Court Weighs In On Deadline For Filing FTC Refund Claims

On September 19, 2014, the U.S. Court of Federal Claims issued its opinion in Albemarle Corp. v. United States, No. 12-184T, holding that it lacked jurisdiction over the taxpayer's claim for refunds based on foreign tax credits because such claims were not timely made with the Internal Revenue Service (IRS). The 49-page opinion provides a detailed discussion of the rules under IRC § 6511(d)(3)(A) relating to the period of limitation for filing a claim with respect to foreign taxes paid or accrued, but its analysis and result are questionable.

Generally, a claim for credit or refund of overpayments of tax must be filed by the taxpayer within the later of three years from the time the return was filed or two years from the time the tax was paid. For claims relating to an overpayment attributable to taxes paid or accrued to a foreign country, Internal Revenue Code (IRC) § 6511(d)(3)(A) extends this period to "10 years from the date prescribed by law for filing the return for the year in which such taxes were actually paid or accrued." Prior to its amendment in 1997, the statute required that such claim be made within 10 years from the date prescribed by law for filing the return for the year with respect to which the claim was made.

In Albemarle, the taxpayer reached a settlement with the Belgian tax authorities in 2002 relating to its 1997 - 2001 tax years. As a result of the settlement, the taxpayer made payments of additional tax to Belgium on January 31, 2002, and August 29, 2002. On May 15, 2009, the taxpayer filed a refund claim related to its 1997 - 2001 tax year. The IRS permitted the refund claims for the 1999 - 2001 tax years, but denied the 1997 and 1998 claims on the ground that they should have been filed on or before March 15, 2008 and 2009, respectively. In other words, the IRS read IRC § 6511(d)(3)(A) as requiring that any refund claims be filed within 10 years from the date the tax return for these years were due, without extension (the returns were filed on September 15, 1998 and 1999, respectively). The IRS's "without extension" position is based on its regulations, even though the statute does not contain this language and extensions are automatic if properly requested. The court did not address this issue, instead focusing on the year during which the statute began to run rather than the particular date within the year. The taxpayer argued that the plain language of the statute allowed a claim for refund to be filed within...