# Rockwater, Inc. v. United States

> Court of Appeals for the Eleventh Circuit · November 15, 2024 · 121 F.4th 1287

URL: https://www.frixlaw.com/law-library/cases/10741684

## Case

- **Court:** Court of Appeals for the Eleventh Circuit
- **Decided:** November 15, 2024
- **Citations:** 121 F.4th 1287
- **Precedential status:** Published
- **Opinion:** Opinion
- **Nature of suit:** NEW
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10741684

## How later opinions describe it (automated extraction)

- holding that vehicles designed for extreme weather conditions for use by a utility company were not off-highway vehicles because their design for frequent off-road use was not the same as being primarily designed for off-road use
- rejecting the argument that the utility vehicles’ designs, which made them heavier, slower, and less fuel-efficient, did not substantially limit or impair their use on public highways

## Opinion text

USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 1 of 28

[PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit

____________________

No. 23-11893
____________________

ROCKWATER, INC.,
d.b.a. Peerless Manufacturing Company,
Plaintiff-Appellee,
versus
UNITED STATES OF AMERICA,
By and Through Its Agent, The Commissioner
of Internal Revenue,

Defendant-Appellant.

____________________

Appeal from the United States District Court
for the Middle District of Georgia
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 2 of 28

2 Opinion of the Court 23-11893

D.C. Docket No. 4:21-cv-00125-CDL
____________________

Before WILLIAM PRYOR, Chief Judge, and LUCK and HULL, Circuit
Judges.
HULL, Circuit Judge:
This appeal requires us to decide whether specially designed
peanut trailers that dry and transport peanuts from farm fields to
off-site buying points on public roads are “off-highway
transportation vehicles” that are exempt from a 12 percent excise
tax that applies to the first retail sale of “[t]ruck trailer and
semitrailer chassis” and “[t]ruck trailer and semitrailer bodies.”
26 U.S.C. §§ 4051(a)(1)(C), (D), 7701(a)(48)(A)(i).
An Internal Revenue Service (“IRS”) audit determined that
Plaintiff-Appellee Rockwater, Inc., doing business as Peerless
Manufacturing Company, owed excise taxes on the sale of three
peanut-drying trailers. Rockwater paid the taxes, statutory
interest, and penalties but filed a claim for a refund from the IRS.
Rockwater then filed this lawsuit against the United States, the
Defendant-Appellant, for a full refund and attorney’s fees. The
district court granted summary judgment in favor of Rockwater as
to its refund request for the excise taxes, statutory interest, and
penalties, but denied Rockwater’s request for attorney’s fees. The
United States appealed.
After review, and with the benefit of oral argument, we
conclude that the district court erred in concluding that
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 3 of 28

23-11893 Opinion of the Court 3

Rockwater’s peanut-drying trailers are “off-highway transportation
vehicles” that are exempt from the tax. Id. § 7701(a)(48)(A)(i). We
reverse in part the grant of summary judgment to Rockwater and
remand with instructions to enter final judgment for the United
States for taxes and statutory interest. Given the government did
not appeal the penalties, we affirm the district court’s ruling that
Rockwater is not required to pay penalties.
I. BACKGROUND
A. The Peanut Harvesting Process
Nearly half of the United States’ peanuts are produced in
Georgia, where farmers harvest the crop each fall. At the start of
the eight-to-ten-week harvest, farmers dig up the peanuts from the
ground and leave them in the fields for a few days to dry in the sun.
Drying is a critical stage in the process. Failing to dry the peanuts
within a few hours of harvesting can cause them to develop mold
and produce harmful aflatoxins.
Peanuts contain over 25 percent moisture at harvest and
must contain no more than 10.49 percent moisture to be safe and
salable. Thus, sun drying alone is insufficient. To finish drying the
peanuts, most commercial farmers use mechanical peanut-drying
trailers and wagons that transport the peanuts off-site to be dried
with fans.
B. Rockwater’s Peanut-Drying Trailers
The relevant facts about Rockwater’s trailers are not
disputed. In 1954, Peerless designed the first mechanical
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 4 of 28

4 Opinion of the Court 23-11893

peanut-curing system, which consisted of a drying box affixed on
wheeled axles and connected to a drying fan. In 2016, after
Rockwater acquired Peerless, David Rogers and David Peeler
purchased Rockwater and reengineered the trailers. In 2017,
Rockwater began manufacturing and selling 45- and 48-foot
peanut-drying trailers under the Peerless name.
Rockwater’s trailers consist of a steel drying box welded to
a chassis. The chassis comprises an I-beam that runs the length of
the chassis. At one end of this I-beam are two oversized sand feet,
which provide additional stability while the trailers are in the fields.
At the other end are two axles with four wheels on each axle. The
steel drying box has eight-foot-tall side walls, an open top, a raised
40 percent perforated floor, and an 18-inch-tall gap, or “plenum,”
that runs the length of the trailer below the perforated floor, where
the drying fan connects and blows warm air that rises through the
peanuts and out the open top. Other features of the drying box are
its horizontally-hinged rear door, which allows peanuts to be
unloaded by hydraulically lifting the trailer at an angle for the
peanuts to empty out the back. The trailers can carry about 20 to
23 tons of peanuts. Here is a picture of Rockwater’s peanut trailer.
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 5 of 28

