Whether the Federal Circuit properly held that tax credits operate as a reduction of tax liability rather than as a payment of taxes owed

QUESTION PRESENTED Courts have long held that “[p]ayments of taxes may be made in cash or by credit.” United States v. Piedmont Mfg. Co., 89 F.2d 296, 299 (4th Cir. 1937). In the decision below, however, the Federal Circuit held that the more than one billion dollars of tax credits that Petitioner Sunoco, Inc., earned under a federal tax program incentivizing production of environmentally friendly fuels operated to reduce the amount of excise tax liability that Sunoco incurred in the first place, rather than to pay that liability. In the process, the Federal Circuit wiped out billions of dollars in tax benefits to which producers like Sunoco would have been entitled if they had been permitted to deduct the excise taxes paid through tax credits from their taxable income. The question presented is: Whether the Federal Circuit properly held that tax credits operate as a reduction of tax liability rather than as a payment of taxes owed.