[00:00:00] Speaker 01:
Our argument this morning is 22-1377 Indiana Municipal Power Agency versus United States.

[00:00:09] Speaker 01:
Good morning, Ms.

[00:00:09] Speaker 01:
Whipple, whenever you're ready.

[00:00:11] Speaker 02:
Good morning, Your Honor.

[00:00:12] Speaker 02:
I am Peggy Whipple on behalf of the appellants.

[00:00:15] Speaker 02:
May it please the Court?

[00:00:17] Speaker 02:
The Court of Federal Claims erred in dismissing appellant statutory claim because no Congress has ever expressly said that the government may pay anything less

[00:00:27] Speaker 02:
than 35% of the interests due for the life of the appellants build America bonds, which, with the court's permission, I'll call Babs for brevity.

[00:00:36] Speaker 02:
And the court below erred in dismissing the contract claim because appellants did plead all of the elements of the contract grounded in the party's conduct and also language in Section 3A of the ARRA, which expressly declared Congress's intent

[00:00:55] Speaker 02:
that the government would, and I quote, invest, end quote, in the $4 billion in BABS issued by appellants to build power plants, create jobs, and pull America out of recession.

[00:01:08] Speaker 02:
In a nutshell,

[00:01:09] Speaker 02:
This is the deal that Congress and the appellants made.

[00:01:11] Speaker 01:
But do you agree on the legal question?

[00:01:15] Speaker 01:
I mean, you just think they put this in the wrong bucket.

[00:01:18] Speaker 01:
I'm sorry?

[00:01:19] Speaker 01:
You just think that the judge put this in the wrong bucket.

[00:01:22] Speaker 01:
You don't disagree that if this were construed as discretionary spending not in an appropriations act, then it would be covered by sequestration.

[00:01:37] Speaker 02:
If this was construed as discretionary spending, yes, but it can't be because it is funded by a permanent appropriation, which is not a discretionary appropriation.

[00:01:49] Speaker 02:
And so it couldn't happen in these facts.

[00:01:52] Speaker 02:
31 USC section 1324 is a permanent appropriation, not a discretionary appropriation.

[00:02:01] Speaker 02:
In a nutshell, this is the deal.

[00:02:03] Speaker 00:
Is a 35% pay down without any type of oversight

[00:02:09] Speaker 02:
There is an exchange of forms.

[00:02:12] Speaker 02:
These appellants have interest due twice a year, not once a year, but twice a year.

[00:02:18] Speaker 02:
And each time these appellants make an interest payment, they are required to submit a form, CP 8038, to the IRS that confirms both that they've made the payment

[00:02:31] Speaker 02:
and the amount of the payment the IRS is then able to calculate.

[00:02:34] Speaker 00:
What happens if that form is not filled out?

[00:02:38] Speaker 00:
They don't get the 35%.

[00:02:40] Speaker 02:
Well, no, because the IRS wouldn't know what to calculate the 35% off of.

[00:02:44] Speaker 00:
Let's say it was filled out incompletely.

[00:02:48] Speaker 00:
Who has the discretion to decide that the form has been or not been received?

[00:02:54] Speaker 00:
or that the form is inactive, incomplete?

[00:02:58] Speaker 02:
Based on the record that we have, I understand it would be the IRS, because they return a form that confirms, we have received your form CP8038, and it's being processed.

[00:03:10] Speaker 02:
So somebody there obviously has the authority.

[00:03:14] Speaker 00:
The funding's not automatic.

[00:03:16] Speaker 00:
It's not like getting your check in the mail.

[00:03:19] Speaker 02:
Correct.

[00:03:20] Speaker 02:
The funding is automatic, but the amount of the check, the amount that's actually written on the check, that is calculated from the form.

[00:03:30] Speaker 00:
Why is that not discretionary?

[00:03:32] Speaker 02:
Because discretionary appropriations are annual, ordinary, or supplemental appropriations, whereas this appropriation is the permanent and definite appropriation

[00:03:46] Speaker 02:
31 USC 1324 for the refund of tax revenues.