23-11893 Opinion of the Court 5

Farmers ordinarily use Rockwater’s trailers in the following
manner. The farmers load the harvested peanuts into the trailers’
open tops and drive the trailers to a drying shed that usually is
located at an off-site buying point (collectively, “buying point”).1
The “typical[]” distance from the field to the buying point is about
20 miles. Approximately two-thirds of those 20 miles are on public
roads. The trailers make an average of two to three trips each week
from the fields to the buying points.
It is necessary to move the trailers to the drying sheds
because the drying fans that attach to the trailers require gas and

1 The parties do not dispute that although some farms have their own drying

sheds, most drying sheds are located at centralized peanut-buying points.
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 6 of 28

6 Opinion of the Court 23-11893

electricity, which are unavailable in the fields. The fans run
continuously for about a day on average, after which the peanuts
are emptied from the trailers and the trailers are returned to the
fields to begin the process again.
The trailers are not conducive to all-purpose transportation
needs. Their all-steel construction makes the trailers heavier than
most other trailer types, and the 18-inch plenum raises the trailers’
center of gravity, which increases the rollover risk. The perforated
flooring cannot support dense loads. Nor can the trailer be loaded
from the back because the rear door is hinged horizontally to allow
for gravitational unloading when the trailer is lifted at an angle.
Still, several design features facilitate the trailers’ trips from
the fields to the drying sheds by public road. The trailers “operate
by road speed limits.” Although the trailers can safely travel
55 miles per hour, Rockwater provides no maximum speed
recommendation. The trailers ordinarily are not designated
oversize or overweight, so they do not require special markings or
special permits to operate on the public roads. The trailers use
standard semitrailer tires because Rockwater “d[id] not want to
burden [its] customers with specialized tires.” The trailers also
come with standard brakes, lights, and reflective stripes that
comply with federal and state law for public roadway operation.
And before a sale, the trailers undergo a Department of
Transportation (“DOT”) inspection and receive vehicle
identification numbers.
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 7 of 28

23-11893 Opinion of the Court 7

In addition, Rockwater’s online advertisement for the
trailers provides a bulleted list of the trailers’ features. The first
bullet point states that placing the stress of the load on the chassis
and not the body “allows the safest most reliable method for
handling your crop from the field to the buying point.”
C. Procedural History
The IRS audited Rockwater for failing to file a quarterly
federal excise tax return for its sale of three trailers in the second
quarter of 2017. After the IRS determined that the 12 percent tax
applied to the trailer sales, Rockwater paid $37,031.76 in excise
taxes, penalties, and interest.
Rockwater then filed a claim for a refund with the IRS.
Rockwater then filed this lawsuit challenging the application of the
excise tax to its trailer sales and requesting a refund and attorney’s
fees. In its complaint, Rockwater alleged that its trailers were
exempt from the excise tax on the first retail sale of highway
vehicles because the trailers are “off-highway transportation
vehicles.” See 26 U.S.C. §§ 4051(a)(1)(C), (D), 7701(a)(48)(A)(i).
The first retail sale means the first time a trailer is sold. See id.
§ 4051(a)(1). The excise tax does not apply to resales of the same
trailer thereafter. See id.
After discovery, Rockwater and the United States filed
cross-motions for summary judgment. The district court granted
summary judgment in favor of Rockwater as to the taxes. The
district court also ruled that “[e]ven if it were determined that
Rockwater owed the tax, it still had reasonable cause not to pay it
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 8 of 28

8 Opinion of the Court 23-11893

initially” and so neither statutory interest nor penalties were
appropriate.
The United States appealed as to the taxes and statutory
interest but not as to the penalties. As the government argues, and
Rockwater now does not dispute, the Internal Revenue Code (the
“Code”) provides that penalties are subject to a “reasonable cause”
exception, see Code § 6651(a)(1), but statutory interest is not, see id.
§§ 6601(a), 6621. So the statutory interest depends on whether
Rockwater owed the excise taxes or whether its peanut-drying
trailers are exempt. That is the legal issue we examine.
II. STATUTORY AND REGULATORY OVERVIEW
A. Standards of Review
We review the statutory interpretation and application of
the Code de novo. C.I.R. v. Driscoll, 669 F.3d 1309, 1311 (11th Cir.
2012). We also review a grant of summary judgment de novo. Thai
Meditation Ass’n of Ala. v. City of Mobile, 83 F.4th 922, 926 (11th Cir.
2023).
In tax refund lawsuits, the IRS Commissioner’s assessment
has “the support of a presumption of correctness.” Welch v.
Helvering, 290 U.S. 111, 115 (1933). “[E]xemptions from taxation
are to be construed narrowly.” Mayo Found. for Med. Educ. & Rsch.
v. United States, 562 U.S. 44, 59-60 (2011) (citation and quotation
marks omitted).
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 9 of 28

