Failure To Timely File Refund Suit Bars Issuance Of A Refund

Chief Counsel Advice 201110011

In a new Chief Counsel Advice (CCA), IRS says it cannot allow a claim for refund after the taxpayer's two-year period for filing suit has expired. Both Code Sec. 6514(a) and Code Sec. 6532(a) must be considered to arrive at this conclusion.

Observation: This CCA rejects (and corrects) the conclusion in an earlier CCA. In Chief Counsel Advice 201048030, IRS had concluded that it could allow a refund claim after Code Sec. 6532’s two-year filing period for refund suit had expired.

Background. Under Code Sec. 6511(a), a claim for credit or refund of an overpayment must be filed by the taxpayer within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever period expires later. IRS can't allow or make a credit after the expiration of the three-year/two-year limitations period in Code Sec. 6511(a) for the filing of a claim for credit or refund, unless a claim for credit or refund is filed by the taxpayer within that period.

Under Code Sec. 6532(a), where the taxpayer timely files a claim for credit or refund, he has 2 years to bring a lawsuit for the credit or refund, measured from the date that IRS mails the taxpayer notice of the disallowance of the part of the claim to which the suit or proceeding relates. Any consideration, reconsideration or action by IRS won't operate to extend the two-year period for filing suit (Code Sec. 6532(a)(4))

Under Code Sec. 6514(a), a refund made after the expiration of the period of limitation for filing a refund claim is erroneous if no claim was filed or if the claim was filed late. Likewise, a refund on a timely filed but disallowed claim is erroneous if the refund was made after the expiration of the statutory period for filing suit, unless the taxpayer timely filed suit.

Issue. The question raised in the CCA was whether consideration of Code Sec. 6532 alone was enough to determine whether IRS's Office of Appeals may allow a claim for refund after the two-year period for filing suit has expired.

Thumbs down. The CCA said that the answer is “no.” Looking at Code Sec. 6532 alone, it would appear that nothing prevents IRS from allowing a claim and issuing a refund after the expiration of the two-year period. However, where the taxpayer timely files a claim, but does not timely file suit within the two-year window, any refund made is erroneous and any credit given is void under Code Sec. 6514(a). Thus, the CCA concludes that, looking at Code Sec. 6523 and Code Sec. 6514 together, IRS cannot approve a claim for refund after the time for the taxpayer to file a suit for refund expires.

References: For post-limitation period refunds or credits, see FTC 2d/FIN ¶T-9101; United States Tax Reporter ¶65,144; TaxDesk ¶806,004; TG ¶70735.