[00:03:52] Speaker 01:
But it's not, I mean, the judge concluded it's not an appropriation act.

[00:03:56] Speaker 01:
And he had a lot of basis for what the GAO says and what the various statutes say about what constitutes an appropriation act.

[00:04:06] Speaker 01:
So what's your best argument against his conclusion in that regard?

[00:04:11] Speaker 02:
He erred because,

[00:04:15] Speaker 02:
The ARRA, for two reasons.

[00:04:17] Speaker 02:
The ARRA itself, by definition, by definition of 1 USC section 105 is an appropriation act, because the title of it absolutely conforms to that statutory definition of what an appropriation act is.

[00:04:35] Speaker 02:
That's error number one.

[00:04:37] Speaker 02:
Error number two is the judge erred in arguing or in deciding

[00:04:43] Speaker 02:
that the permanent indefinite appropriation of 31 USC 1324 is not an appropriation act.

[00:04:54] Speaker 02:
And that was simply error.

[00:04:57] Speaker 02:
It is, by its definition, an appropriation act.

[00:05:00] Speaker 02:
It's a permanent one, but it is an appropriation act.

[00:05:05] Speaker 02:
In this case, let me start.

[00:05:06] Speaker 02:
I'm sorry.

[00:05:07] Speaker 04:
I'm a little confused by a lot of this that we're talking about today.

[00:05:12] Speaker 04:
I didn't think that sequestration applied to this because it was a discretionary appropriation, because I thought sequestration applied to two things.

[00:05:21] Speaker 04:
It applied to discretionary appropriations and direct spending laws.

[00:05:27] Speaker 04:
The judge didn't, correct me if I'm wrong, but he didn't find that sequestration applied to you because this is a discretionary appropriation.

[00:05:36] Speaker 04:
He found that this is a direct spending law.

[00:05:39] Speaker 02:
You are absolutely correct.

[00:05:40] Speaker 02:
And he was wrong in doing that, but that is indeed what he held.

[00:05:44] Speaker 04:
And why is he wrong in doing that?

[00:05:47] Speaker 04:
Because it is, I mean, it's not a, are you trying to argue it was a discretionary appropriation?

[00:05:55] Speaker 02:
No.

[00:05:56] Speaker 02:
We are arguing that it is an appropriation act, therefore not subject to sequestration.

[00:06:03] Speaker 02:
And we are not.

[00:06:04] Speaker 04:
Where's the statutory authority that appropriations that aren't discretionary are not subject to sequestration?

[00:06:15] Speaker 04:
I thought that when Congress wanted to exempt these kind of

[00:06:22] Speaker 04:
of laws that are not discretionary.

[00:06:24] Speaker 04:
First of all, what's the category that's not discretionary appropriations and not direct spending?

[00:06:31] Speaker 02:
Your definitions, and this is at the start.

[00:06:34] Speaker 04:
Can you answer that?

[00:06:34] Speaker 04:
I know I asked you the first question first.

[00:06:36] Speaker 04:
Can you answer that latter question?

[00:06:38] Speaker 04:
Is there a third category that's not a discretionary appropriation and not a direct spending law?

[00:06:46] Speaker 02:
Well, yes.

[00:06:47] Speaker 02:
And what is it?

[00:06:48] Speaker 02:
Well, there would be more than three, because if you get completely into the funds that are refunds of overpayments of tax, that is neither discretionary appropriations nor an appropriations act, because it is not direct spending.

[00:07:08] Speaker 02:
It is the government briefly holding money to which it has no title to keep it.

[00:07:16] Speaker 02:
When the government receives an overpayment of tax, it doesn't get to keep that revenue.

[00:07:22] Speaker 02:
It is required by statute to refund it to the rightful owner of the money.

[00:07:28] Speaker 02:
And it so does that.

[00:07:29] Speaker 02:
None of that is direct spending.

[00:07:31] Speaker 04:
That's not a direct spending.

[00:07:32] Speaker 02:
None of it is.