23-11893 Opinion of the Court 9

B. Federal Excise Tax on “Highway Vehicles”
The Code imposes a 12 percent tax on the first retail sale of
“[t]ruck trailer and semitrailer chassis” and “[t]ruck trailer and
semitrailer bodies.” 26 U.S.C. § 4051(a)(1)(C), (D). The Code does
not define those terms. But Congress authorized the Secretary of
the Treasury to pass rules and regulations to enforce the Code. Id.
§ 7805(a).
In turn, the relevant Treasury Regulations clarify that a
chassis and body are taxable under Code § 4051(a) “only if such
chassis or body is sold for use as a component part of a highway
vehicle.” Treas. Reg. § 145.4051-1(a)(1)(ii), (a)(2) (emphasis added).
The Treasury Regulations also define “highway vehicle” as “any
trailer or semitrailer, designed to perform a function of
transporting a load over public highways, whether or not also
designed to perform other [functions].” Id. § 48.4061(a)-1(d)(1). A
“public highway” includes “any road (whether a Federal highway,
State highway, city street, or otherwise)” which is not a private
roadway. Id.
The Treasury Regulations further provide that “in
determining whether a vehicle is a ‘highway vehicle,’ it is
immaterial that the vehicle is designed to perform a highway
transportation function for only a particular kind of load.” Id.
Examples of a “highway vehicle” are “passenger automobiles,
motorcycles, buses, and highway-type trucks, truck tractors,
trailers, and semi-trailers.” Id. A vehicle that is not a “highway
vehicle” is a “nonhighway vehicle.” Id.
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 10 of 28

10 Opinion of the Court 23-11893

Here, Rockwater’s trailers are sold as a component part of a
highway vehicle, which standing alone would make them taxable.
The focus of Rockwater’s appeal is on another provision in the
Code that exempts “off-highway transportation vehicles” from the
12 percent excise tax. We turn to that provision.
C. Exemption for Off-Highway Transportation Vehicles
In the Code, Congress has defined types of “off-highway
transportation vehicles” to which the § 4051(a) tax does not apply.
26 U.S.C. § 7701(a)(48). Section 7701(a)(48)(A)(i) provides that “[a]
vehicle shall not be treated as a highway vehicle” under § 4051(a) if
these two special design requirements are met:
(1) the “vehicle is specially designed for the primary
function of transporting a particular type of load
other than over the public highway and”
(2) because “of this special design such vehicle’s
capability to transport a load over the public highway
is substantially limited or impaired.”
Id. § 7701(a)(48)(A)(i). 2 The next statutory subsection also provides
that “a vehicle’s design is determined solely on the basis of its
physical characteristics.” Id. § 7701(a)(48)(A)(ii).

2 Section 7701(a)(48)(B) adds another exception. It provides that
nontransportation trailers and semitrailers, which function only as enclosed
stationary shelters, also are exempt. 26 U.S.C. § 7701(a)(48)(B). This
exception is not involved in this case.
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 11 of 28

23-11893 Opinion of the Court 11

Finally, Code § 7701(a)(48)(A) provides that we may
consider several factors in assessing whether the vehicle’s
capability to transport a load over a public highway is “substantially
limited or impaired”: (1) “the size of the vehicle”; (2) “whether
such vehicle is subject to the licensing, safety, and other
requirements applicable to highway vehicles”; and (3) “whether
such vehicle can transport a load at a sustained speed of at least
25 miles per hour.” Id. § 7701(a)(48)(A)(i), (iii).
With this background, we turn to the parties’ arguments.
III. DISCUSSION
The parties do not dispute that because Code
§ 7701(a)(48)(A)(i) uses “and” to connect the two requirements,
Rockwater’s trailers must satisfy both criteria to be exempt from
taxation as “off-highway transportation vehicles.” See Schlumberger
Tech. Corp. & Subsidiaries v. United States, 55 Fed. Cl. 203, 220 (2003)
(“The off-highway use exception is a two-part, conjunctive test.”).
In other words, we must reverse if Rockwater’s trailers fail to
satisfy either of Code § 7701(a)(48)(A)(i)’s criteria.
A. The Trailers Are Not Specially Designed to Transport
Peanuts Off-Highway
The initial issue is whether Rockwater’s trailers meet the
first requirement of being “specially designed for the primary
function of transporting” peanuts “other than over the public
highway.” 26 U.S.C. § 7701(a)(48)(i). This special design
requirement asks whether the vehicle is specially designed for the
primary function of transporting a load off public highways. See id.
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 12 of 28

