Free Status Report - District Court of Federal Claims - federal

Case 1:96-cv-00074-FMA

Document 101

Filed 04/07/2006

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS _______________ No. 96-74T (Judge Allegra) COLUMBIA/HCA HEALTHCARE CORPORATION, Plaintiff, v. THE UNITED STATES, Defendant. _______________ JOINT STATUS REPORT _______________ IN RESPONSE to this Court's Order dated March 8, 2006 requiring the parties to report on the status of settlement on or before April 7, 2006 and every 28 days thereafter, the parties present the following joint status report: 1. As explained in prior status reports in this case, on October 4, 2004, the United

States Supreme Court denied plaintiff's petition for writ of certiorari with respect to the nonaccrual experience method issue in Hospital Corporation of America v. Commissioner, 107 T.C. 116 (1996), aff'd, 348 F.3d 136 (6th Cir. 2003). Accordingly, the decision in the

aforementioned case has become final under 26 U.S.C. § 7481. 2. All other issues in this case have been resolved, thus requiring only the

completion of the computations of plaintiff's tax liability with respect to the 1991 taxable year. 3. HCA Inc., the successor to plaintiff, and the Internal Revenue Service ("IRS")

have had discussions and meetings regarding the process of computing the tax liabilities of HCA, its predecessors, successors and subsidiaries for the taxable periods affected by the final decision in the case discussed in paragraph 1 above. Due to the volume and complexity of the

Case 1:96-cv-00074-FMA

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computations and the range of possible outcomes in litigation, neither HCA nor the IRS prepared contemporaneous computations of the nonaccrual experience method exclusion using the formula specified in the amended temporary regulations (the "amended regulatory formula"), which formula was upheld by the Tax Court in Hospital Corporation of America v. Commissioner discussed in paragraph 1 above. Approximately 31 taxable periods from 1987 through 1996 of HCA, its predecessors, successors and subsidiaries affected by this decision are pending before this Court, the Tax Court, and the IRS's counsel and Examination Division. HCA has now provided the IRS with computations of the nonaccrual experience method exclusions and the tax liabilities for each of the 31 taxable periods. 4. On October 12, 2004, HCA proposed to the IRS a streamlined computational

methodology to compute the nonaccrual experience method exclusion for all taxable periods prior to and pending before this Court and the Tax Court. On February 8, 2005, HCA provided computations to the IRS of the tax liability using this methodology for each of these taxable periods, including its 1989-1991 taxable years. The IRS requested revised nonaccrual

experience method computations on May 2, 2005 and HCA undertook the process of locating and gathering the data to prepare detailed computations of the nonaccrual experience method exclusion using the amended regulatory formula for these periods. 5. On November 4, 2005, HCA provided the IRS with the requested tax

computations using the amended regulatory formula for its 1989-1991 taxable years. The IRS recently began reviewing the nonaccrual experience method computations provided by HCA and has stated that an additional nine to twelve months is necessary to complete its computational review of the tax liabilities for the 31 taxable periods involved. The IRS has advised

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Defendant's counsel that it intends to complete its review of HCA's tax computations sequentially, beginning with the earliest open tax period. 6. Assuming the IRS accepts HCA's computations that were provided on November

4, 2005, final tax computations for the 1991 taxable year should be complete. 7. Pursuant to the Court's Order dated March 8, 2006, the parties will file a status

report 28 days subsequent hereto, except that the parties will nonetheless advise the Court as soon as the parties have agreed to the tax computations with respect to plaintiff's 1991 taxable year. 8. Report. Respectfully submitted, Defendant's counsel has authorized Plaintiff's counsel to file this as a Joint Status

/s/ Felix Laughlin Felix B. Laughlin DEWEY BALLANTINE LLP 1775 Pennsylvania Avenue, N.W. Washington, D.C. 20006 (202) 862-1040 (202) 862-1041 (fax) email: [email protected] Counsel for Plaintiff

April 7, 2006

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