[00:07:32] Speaker 04:
Are you trying to argue that that's what this money is?

[00:07:35] Speaker 02:
We are arguing exactly that's what this money is, because Congress defined these payments as overpayments of tax.

[00:07:43] Speaker 02:
in section 1531 of ARRA.

[00:07:47] Speaker 04:
Do you agree that this is not a discretionary appropriation?

[00:07:51] Speaker 02:
Correct.

[00:07:53] Speaker 04:
And it's not.

[00:07:54] Speaker 04:
Does sequestration apply to discretionary stuff, too?

[00:07:57] Speaker 04:
I think it kept getting pulled off.

[00:07:59] Speaker 04:
It does.

[00:08:00] Speaker 04:
Does sequestration still apply to direct spending?

[00:08:03] Speaker 02:
It applies to direct spending, which is what the court below covers.

[00:08:08] Speaker 02:
What is direct spending?

[00:08:09] Speaker 02:
The definition is it's statutory

[00:08:11] Speaker 02:
Addendum, page 6, it is 2, United States Code 900, subsection C8.

[00:08:20] Speaker 01:
And that's what the Court of Federal Claims at Appendix 10 concluded 1324 was.

[00:08:28] Speaker 01:
Yes, he did that incorrectly.

[00:08:30] Speaker 01:
And he had a bunch of reasons for why this would be under that.

[00:08:35] Speaker 01:
It's most naturally seen as providing for direct spending as opposed to under an appropriation act.

[00:08:41] Speaker 01:
And he's got like four reasons why that is the case, including the glossary of terms by the GAO, the committee that's not having gone through appropriations, but rather the judiciary, and a whole bunch of reasons.

[00:08:58] Speaker 01:
Why don't you respond to those?

[00:09:00] Speaker 01:
I mean, was he just wrong?

[00:09:02] Speaker 01:
Where was he wrong?

[00:09:04] Speaker 02:
First of all, he was wrong when he dismissed the case, because the grounds that he gave were that 31 USC 1324, he said, is not an appropriation act for two reasons.

[00:09:17] Speaker 02:
He said it's because it doesn't have the proper title that's required by one USC 105, and number two, he said,

[00:09:28] Speaker 02:
It was not under the jurisdiction of the House and Senate Appropriations Committees.

[00:09:33] Speaker 02:
Those were the two reasons he gave in his original order of dismissal.

[00:09:37] Speaker 02:
We sought reconsideration of that order and said, but Your Honor, we focused on 31 USC 1324 because that's the attack the government leveled in the motion to dismiss.

[00:09:51] Speaker 02:
But please don't lose sight of the fact that the ARRA itself.

[00:09:55] Speaker 01:
So that was a different argument.

[00:09:57] Speaker 01:
But here, you're challenging, I guess, I was looking for your quick and brief and articulate rationale of why he was wrong on 1324.

[00:10:07] Speaker 01:
If you want to move to the reconsideration, he wasn't obligated to deal with that issue, but he did.

[00:10:13] Speaker 01:
And he rejected it as well.

[00:10:17] Speaker 01:
I guess I'm not seeing where the error was in his treatment of the ARRA, a 400-page thing that includes direct spending and includes a lot of other stuff.

[00:10:29] Speaker 01:
So I thought he was very helpful to us to deal with an issue that he pressed.

[00:10:35] Speaker 01:
It wasn't obligated to do.

[00:10:37] Speaker 01:
But what's your response to his conclusion on the ARRA?

[00:10:40] Speaker 02:
Well, if I might also, I think, do a better job of answering your question about 31 USC 1324.

[00:10:47] Speaker 02:
It cannot be direct spending as he ended up holding that it must be, because on its face, it is a permanent appropriation for the refund of revenue collections.

[00:11:02] Speaker 02:
That is the point.

[00:11:04] Speaker 02:
being required by that statute to refund revenue collections, that's not the same thing as direct spending by the government.

[00:11:13] Speaker 02:
On the ARRA itself, your second question, Your Honor.

[00:11:17] Speaker 04:
I'm sorry.