12 Opinion of the Court 23-11893

The statutory requirement does not ask about the type of load
being carried or non-transportation features of the vehicle. See id.
Instead, this first requirement focuses on the primary, special
transportation design of the vehicle, instead of the
non-transportation purposes it might also serve. See id.
The physical characteristics that Rockwater cites do not
establish that the primary transportation purpose of its trailers is
off-highway use. Rockwater points to features like (1) the I-beam
and oversized sand feet providing greater stability in the field,
(2) the perforated floor and plenum allowing for drying fans to
blow warm air up through the peanuts, and (3) the open top and
the hinged rear gate facilitating the loading and unloading of the
peanuts.
Although the oversized sand feet lend the trailers stability
when stationary, the sand feet serve no purpose during transport.
And in considering the transportation function of these trailers, it
is immaterial whether the top is open or the floors are perforated
or the rear door is hinged. What matters is that these design
features serve the purpose of drying peanuts primarily in stationary
locations like buying points. They do not establish a primary
purpose of transporting peanuts.
As the government points out, the trailers are outfitted with
standard highway equipment that allows the trailers to operate at
55 miles per hour. Although the trailers are specially designed to
facilitate the drying of peanuts, their special peanut-drying design
has nothing to do with off-highway transportation.
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 13 of 28

23-11893 Opinion of the Court 13

Let’s consider a similar challenge brought in the Sixth
Circuit involving the application of the same highway vehicle tax,
id. § 4051(a), to a coal-hauler dump truck. See Worldwide Equip.,
Inc. v. United States, 605 F.3d 319, 321 (6th Cir. 2010). In Worldwide,
a heavy truck dealer challenged the application of the tax to its
coal-hauler dump trucks. Id. To haul coal in the muddy, gravelly
Appalachian coal fields, the coal-hauler dump trucks were outfitted
with (1) a special engine, transmission, and rear axle combination;
(2) an oversized steel dump body; and (3) special off-road tires. Id.
at 327-28. Evidence reflected that the rear axles and special tires
would overheat if the truck was operated at or above 35 to 40 miles
per hour for any length of time. Id. at 328. Holding that sufficient
evidence precluded summary judgment for the government on the
special design prong, the Sixth Circuit explained that the evidence
suggested that the coal-hauler dump trucks were specially designed
to haul coal off-road in the coal fields. Id. at 326-27, 331. The Sixth
Circuit noted that this special design for off-highway transportation
was apparent from the coal-hauler dump trucks’ special frames,
engines, transmissions, and off-road tires and the need for special
permits to operate the trucks on the highway due to their size and
weight. Id. at 326-28.
Unlike in Worldwide, the special features that Rockwater
calls our attention to are specific to peanut drying, not transporting
the peanuts. See id. Indeed, the physical characteristics relevant to
assessing the trailers’ transportation design are its standard tires, its
ability to operate by road speed limits, and its DOT-compliant
brakes, lights, and reflective stripes, all of which support
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 14 of 28

14 Opinion of the Court 23-11893

Rockwater’s advertisement that the trailers are the “safest most
reliable method for handling your crop from the field to the buying
point.” (Emphasis added). In fact, Rockwater’s advertisement
reveals that the trailers’ ability to transport peanuts from fields to
buying points, which almost always requires travel over public
roads, is the primary goal of its transportation design. The
presence of these highway transportation features coupled with the
absence of specific features for off-highway transportation establish
that the trailers were not specially designed for the primary
purpose of moving peanuts off-highway. And without specific
off-highway transportation design features, the fact that the trailers
are capable of being towed in the fields does not, without more,
establish that off-highway transportation is a special design, much
less the primary function. See Fla. Power & Light Co. v. United States,
56 Fed. Cl. 328, 333 (2003) (holding that vehicles designed for
extreme weather conditions for use by a utility company were not
off-highway vehicles because their design for frequent off-road use
was not the same as being primarily designed for off-road use).
The First Circuit rejected an argument like Rockwater’s
when it held that hydraulic boat trailers were not off-highway
vehicles. See Hostar Marine Transp. Sys., Inc. v. United States,
592 F.3d 202, 212-13 (1st Cir. 2010). The First Circuit explained that
although the hydraulic boat trailers exhibited some special design
features, those features either were irrelevant to their “on-versus
off-highway function” or supported their “on-highway function.”
Id. at 213. For example, the First Circuit considered the boat
trailers’ open-center frames, hydraulic components, and stub axles,
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 15 of 28

