT, JACOBS, GERBER, WELLS, RUWE, COLVIN,
HALPERN, CHIECHI, GALE, and THORNTON, JJ., agree with this
opinion.

     PARR, BEGHE, LARO, and MARVEL, JJ., did not participate in
the consideration of this opinion.