[00:11:17] Speaker 04:
Appropriations law is very arcane.

[00:11:20] Speaker 04:
Yes, sir.

[00:11:24] Speaker 04:
This is not a refund in the typical sense that you pay taxes when you're getting a refund.

[00:11:31] Speaker 04:
It's a government program to give you a subsidy.

[00:11:34] Speaker 02:
Exactly.

[00:11:34] Speaker 04:
So it's government spending in some sense.

[00:11:38] Speaker 02:
It is a program to give a subsidy.

[00:11:41] Speaker 04:
It's a budgetary resource.

[00:11:43] Speaker 02:
It's through refunds that Congress obviously took great pains to not define as direct spending.

[00:11:54] Speaker 02:
I think that's why it's key to remember that Congress defined these refunds as overpayments of tax.

[00:12:02] Speaker 04:
I'm sorry.

[00:12:02] Speaker 04:
I shouldn't have the answer to this, but keeping all these statutory provisions in my head is hard.

[00:12:07] Speaker 04:
Is 31-1324 the specific BAB program, or is it just the refund?

[00:12:13] Speaker 02:
It is the refund statute that was amended by the BAB's program, so that it includes the BAB's refunds in its list of refunds that it makes.

[00:12:26] Speaker 04:
So why can't some of that be direct spending and some of it just be refunds?

[00:12:30] Speaker 04:
The BABS program is definitely government spending on behalf of these programs to subsidize whatever improvements you all were supposed to make.

[00:12:39] Speaker 04:
They put it under, it didn't get appropriated funds in the typical sense.

[00:12:43] Speaker 02:
Not in the typical sense, it was.

[00:12:45] Speaker 04:
It's not a discretion.

[00:12:46] Speaker 04:
They could have.

[00:12:47] Speaker 04:
They could have said, here's $50 million, apply for these grants, and we'll give you these grants to subsidize that.

[00:12:55] Speaker 04:
That would be discretionary spending.

[00:12:56] Speaker 02:
And they could have done it, and they didn't.

[00:12:58] Speaker 04:
It's not that.

[00:12:58] Speaker 04:
You're right.

[00:12:59] Speaker 04:
Instead, they said, we're going to do the spending as a refundable tax credit, and it will be paid out of the refund fund.

[00:13:08] Speaker 02:
Correct.

[00:13:08] Speaker 02:
That is exactly correct.

[00:13:10] Speaker 04:
And I think that's key.

[00:13:12] Speaker 02:
It's not direct spending.

[00:13:14] Speaker 02:
The key is because.

[00:13:17] Speaker 04:
I guess what I'm asking, I'm sorry to keep interrupting you.

[00:13:19] Speaker 02:
That's OK.

[00:13:19] Speaker 04:
I'm having a hard time putting that.

[00:13:22] Speaker 04:
How do you define if it's not discretionary spending, which I think we agree it's not, and it's not direct spending, what third bucket out there does Congress have the budgetary authority to put it in?

[00:13:35] Speaker 04:
And what statute or what appropriations?

[00:13:38] Speaker 02:
Refunds from revenue collections that the government is not entitled to hold.

[00:13:43] Speaker 02:
And that's exactly what Congress decided to do.

[00:13:46] Speaker 02:
Surely not by accident.

[00:13:48] Speaker 02:
You're right.

[00:13:48] Speaker 02:
This is not a simple formula.

[00:13:52] Speaker 04:
No, no, no.

[00:13:55] Speaker 04:
You're referring to a specific type of fund, but that's not government spending at all.

[00:14:01] Speaker 04:
Right.

[00:14:02] Speaker 04:
Refunding money that the taxpayer improperly paid is not government spending.

[00:14:08] Speaker 04:
Agree.

[00:14:09] Speaker 04:
You agree, though.

[00:14:09] Speaker 04:
This is government spending.

[00:14:11] Speaker 04:
It's coming back to you in the guise of a refundable tax credit.

[00:14:15] Speaker 04:
But it's government spending.

