Court Holds that Untimely Refund Claim by Amended Return Stating a Different Legal Basis Does Not Relate Back to Timely Refund Claim by Amended Return (2/20/24)

In American Guardian Holdings, Inc. v. United States (N.D. Ill. Case 23 C 1482 Memo Op. & Order 2/7/24), GS here and CL here, the district court held that that it had no jurisdiction over an untimely refund claim (by untimely amended return, Form 1120X) requesting a refund in the same amount as a prior timely refund claim (by timely amended return, Form 1120X) but stating a different legal basis than the timely refund claim. In the untimely refund claim, the taxpayer asked the court to “discard” the timely filed amended return. (The latter fact was not relevant to the holding.)

For clarity, the taxpayer filed the following documents: the original return; a timely refund claim  (by Form 1120X) seeking most of the tax paid; a timely refund claim (by Form 1120X) seeking all of the tax paid; and an untimely third amended return (by Form 1120X) seeking all of the tax paid. For analysis of the issue of whether the court had jurisdiction over the untimely amended return, the court compared the untimely third amended return to the timely second amended return. The issue was whether the claim in the untimely third amended return was a clarification of the claim made in the timely second amended return or stated a different basis.  I simplified in the original paragraph by mentioning only a timely filed refund claim and a subsequent untimely filed refund claim.

I discuss the general issue in the most recent edition of the Federal Tax Procedure (Practitioner Edition p. 236; Student Edition (without footnote p. 165)) as follows:

(d) Germaneness Doctrine.

          The germaneness doctrine may apply where the taxpayer:

          (1) files a formal claim within the limitations period making a specific claim; and (2) after the limitations period but, while the IRS still has jurisdiction over the claim, files a formal amendment raising a new legal theory -- not specifically raised in the original claim -- that is “germane” to the original claim, that is, it depends upon facts that the IRS examined or should have examined within the statutory period while determining the merits of the original claim. Unlike the waiver doctrine, the inquiry here is not whether the particular legal theory for recovery has been considered by the IRS during the limitations period but whether the underlying facts supporting that legal theory were discovered or should have been discovered by the IRS in considering the original claim during the limitations period. n1049

n1049  Computervision Corp. v. United States, 445 F.3d 1355, 1370 (Fed. Cir. 2006) (citing  Bemis Brothers Bag Co. v. United States, 289 U.S. 28, 53 S. Ct. 454 (1933) and United States v. Andrews, 302 U.S. 517, 524 (1938).  In Computervision, the Federal Circuit rejected the holding of two other courts that the more specific formal claim could be filed after the IRS has completed consideration of the inadequate original claim by granting the original claim, by denying the original claim, or by the taxpayer having filed a suit for refund without IRS formal action on the claim. The cases rejected in Computervision are:   Mutual Assurance Inc. v. United States, 56 F.3d 1353 (11th Cir. 1995); St. Joseph's Lead Co. v. United States, 299 F.2d 348 (2d Cir. 1962).

 In American Guardian, the Court discusses the germaneness doctrine as follows:

Payment of "Tax" After the Assessment Limitations Period Expires - Refunds (9/11/15)

Apropos to our discussions in class of the statute of limitations on assessment, in ECC 201536020 (9/4/15), here, the IRS attorney addresses the refund of taxes paid after the assessment statute of limitations expired:

A tax payment made to the Service after the expiration of the period of limitation on assessment is considered an overpayment, even if there was no tax liability. Section 6401(a) & (c). The Service has authority to refund overpayments, but only within the applicable period of limitations. Section 6402(a); Rev. Rul. 74-580. The IRM in section 25.6.1.10.2.5.6.2 (10-11-2012) Claim for an Amount Paid After the ASED, (stating "If an amended return is filed after the expiration of the period of limitations on assessment, any amount paid with that return must be refunded to the taxpayer. The taxpayer does not need to file a claim for refund in order to receive a refund of the payment made with the late filed amended return for additional tax assessment.") is discussing the need for filing a claim, not the applicability of the period of limitations. Therefore, a payment made after the ASED may be refunded to the taxpayer, but only within the limitations set forth in section 6511.

ASED in the quote means:  assessment statute expiration date and is the usual IRM term for the date the statute on assessment expires.  In the above quote, the payment was made with no timely assessment.

As indicated, the IRS can refund the overpayment resulting from payment after expiration of the statute of limitations, but the taxpayer must file the claim for refund within the refund claim statute of limitations if the IRS does not refund voluntarily.

Pay Attention to Court Filings Not Qualifying for the Timely Mailing-Timely Filing Rule (7/10/13)

Every tax controversy practitioner and student is aware of the time-mailing, timely-filing rule in Section 7502, here. The general concept is easily stated -- a document timely mailed to the IRS or a petition to the Tax Court will be deemed timely filed even if it arrives after the due date.  The rule is subject to some nuance and risks.  I won't get into the nuances and risks now.

But, I do want to remind readers that there is no such timely mailing-timely filing rule for other filings.  Perhaps the other most common filing that tax practitioners will deal with is the filing of the suit for refund, necessarily in a court other than the Tax Court.  There is a statute of limitations for a suit for refund -- 2 years from the date the refund claim is denied.  There is no timely-filing, timely-mailing rule for such suits.

