Alaska Employment Law

Temsco Helicopters and the IRS disagreed about Temsco’s liability for air transportation excise taxes for 2001-2004.  The agency claimed that Temsco had underpaid by a substantial (but unidentified) sum.  Temsco sued to resolve the matter, and then submitted a Rule 68 Offer of Judgment for $400,000, inclusive of taxes, penalties, interest, fees, and costs.  The IRS rejected the offer, and later lost on summary judgment, District Judge John Sedwick holding that Temsco was entitled to a refund of $16,420.  (The IRS has appealed the merits.)

Temsco moved for $237,000 in fees and $33,000 in costs.  Sedwick denied Temsco fees and costs, reasoning as follows: Rule 68 allows the prevailing party fees only if the substantive statute treats attorney fees as “costs” and if the Rule 68 offeror is the prevailing party not only under Rule 68 (Offer exceeded the judgment), but also under the substantive statute.   Here, the underlying substantive statute - 26 USC § 7430, which permits limited recovery of fees in tax litigation - requires proof of two additional criteria as part of the “prevailing party” test: 1) net worth less than $7,000,000; and 2) failure of the government to show that its position was “substantially justified.”  In this case, Temsco failed to show that its net worth doesn’t exceed $7,000,000.  Rather than disputing its net worth, Temsco argued that it needn’t meet the two criteria under Section 7430.  Sedwick rejected Temsco’s argument.

Temsco Helicopters, Inc. v. U.S., 2009 WL 1537844 (D.Alaska June 2, 2009) 

Clay Keene of Ketchikan is local counsel for Temsco.  All other counsel are from Outside.