[00:14:16] Speaker 04:
So if it's not discretionary appropriated spending and it's not direct spending, what's the larger category of government spending that you would refer this as?

[00:14:26] Speaker 04:
Not as a refund, because that's unhelpful.

[00:14:29] Speaker 02:
respectfully, I cannot agree that it is direct spending.

[00:14:35] Speaker 04:
I'm not asking you to agree that it's direct spending.

[00:14:38] Speaker 04:
I'm asking you because you seem to say it's not direct spending.

[00:14:41] Speaker 04:
It's not discretionary appropriations.

[00:14:45] Speaker 04:
So it must be a third type of spending.

[00:14:48] Speaker 04:
A refund is not spending.

[00:14:50] Speaker 02:
Agreed.

[00:14:51] Speaker 04:
Agreed.

[00:14:51] Speaker 04:
So what is that third type of spending that you think that Congress has the authority to do that you would say that this is that's not covered by sequestration?

[00:15:00] Speaker 02:
That third type of, I won't say spending, that third type of moving money from one place to another, that Congress can authorize the movement of money from one place to another.

[00:15:12] Speaker 02:
is to refund an overpayment of tax.

[00:15:14] Speaker 04:
I mean, if you're going to resist the notion that this is different than a refund, this is not moving money around.

[00:15:20] Speaker 04:
This is government proactively giving your clients money.

[00:15:24] Speaker 04:
They do it in the form of a refundable tax credit.

[00:15:27] Speaker 02:
Yes.

[00:15:27] Speaker 04:
But this is a spending program.

[00:15:30] Speaker 04:
So you're not, you don't, sorry I ate up all your butter.

[00:15:34] Speaker 04:
I take it you don't, there's not this third category out here that is called this type of government spending.

[00:15:41] Speaker 02:
We're going to have to just respectfully disagree on that.

[00:15:44] Speaker 02:
And not because I'm being stubborn, but because I'm sticking with the language Congress used.

[00:15:50] Speaker 01:
OK.

[00:15:50] Speaker 01:
Will we store some rebuttal?

[00:15:52] Speaker 01:
Let's hear from the government.

[00:15:54] Speaker 03:
May it please the court.

[00:15:56] Speaker 03:
I'd just like to take off from a couple of the points that the appellant made.

[00:16:01] Speaker 03:
First, with regards to whether the ARA constitutes an appropriation act itself.

[00:16:08] Speaker 03:
the argument that they had made under consideration, which they seem to be relying upon today.

[00:16:13] Speaker 03:
We would note that the ARA itself does not actually appropriate anything for this particular program.

[00:16:18] Speaker 03:
The relevant provision and the proper provision that the court focused upon, as had been argued by the parties initially, was 1324.

[00:16:26] Speaker 03:
1324 is an indefinite, permanent piece of direct spending.

[00:16:33] Speaker 03:
For the purposes of clarification, we would agree that this is government direct spending.

[00:16:40] Speaker 03:
It is distinct from refunding money that was put into the Treasury.

[00:16:45] Speaker 03:
However, it should be noted that

[00:16:49] Speaker 03:
GEO appropriations law, a handbook at 211, which was one of the documents the court relied upon in deciding this case, does list 13 USC 1322, which is a refund provision.

[00:17:04] Speaker 03:
as a permanent indefinite appropriation, a piece of direct spending.

[00:17:08] Speaker 03:
So to simply say that this is very different would be inconsistent with the characterizations which Congress has made.

[00:17:14] Speaker 01:
Well, the ARA has a lot in it.

[00:17:17] Speaker 01:
So we're talking about this particular provision and not necessarily under.

[00:17:23] Speaker 01:
What I don't understand about their argument about the ARA is that the funding for the program doesn't come from the ARA, right?

[00:17:31] Speaker 01:
It comes from 1324.

[00:17:31] Speaker 01:
1324, that's correct.

[00:17:33] Speaker 01:
So to rest on the AR, I mean, I kind of understood why they didn't press it in the first instance, but they did raise it on reconsideration.