I guess I could leave it at that, but I do call readers' attention to a recent case, Langan v. United States, 2013 U.S. Claims LEXIS 740 (Fed. Cl. June 28, 2013), here.  In this case, the claim disallowance was mailed on 12/16/09.  The taxpayer's lawyer delivered the envelope containing the Court of Federal Claims complaint to the USPS in Massachusetts late on 12/15/11, just one day before the statute closed.  The Court of Federal Claims received the envelope and stamped the complaint on 12/19/11.  Too late.

The taxpayer tried to save the day on some older authority from the court that could be read to say that a filing timely delivered to the USPS in time to be timely received by the court will be deemed to have been timely delivered even if was not timely delivered.  In effect, there would be some type of equitable relief if the timely mailing was prudent because of the expectation of timely delivery. This authority even if it were still good, did not apply because the late delivery in Langan to the USPS on the day before the complaint was required to be filed was not filed in time that, in due course, it would be timely delivered the next day.  (The taxpayer's counsel actually used a type of USPS service that would have promised timely next-day delivery had it been deposited with the USPS earlier in the day, but the late delivery (around 11pm) did not qualify for USPS assurance of next day delivery and thus taxpayer's counsel did not act prudently, a necessary condition for the special relief if it even continued to exist.)

This is a cautionary tale.  Just based on the bare facts, the taxpayer's lawyer appears to have botched this and, if so, the tax dollars paid are gone forever.  (As I read the rules, the IRS is  now forbidden to make a refund even if it were to discover that it was due.)

No Overpayment For Tax Timely Assessed OR Collected (12/29/12)

In ILM 201252015, here, the IRS reached some interesting conclusions regarding the statute of limitations.  The ILM blazes no new legal trails, but is a helpful reminder of the rules that it applied.

I tried to develop a simplified set of facts that would illustrate the facts in the ILM but could not because there are some confusing dates which are identified by pseudonyms rather than actual dates.  If I had the actual dates it would likely not be confusing.  So, I will simply state the key legal propositions asserted in the ILM.

1. The normal statute of limitations is 3 years.  Section 6501(a).
2. The normal statute may be extended by agreement.  Section 6501(c)(4).  In this case it was by Form 872 Consent, which extends to a date stated.
3. In the case of an amended return filed within the 60 day window of the statute expiration date (whether the normal statute or the extended statute), the assessment date expires no later than 60 days after the amended returns.  Thus, for example, say that the year 01 return was timely filed on 4/15/02 and the normal statute date is 4/15/05.  If the taxpayer files an amended return on 4/1/05, the statute to assess the tax reported on the amended return does not expire before 5/31/05 (60 days after 4/1/05).
4. Tax actually collected by the IRS while the assessment statute is still open is not an overpayment even if the IRS does not assess the tax until after the statute expiration date.  Thus, in the above example,  assume that the same example, except that (i) the taxpayer sent a payment of $100,000 with the amended 01 return filed 4/1/05; (ii) the IRS posts the payment to the year 01 on 4/3/05; but (iii) the IRS does not assess until 9/1/05 (well after the period for assessment, even after the Section 6501(c)(7) 60 minimum extension).  There is still no overpayment because the IRS timely collected the tax.

With that background, the following legal analysis in the ILM is helpful.

Ninth Circuit Denies an Untimely Claim for Refund (9/1/12)

In Reynoso v. United States, 692 F.3d 973, 2012 U.S. App. LEXIS 18208 (9th Cir. 2012), here, the Ninth Circuit applied the Section 6511, here, rules for statutes of limitations applying to refund to deny the taxpayer a claim for refund.  I don't think the Ninth Circuit broke new ground in the holdings.  See Oropallo v. United States, 994 F.2d 25, 30 (1st Cir. 1993).  I have,however, added the following examples to the examples in the text to show how the refund statute of limitations works:

Example 8.  Taxpayer prepays year 01 taxes in the amount of $100,000 by combination of estimated tax and withholding tax, but then fails to file the return timely on 4/15/02 and does not request an extension.  Those prepayments are deemed paid on 4/15/02.  The taxpayer thereafter files a delinquent year 01 original return on 7/15/05 on which he reports a tax liability of $50,000, claims credit for the prepaid tax of $100,000, and claims a resulting year 01 refund of $50,000.  The taxpayer meets the three year requirement of § 6511(a) because the claim for refund is filed contemporaneously with the return.  However, he flunks § 6511(b)(2)(A)’s look-back period requirement because the refund cannot exceed the taxes paid in the preceding three year period. Strangely, if the taxpayer had originally timely received an extension of the year 01 return which would have permitted him to file a timely year 01 return by 10/15/02, then the taxpayer will have met the § 6511(b)(2)(A) 3-year look-back requirement because extensions are counted even if not used. 

Example 9.  Same Example 8, except assume (i) the taxpayer does not apply for an extension, (ii) for some reason, the IRS treats the prepayment of $100,000 not as a payment of tax deemed paid on 4/15/02 but as a deposit or cash bond and (iii) the IRS applies the cash bond as a payment on 9/1/02.  The refund claim is then timely because the 7/15/05 filing is within 3 years of the date of payment.