23-11893 Opinion of the Court 15

but concluded that no evidence supported the inference that the
features were related to the roads on which the trailers traveled
instead of the boats that they hauled. Id. The First Circuit also
pointed to several features that “emphatically point[ed] towards
their special design for on-highway transportation,” such as
DOT-compliant brakes, lighting, tires, and wheel coverings and the
ability to travel at normal highway speeds. Id.
Likewise, the transportation features of Rockwater’s
peanut-drying trailers, including its DOT compliance and ability to
travel by normal road speed limits on public highways without
special permits or markings, evince that their primary
transportation design was for use on public roads. Without this
design, no matter the peanut-drying features on the trailers, the
peanuts would be marooned in the fields, unable to reach the
critical drying fans at the buying points.
Based on the first requirement in § 7701(a)(48)(A)(i), the
peanut-drying trailers do not meet the statutory definition of
“off-highway transportation vehicles,” and the district court’s grant
of summary judgment to Rockwater must be reversed.
Nevertheless, we also consider the trailers’ ability to meet the
second requirement below.
B. The Trailers’ On-Highway Capability is Not
Substantially Limited or Impaired
The next issue is whether the trailers’ capability to carry
cargo over the public highways is substantially limited or impaired.
Code § 7701(a)(48)(A)(iii) provides several factors to consider in
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 16 of 28

16 Opinion of the Court 23-11893

assessing whether a vehicle’s capability is substantially limited or
impaired, including the size of the vehicle, its safety and licensing
features, and its ability to travel over 25 miles per hour. See
26 U.S.C. § 7701(a)(48)(A)(iii). All these factors weigh in the
government’s favor.
First, the trailers are not designated as oversize or
overweight. This means that the trailers do not require special
permits to operate. Second, the trailers go through DOT
inspection before sale and have DOT-compliant brakes, lights, and
reflective stripes. The trailers also are marketed as safe to handle
loads of peanuts from the fields to the buying points, which
Rockwater acknowledges almost always requires travel on public
roads. The trailers can travel by “road speed limits” of 55 miles per
hour, too, well above the 25-mile-per-hour threshold.
Notably, all the statutory factors concern physical
characteristics of the vehicle. See id. § 7701(a)(48)(A)(ii), (iii). This
is why Rockwater’s arguments about the trailers’ economic
feasibility and the short duration of the harvest season are
unpersuasive. As the Court of Federal Claims explained, the
“words ‘substantially limited or substantially impaired’ are [not]
synonymous with impaired efficiency of vehicle operation.” Fla.
Power & Light Co., 56 Fed. Cl. at 333-34 (rejecting the argument that
the utility vehicles’ designs, which made them heavier, slower, and
less fuel-efficient, did not substantially limit or impair their use on
public highways). Moreover, Rockwater relies on evidence about
the type of cargo that its trailers are designed to carry, instead of
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 17 of 28

23-11893 Opinion of the Court 17

evidence that the trailers are substantially less capable of traveling
on public roads. It argues that its trailers’ raised center of gravity
increases the rollover risk, but this is not dispositive. Despite the
increased rollover risk, which is not unique to these trailers, the
trailers remain capable of safely operating by road speed limits and
do not need special markings or permits for highway travel.
Because Rockwater failed to establish that its trailers were
off-highway transportation vehicles, 26 U.S.C. § 7701(a)(48)(A)(i),
that are exempt from taxation, id. § 4051(a)(1), the government
was entitled to summary judgment on the taxes and statutory
interest.
IV. THE DISSENT
A. Excise Taxes
The dissent agrees Rockwater owes the excise taxes. While
the Court identifies two independent reasons why, the dissent joins
only the reason in Part III.A. As to the second reason in Part III.B,
our dissenting colleague argues there is a jury issue. But this
ignores that the parties’ cross-motions for summary judgment
agreed that no material facts were in dispute and, on appeal, the
parties did not argue that a jury question exists on any issue. We
properly decide the legal issues that the parties identified and
litigated.
B. Statutory Interest
The Code provides for mandatory statutory interest on the
taxes owed here. See 26 U.S.C. § 6601. Because Rockwater owes
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 18 of 28

