CCA 201125028: Recovery of erroneous partnership refunds after an FPAA period expired

Plain-English summary

Chief Counsel Advice addressed procedures for recovering erroneous refunds issued to partners when periods under IRC §§ 6229 or 6501 had expired. The advice stated that, if the IRS could still timely issue a final partnership administrative adjustment, it could assess and collect the erroneous amounts through that process. If the period for issuing the adjustment had expired, the IRS would instead need to bring an individual refund action against each partner under IRC §§ 7405 and 6532(b). The advice also stated that a timely administrative adjustment request petition by the tax matters partner would not suspend the collection period, although the suit could determine the correct partnership items for the partner-level refund actions.

Ruling snapshot

• Question: How could the IRS recover erroneous refunds issued to partners after the period for issuing an FPAA had expired?
• Outcome: Advice given.
• Key authorities: IRC §§ 7405 and 6532(b), with periods under §§ 6229 and 6501 discussed.

Full text (IRS public release)

ID: CCA_2011052309490137 Number: 201125028
Release Date: 6/24/2011
Office: ---------
UILC: 7405.00-00

From: --------------------
Sent: Monday, May 23, 2011 9:49:13 AM
To: --------------------
Cc: ------------
Subject: RE: Erroneous Refund Procedures for AARs with Expired 6229 or 6501

1. If erroneous refunds are issued to partners, we can issue a timely FPAA to assess and collect these
   amounts.

2. If the period for issuing an FPAA has expired, we would have to initiate individual refund actions
   against each separate partner under section 7405 and 6532(b).

3. The filing of a timely AAR petition by the TMP would not suspend the period for collecting the
   erroneous refunds, but the AAR suit may determine the correct amount of partnership items on the merits
   for purposes of the concurrent partner-level erroneous refund suits.

4. Whether erroneous refund suits should be handled by a single IRS counsel office will need to be
   determined on a case by case basis by the responsible area counsel.