CCA 200851101: A treaty competent authority provision can let a late administrative adjustment request through

Plain-English summary

Two sentences of advice, on a narrow but useful point about deadlines.

An administrative adjustment request is how a partnership asks the Service to change items it already reported, and like other claims it is bound by a limitations period. Once that period runs, the ordinary answer is that the claim is too late and no refund follows, however meritorious it may be.

Tax treaties can change that answer. The mutual agreement article of a treaty gives each country's competent authority a channel for resolving cases of taxation inconsistent with the treaty, typically double taxation arising from how the two countries allocated income between related parties. A resolution reached years later is worth nothing if the domestic limitations period has already closed, so many treaties authorize the competent authorities to waive or remove procedural barriers to a credit or refund. The advice quotes section 9.05 of Rev. Proc. 2006-54, the procedure governing competent authority requests, which says that in cases where the mutual agreement article carries that authorization, taxpayers may be allowed a credit or refund even though the otherwise applicable period of limitations has expired.

The conclusion follows directly. If the treaty in question contains such an authorization, the administrative adjustment request producing the refunds may be filed out of time.

Two limits are worth noting because the release is short enough that they are easy to miss. The answer is conditional on the particular treaty: the authorization is a feature of individual mutual agreement articles, not a general rule, so the treaty text must be checked rather than assumed. And the route runs through the competent authority process. This is not a free extension of the limitations period for any late claim that happens to involve a foreign country.

This is a clean digital release rather than a scan, so no OCR correction was needed. The quotation from Rev. Proc. 2006-54 is reproduced as released, including the bracketed period closing the quoted passage.

Ruling snapshot

• Question: May an administrative adjustment request producing refunds be filed after the limitations period has expired, in a competent authority case?
• Outcome: Advice given. Yes, if the treaty's mutual agreement article authorizes the competent authority to waive or remove procedural barriers to a credit or refund, as section 9.05 of Rev. Proc. 2006-54 describes.
• Key authorities: IRC section 6227; Rev. Proc. 2006-54, section 9.05; the mutual agreement article of the applicable treaty.

Full text (IRS public release)

ID: CCA-911105-08 Number: 200851101
Office: -------------- Release Date: 12/19/2008

UILC: 6227.00-00

From: -------------------
Sent: Thu 9/11/2008 10:54 AM
To: -------------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
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Subject: AAR-Competent Authority Case

Sec. 9.05 of Rev. Proc. 2006-54 states that in "those cases where the mutual agreement article authorizes a competent authority to waive or remove procedural barriers to the credit or refund of tax, taxpayers may be allowed a credit or refund of tax even though the otherwise applicable period of limitations has expired."

If the treaty in question contains such an authorization, an AAR (resulting in the refunds) may be filed out of time.