18 Opinion of the Court 23-11893

taxes, it automatically owes interest. Yet our dissenting colleague
would have us rule that Rockwater does not owe interest. This is
a nonsensical result that no one asks for. As set forth below,
Rockwater has never argued that it did not have to pay interest on
taxes owed by Rockwater.
Starting in the district court, the parties litigated over
whether Rockwater owed the excise taxes and penalties. Even if it
owed the taxes, Rockwater argued that penalties are subject to a
reasonable cause defense. 3 However, Rockwater never argued
that reasonable cause would supply a defense to the mandatory
statutory interest.
The district court’s summary judgment order held that
Rockwater did not owe the excise taxes. As a brief alternative
ruling, the district court concluded that even if Rockwater owed
the taxes, it had reasonable cause not to pay them initially and did
not owe the penalties.
That section of the order, entitled “Penalties,” cited only the
penalty statute and cases about reasonable cause in the context of
owing penalties. The order did not cite the mandatory interest
statute, or any interest cases, or discuss interest at all. Yet in that
Penalties section the district court sua sponte and mistakenly
lumped interest in its reasonable cause ruling, even though that
exception applies solely to penalties.

3 Failing to file a tax return at all incurs a penalty “unless it is shown that such

failure is due to reasonable cause and not willful neglect.” 26 U.S.C. § 6651(a).
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 19 of 28

23-11893 Opinion of the Court 19

Given the district court’s sua sponte and elementary mistake,
the United States argued on appeal that the district court’s order
“should not be interpreted to hold that its ‘reasonable cause’
finding exempts Rockwater from statutory interest” because the
Code provides that penalties are subject to a “reasonable cause”
exception, see Code § 6651(a)(1), but statutory interest is not, see id.
§§ 6601(a), 6621. Indeed, the government succinctly cited the
relevant law: “Compare I.R.C. § 6651(a) (penalty is subject to a
reasonable cause exception) with I.R.C. § 6621 (interest is not).” As
the government said at oral argument, “There’s not much more to
say than that.” Given the instant context of mandatory, statutory
interest, the government’s argument did everything necessary to
explain the elementary legal error by the district court. Notably,
too, Rockwater does not claim the government abandoned or
failed to preserve the interest error on appeal; only our dissenting
colleague does.
And importantly, Rockwater also has never claimed that
even if it owed the taxes, it did not owe interest.
At oral argument, the United States clarified that it did not
challenge the reasonable cause penalty ruling, but it maintained
that no reasonable cause defense applies as to the mandatory
statutory interest. Rockwater did not dispute this either during
oral argument or in its response brief. The record before us is clear
that both parties have always understood that Rockwater’s liability
for interest is automatic if it is required to pay the excise taxes.
That’s the way the tax law works.
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 20 of 28

20 Opinion of the Court 23-11893

What this means is that everyone but our dissenting
colleague recognizes that the mandatory, statutory interest has and
continues to rise and fall solely on the issue of the excise taxes. And
because we do not represent one party or the other, we decline to
litigate an “issue” and affirm an alternative ruling that yields an
illogical result that no party has requested either in the district court
or on appeal.
V. CONCLUSION
We REVERSE the grant of summary judgment to
Rockwater, REMAND for entry of final judgment in favor of the
United States on Rockwater’s complaint as to the excise taxes and
statutory interest, and AFFIRM the finding that Rockwater is not
required to pay penalties.
REVERSED IN PART AND AFFIRMED IN PART.
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 21 of 28

23-11893 LUCK, J., concurring and dissenting in part 1

LUCK, Circuit Judge, concurring in part and dissenting in part:
The district court granted summary judgment for Rockwa-
ter, Inc. and ordered that the company be refunded three separate
pots of money: (1) excise taxes that Rockwater paid to the govern-
ment; (2) interest that the government imposed for the delay in
paying the excise taxes; and (3) penalties the government imposed
for delaying payment on the taxes. On appeal, the government
raised only “one issue” related to the first pot of money—the excise
taxes refund.
But the government did not argue that the district court
erred in ordering the refund for the second pot of money—interest.
The word interest did not appear in the issue section of the govern-
ment’s initial brief. It did not appear in the summary of the argu-
ment. And it did not appear in the argument section. Not “plainly
and prominently,” as we require to preserve an issue for appeal. See
Sapuppo v. Allstate Floridian Ins. Co., 739 F.3d 678, 681 (11th Cir. 2014)
(quotation omitted). Not at all in those sections of the initial brief.
That means the interest refund issue has been abandoned. See
United States v. Willis, 649 F.3d 1248, 1254 (11th Cir. 2011) (“A party
seeking to raise a claim or issue on appeal must plainly and promi-
nently so indicate. . . . Where a party fails to abide by this simple
requirement, he has waived his right to have the court consider that
argument.” (quotation, citation, and brackets omitted)); Access
Now, Inc. v. Sw. Airlines Co., 385 F.3d 1324, 1330 (11th Cir. 2004) (“Any
issue that an appellant wants [us] to address should be specifically
and clearly identified in the brief. . . . Otherwise, the issue—even
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 22 of 28