[00:17:43] Speaker 01:
And it seems a little odd to rest on it, because it's not the source of the funding in any event.

[00:17:49] Speaker 01:
I mean, they made the argument on 1324, which I understand.

[00:17:53] Speaker 03:
And we would agree that 1324 is the appropriate focus.

[00:17:56] Speaker 04:
Are all kind of revolving funds, like the refund fund, considered direct spending?

[00:18:05] Speaker 03:
Yes, generally.

[00:18:05] Speaker 03:
Like the judgment fund.

[00:18:06] Speaker 03:
The judgment fund would be direct spending.

[00:18:09] Speaker 04:
Is there support in GAO documents or something that lists the judgment fund?

[00:18:15] Speaker 03:
They do list the judgment fund as something along that.

[00:18:17] Speaker 03:
And I think it's also important that in 905, when Congress was listing the exemptions,

[00:18:24] Speaker 03:
from the sequestration provision, it listed the judgment fund among those.

[00:18:28] Speaker 03:
You have to know it's a section that provides claims, I believe it's called Claims, Judgments, and Relief Acts, which encompasses the judgment fund.

[00:18:36] Speaker 03:
They have a code associated with it, which tells us it's the judgment fund.

[00:18:39] Speaker 03:
Those codes can be a little obtuse at times.

[00:18:43] Speaker 04:
So the refund fund that's at issue here is, in your view, not, well, they didn't specifically exempt it from sequestration.

[00:18:52] Speaker 03:
No, they specifically exempted those refunds to individual taxpayers, but not these particular bonds, this particular type of refund.

[00:19:03] Speaker 04:
At 905, Congress- But there are other types of taxpayers that might be entitled to a refund, but would have it reduced because of sequestration?

[00:19:11] Speaker 03:
Yeah, so at 905D, Congress expressly exempted refundable income tax payments made to individuals.

[00:19:19] Speaker 03:
But it did not exempt these particular payments.

[00:19:24] Speaker 01:
Which sort of, you would argue, I assume, cuts your way.

[00:19:27] Speaker 01:
Yes, it does.

[00:19:27] Speaker 01:
Because Congress knew that for these types of payments, they had to explicitly exempt them.

[00:19:32] Speaker 01:
And it did, but not for this particular one.

[00:19:35] Speaker 03:
Absolutely.

[00:19:37] Speaker 03:
The only other point I wanted to raise

[00:19:40] Speaker 03:
And this was only briefly raised was with regards to the the contract claim.

[00:19:46] Speaker 04:
I think we've covered most of this in our brief The suggestion that there's some third type of

[00:20:02] Speaker 04:
bucket out there, I thought that it's either discretionary appropriations or it's direct spending.

[00:20:09] Speaker 04:
And of course, direct spending is, in some sense, an appropriation, because everything has to be appropriated.

[00:20:15] Speaker 04:
It's not discretionary.

[00:20:17] Speaker 04:
I give you x sum of money to do something for the next year or two years.

[00:20:23] Speaker 04:
Here's a statutory authorization to spend money.

[00:20:26] Speaker 03:
Well, I mean, to the extent there is sort of a third bucket, or there might even be a fourth bucket, there are sort of four buckets, I think, that Congress talks about.

[00:20:36] Speaker 03:
OK.

[00:20:37] Speaker 03:
And that would be Appropriations Acts, which we contend is not issued here.

[00:20:41] Speaker 03:
Direct spending.

[00:20:42] Speaker 03:
And then they talk about entitlement programs.

[00:20:46] Speaker 03:
And they also talk about, I forget what it's, but it's another very specific entitlement fund.

[00:20:50] Speaker 03:
So here, I don't think either party contends this is entitlement.

[00:20:55] Speaker 03:
Those are very specific acts defined by the statute.

[00:20:58] Speaker 03:
I don't think it falls in any other bucket.

[00:21:01] Speaker 03:
This is either really true.

[00:21:02] Speaker 01:
Do you happen to know if the entitlement funds come out of the appropriations committee or other committees?

