Cases & Deals

Bridgestone/Firestone wins trial verdict in tax refund suit against U.S. government

Clients Bridgestone/Firestone, Inc.

Jones Day received a favorable decision from the United States District Court for the Middle District of Tennessee on behalf of Bridgestone/Firestone Americas Holding, Inc. in their tax refund suit against the government.

At issue was whether a tire that Bridgestone/Firestone sold and marketed was, under the IRS Code "of the type used on highway vehicles." To determine this, the Court considered the tire's actual use or function, including the extent to which it was used in ongoing coal operations, and its ratio of on-highway to off-highway use. The Court also considered the tire's design, and whether it was in fact specially designed for off-highway use. Jones Day faced the difficult task of convincing the Judge that Bridgestone's tire was neither designed for, nor primarily used on, highway vehicles. To do this, several witnesses, including Bridgestone's Controller of Tax, its Engineering Manager for North American Products, and a tire expert who testified to the off-highway design features of the tire, were examined and the Government's technical expert on the tire was cross-examined.

Bridgestone's case prevailed, and the Court found both that the tire was predominantly used off-highway, and that the tire's characteristics made it better suited for off-road use than on-road use, such that it was not a tire of the type used on highway vehicles. As such, the court found that Bridgestone met its burden of persuasion to show that the IRS's assessment was erroneous and illegal and that it was entitled to a full refund of the amount already paid, as well as to judgment on the government's counterclaims for the approximately $1.6 million erroneously and illegally assessed from 1995 through the first quarter of 2000. In total, given the assessments from 1995 through the current day, this decision saved Bridgestone in excess of $4 million.

Bridgestone/Firestone v. USA, No. 3:02-0994, 2006 WL 724561(M.D. Tenn. Mar. 22, 2006)

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