2 LUCK, J., concurring and dissenting in part 23-11893

if properly preserved at trial—will be considered abandoned.”);
Marek v. Singletary, 62 F.3d 1295, 1298 n.2 (11th Cir. 1995) (“Issues
not clearly raised in the briefs are considered abandoned.” (citation
omitted)).
The government’s only substantive reference to interest was
in a footnote in the statement-of-the-case section of the initial brief.
But the footnote was not enough to preserve sufficiently for appeal
the interest refund issue. See Tallahassee Mem’l Reg’l Med. Ctr. v.
Bowen, 815 F.2d 1435, 1446 n.16 (11th Cir. 1987) (“In this case, the
single footnote in the Secretary’s initial brief did not sufficiently
preserve the mootness issue.”); see also Asociacion de Empleados del
Area Canalera v. Panama Canal Comm’n, 453 F.3d 1309, 1316 n.7 (11th
Cir. 2006) (“[T]hat argument is waived because it appears only in a
footnote in their initial brief and is unaccompanied by any argu-
ment.” (citation omitted)); Greenbriar, Ltd. v. City of Alabaster, 881
F.2d 1570, 1573 (11th Cir. 1989) (“Although Greenbriar refers to the
district court’s dismissal of its amendment in its Statement of the
Case in its initial brief, it elaborates no arguments on the merits as
to this issue in its initial or reply brief. Accordingly, the issue is
deemed waived.”). And if the footnote wasn’t enough to preserve
the issue, then the citations hidden at the end of the buried foot-
note in the statement-of-the-case section of the brief certainly were
not enough either. Nobody points to any case holding otherwise.
Even if the lone reference in the statement-of-the-case foot-
note was enough to preserve the interest refund issue, the govern-
ment did not argue that the district court erred in ordering the
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 23 of 28

23-11893 LUCK, J., concurring and dissenting in part 3

interest refund. Instead, sans citations, the two-sentence footnote
said: “The [district] court also held that to the extent Rockwater
was not liable for the tax, it was not liable for the interest on the
tax. The court should not be interpreted to hold that its ‘reasona-
ble cause’ finding exempts Rockwater from statutory interest.”
But there is no other way to interpret the district court’s or-
der. The district court found that “Rockwater had reasonable cause
for any delay in paying the tax.” And then the district court applied
that finding to order the interest refund: “Because Rockwater does
not owe the tax, and alternatively because it otherwise had reason-
able cause for its delay in paying it, neither penalties nor interest
are appropriate.” The only way to read what the district court
wrote is that the “reasonable cause” finding applied to Rockwater’s
request for a penalty refund and an interest refund. Because the
government didn’t raise the interest refund issue, and because, even
if it did, the government is wrong in its statement-of-the-case foot-
note, I would affirm that part of the district court’s order.
The majority opinion comes to a contrary conclusion be-
cause, it says, Rockwater never argued or claimed on appeal that it
was due an interest refund. But this turns the preservation rules
on their head. Rockwater is the appellee. It won the three specific
pots of money in the district court, including a refund on the inter-
est it paid to the government because there was reasonable cause
for the delay in payment. Rockwater had no obligation to chal-
lenge an issue it won below. None. Besides, Rockwater did argue
that the government “did not address,” and therefore “abandoned,”
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 24 of 28

4 LUCK, J., concurring and dissenting in part 23-11893

any argument that the district court erred in finding reasonable
cause. Not just me.
The only party with the obligation to raise on appeal any
errors with the district court’s order was the government as the ap-
pellant. If the government really believed, as the majority opinion
does, that the district court erred in awarding interest based on the
reasonable cause finding, then it should have plainly and promi-
nently raised the issue on appeal, as every other appellant is re-
quired to do. But not only did the government fail plainly and
prominently to raise the interest refund issue, it failed even to men-
tion the word interest in the argument section of its brief. Not one
time, which means we must affirm.
That result is neither illogical nor nonsensical. Instead, it
flows naturally from an appellant’s failure to challenge a specific
pot of money awarded by the district court. Affirming is what we
have done in countless appeals where the appellant has not suffi-
ciently preserved an issue, and it is what we would do in any other
appeal where the appellant does not plainly and prominently raise
an issue. That is as true for the government as it is for any other
party-appellant.
* * * *
For the other pots of money—the refunds for the excise
taxes and the penalties—I concur in the judgment. As the majority
opinion explains, there were two requirements that Rockwater had
to meet to qualify for the off-highway transportation vehicle ex-
emption to the excise tax. Rockwater had to show that: (1) its
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 25 of 28