[00:21:08] Speaker 03:
I believe they come out of other committees.

[00:21:11] Speaker 03:
If you look to get an idea of which committees this sort of works through, I do think that Congress has provided some degree of guidance in Title II that talks about the budgeting process.

[00:21:27] Speaker 03:
That doesn't talk about appropriation.

[00:21:28] Speaker 03:
That talks about appropriation bills, because before their appropriation acts, they're an appropriation bill.

[00:21:34] Speaker 03:
So there are references to how appropriation bills are properly handled and what the responsibilities are of various committees of Congress with regards to those.

[00:21:42] Speaker 03:
So I think it's pretty well laid out in Title II.

[00:21:45] Speaker 03:
Are there any further questions?

[00:21:50] Speaker 03:
We respectfully request the court affirm the judgment of the United States Court of Federal Claims.

[00:21:54] Speaker 03:
Thank you.

[00:22:02] Speaker 02:
Briefly, Your Honors, I think it's important to remember that none of the sequestration statutes, all of which were enacted subsequent to the all of the operative ones, were enacted subsequent to the 2009 ARRA.

[00:22:18] Speaker 02:
None of them expressly reference the Babs program.

[00:22:22] Speaker 02:
None of them do.

[00:22:24] Speaker 02:
And so we are working here with construction.

[00:22:27] Speaker 04:
Well, I get that.

[00:22:27] Speaker 04:
But is it necessary for them to call it out specifically?

[00:22:31] Speaker 04:
Or can they say, here's this category standing out here.

[00:22:35] Speaker 04:
And I know you disagree.

[00:22:36] Speaker 04:
But let's just assume that Babs falls within that category.

[00:22:40] Speaker 04:
And they say, sequestration applies to this, everything in this category, except for these exceptions.

[00:22:48] Speaker 02:
Isn't that enough?

[00:22:52] Speaker 02:
So long as they expressly said everything in this described category is subject to sequestration, I would have to agree with you.

[00:23:00] Speaker 04:
So all direct spending is subject to sequestration except programs one through six.

[00:23:07] Speaker 02:
Right.

[00:23:08] Speaker 02:
And we have never argued that direct spending is not subject to sequestration.

[00:23:12] Speaker 02:
We have always argued that this is not direct spending.

[00:23:16] Speaker 04:
OK.

[00:23:16] Speaker 04:
But you didn't ever tell me what it was.

[00:23:19] Speaker 04:
It's not discretionary.

[00:23:21] Speaker 04:
It's not direct spending.

[00:23:22] Speaker 04:
It's not an entitlement program.

[00:23:25] Speaker 02:
It's a refund.

[00:23:27] Speaker 02:
It's a refund from an overpayment of tax.

[00:23:29] Speaker 04:
But that still has to come from some type of government budgetary authorization that is referred to.

[00:23:38] Speaker 04:
And it is at least your friend from the Justice Department said the Judgment Fund, for instance, is

[00:23:48] Speaker 04:
direct spending, and Congress recognizes that's a form of direct spending.

[00:23:52] Speaker 04:
It's a permanent appropriation to give out money.

[00:23:55] Speaker 04:
Why isn't a permanent appropriation to give out refunds the same type of direct spending?

[00:24:01] Speaker 02:
I think it's because in the sense of accounting, money coming in is not the same as money going out.

[00:24:10] Speaker 02:
And the money coming in, if you've never had legal title to it, if you're obligated to just give it back, Congress did not define that as direct spending.

[00:24:20] Speaker 02:
It defined it as a refund of an overpayment of tax.

[00:24:25] Speaker 02:
While we're talking about Congress, one point I didn't get to make that I think maybe is helpful here.

[00:24:31] Speaker 02:
What we're looking for is more express language from Congress, which none of the sequestration statutes gave us regarding BABS.

[00:24:39] Speaker 02:
We do know that in 2017, Congress, for the first and only time since 2009, addressed the BABS program by name.

[00:24:48] Speaker 02:
That's when it actually repealed.

[00:24:50] Speaker 02:
the government's obligation to make the 35% interest payment.

[00:24:55] Speaker 02:
But in doing that repeal, Congress expressly exempted all of Appellant's Babs from the repeal because Congress said this repeal applies only December 2017 going forward.

[00:25:10] Speaker 02:
That's express action.

[00:25:12] Speaker 00:
It seems that much of your argument is that,

[00:25:16] Speaker 00:
the bad payments is an income tax refund, correct?

[00:25:21] Speaker 00:
And that really provides the basis for many of your other arguments.

[00:25:26] Speaker 01:
Yes, it does.

[00:25:27] Speaker 00:
But how can that be?

[00:25:28] Speaker 00:
You're asking us to accept a fiction here.

[00:25:33] Speaker 00:
This is not really an income tax refund, is it?

[00:25:36] Speaker 00:
Income tax refund is a refund by the US government to monies that have been overpaid to it.

[00:25:42] Speaker 00:
They're monies that don't belong to the US government.

[00:25:44] Speaker 00:
They belong to the taxpayer.

[00:25:46] Speaker 00:
Here, the BAD never does belong to the taxpayer before the payment is made, or maybe even after the payment is made.

[00:25:53] Speaker 00:
So this cannot be an appropriation or not subject to sequestration because it's an income tax refund.

[00:26:02] Speaker 00:
Why should we buy into that?

[00:26:05] Speaker 02:
that fiction I I think we buy into the fiction because that's what Congress said we would do with the ARRA and it never created the fiction I mean they there's no

[00:26:19] Speaker 00:
There's no clearness in what Congress was intending to do.

[00:26:24] Speaker 00:
But it set it up in a way that doesn't help your case, I believe.

[00:26:30] Speaker 00:
By setting it up by the IRS to provide the bad payments, it seems to me that what it did is just having one agency pay another.

[00:26:41] Speaker 00:
And the last agency had some discretion as to whether the bad payment is going to be made or not.

[00:26:47] Speaker 02:
The agency only would have discretion to make the calculation of the amount of the payment, not whether or not it would be made.

[00:26:55] Speaker 02:
Because the language of the statute is mandatory.

[00:26:58] Speaker 02:
It's the triple mandate of shall pay.

[00:27:01] Speaker 02:
So the only discretion that rests with the IRS is in the actual math, doing the arithmetic.

[00:27:07] Speaker 00:
So that makes it not an income tax payment credit or refund.

[00:27:14] Speaker 02:
Oh, sorry.

[00:27:17] Speaker 02:
an on-the-spot calculated refund, per Congress's language, not mine.

[00:27:24] Speaker 02:
I mean, that's the language of the ARRA.

[00:27:26] Speaker 00:
It's not a credit, though.

[00:27:29] Speaker 02:
I wonder if Your Honor, because there's a third party involved here, and that may be what Your Honor is hanging up on.

[00:27:35] Speaker 02:
And you're right.

[00:27:35] Speaker 02:
Again, it's the fiction that we've got created.

[00:27:39] Speaker 02:
The appellants, the public power issuers, they were invited, induced, whatever.

[00:27:47] Speaker 02:
to issue these taxable BABS, which instead of the tax exempt bonds, which they normally would have issued for two reasons, because that was supposed to generate more interest in the investing community.

[00:27:59] Speaker 02:
But it also would generate otherwise unexpected tax revenues to the government when the investors, who are the taxpayers, paid the tax on the taxable bond.

[00:28:12] Speaker 02:
And the way Congress wrote ARRA,

[00:28:14] Speaker 02:
As Congress was then coming half circle around, the government was obligated to then refund part of that overpayment of tax back to these public power providers as the deal for having issued taxable bonds instead of tax exempt bonds in the first place.

[00:28:39] Speaker 01:
Your time is up.

[00:28:41] Speaker 02:
Thank you.

[00:28:41] Speaker 01:
Thank you both very much.

[00:28:43] Speaker 01:
And the case is submitted.

[00:28:45] Speaker 01:
That concludes our proceeding for this meeting.