23-11893 LUCK, J., concurring and dissenting in part 5

peanut wagon “is specially designed for the primary function of
transporting a particular type of load other than over the public
highway”; and (2) because “of this special design such vehicle’s ca-
pability to transport a load over the public highway is substantially
limited or impaired.” 26 U.S.C. § 7701(a)(48)(A)(i). In Part III.A.,
the majority opinion elegantly and comprehensively explains why
there’s no genuine dispute that Rockwater did not meet the first
requirement. I happily join that part of the opinion.
We could have ended there because, as the majority opinion
explains, Rockwater’s peanut wagon “must satisfy both criteria to
be exempt from taxation as ‘off-highway transportation vehicles.’”
Because the peanut wagon clearly didn’t meet the first require-
ment, the company was not exempt from the excise tax. But the
majority opinion, in Part III.B., then goes on to decide that there’s
no genuine dispute that Rockwater did not meet the second ex-
emption requirement.
I wouldn’t reach the second requirement because, to me,
whether there’s a genuine dispute that the special design of the pea-
nut wagon substantially limited or impaired the wagon’s capability
to transport a load over the public highway is a harder call and an
unnecessary one. The majority opinion is right that the statutory
factors weigh in the government’s favor. But the statutory factors
are not exclusive, and other factors weigh in favor of Rockwater.
Rockwater’s peanut wagon, for example, had an all-steel de-
sign, oversized sand feet, an open top, a top-hinged lift gate, and a
perforated floor that is raised eighteen inches higher than a normal
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 26 of 28

6 LUCK, J., concurring and dissenting in part 23-11893

trailer’s floor. The all-steel design and oversized sand feet increased
the peanut wagon’s weight, which hindered its capability to
transport loads economically over the public highways. The open
top exposed the load to the elements, the top-hinged lift gate disal-
lowed traditional loading and unloading, and the perforated floor
was far weaker than a normal one. Those features made it difficult,
if not impossible, to transport anything other than peanuts. And
the raised floor raised the wagon’s center of gravity, which in-
creased the rollover risk during transport.
With similar evidence, two of our sister circuits have af-
firmed jury verdicts finding a substantial limitation under the sec-
ond requirement. See GLB Enters. v. United States, 232 F.3d 965 (8th
Cir. 2000); Flow Boy, Inc. v. United States, No. 82-1823, 1984 WL
15513 (10th Cir. Jan. 20, 1984). In Flow Boy, for example, the Tenth
Circuit affirmed the jury’s verdict finding that the specialized ce-
ment trailers’ capability to transport a load over public highways
was substantially limited because it was not economically efficient
to operate the loaded cement trailers on the public highway. See
1984 WL 15513, at **1–2. The Tenth Circuit explained that the
jury’s finding was supported by credible evidence showing that the
cement trailers were too heavy to carry optimal loads over the pub-
lic highway, hindering the trailers’ economic efficiency. See id.
Similarly, in GLB Enterprises, the Eighth Circuit affirmed a
jury’s verdict finding that the specialized cotton trailers’ capability
to transport a load over public highways was substantially limited
because it was less safe to operate the loaded cotton trailers on the
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 27 of 28

23-11893 LUCK, J., concurring and dissenting in part 7

public highway. See 232 F.3d at 967. There, the cotton trailers’ spe-
cial design features—that significantly increased its weight (which
impaired braking) and changed its center of gravity (which in-
creased rollover risk)—made the trailers dangerous enough that a
special permit was necessary to operate the trailers over public
highways when loaded at a certain capacity. Id. at 968. Even
though the peanut wagon here did not require a special permit to
operate over the public highways, its special design features, which
increased the wagon’s weight and rollover risk, raised similar eco-
nomic and safety concerns as Flow Boy’s cement trailers and GLB
Enterprises’s cotton trailers.
The majority opinion doesn’t address some of these con-
trary facts or the caselaw from our sister circuits because, it says,
“the parties’ cross-motions for summary judgment agreed that no
material facts were in dispute and, on appeal, the parties did not
argue that a jury question exists on any issue.” But whether the
peanut wagon’s special design substantially limited or impaired its
capability to transport a load over the public highway was very
much in dispute, as it was in Flow Boy and GLB Enterprises. Indeed,
the dispute takes up an entire section of the government’s initial
brief. In any event, the majority opinion misses the point. We
should not go out of our way to reach an alternative ground
(whether it’s a judge question or jury question) where there’s some
doubt whether we’re right. Better to decide only one ground
where we’re clearly right than to stretch to decide a second unnec-
essary alternative ground where we’re not.
USCA11 Case: 23-11893 Document: 43-1 Date Filed: 11/15/2024 Page: 28 of 28

8 LUCK, J., concurring and dissenting in part 23-11893

Because the majority opinion is so clearly right about the
first exemption requirement in Part III.A., I would resolve the ex-
cise tax refund issue on that ground without getting into the more
complicated conflicting evidence on the second exemption require-
ment.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10741684. Public record. Not legal advice.