Advice on when an IRC § 6603 deposit becomes a tax payment

Plain-English summary

Chief Counsel's office advised that the refund limitations period begins when an IRC § 6603 deposit is converted and applied to pay an assessed tax liability. Before that application, the deposit is not a payment of tax and is not subject to a refund claim as an overpayment. The advice relied on IRC § 6603, the legislative history, Rev. Proc. 2005-18, and the principle that the payment date must be identified before the refund limitations period under § 6511 can be determined.

Ruling snapshot

• Question: When does the refund limitations period begin for an IRC § 6603 deposit that is converted to pay a tax liability?
• Outcome: Advice given.
• Key authorities: IRC §§ 6511 and 6603; H.R. Rep. No. 108-755; Rev. Proc. 2005-18.

Full text (IRS public release)

ID: CCA-12111428-13 Number: 201316015
Release Date: 4/19/2013
Office: --------------
UILC: 6511.00-00, 6603.00-00

From: ----------------
Sent: Thursday, February 14, 2013 5:33 PM
To: -------------------
Cc: --------------------------------------
Subject: Section 6603 RSED Issue ---------

Hi ---------

You asked us when the refund period of limitations begins to run when a section 6603
deposit is converted to pay a tax liability. We agree with your conclusion - the refund
period of limitations starts when the section 6603 deposit is converted to pay a tax. As
the Sixth Circuit noted recently, “to defined ‘overpayment’ with any precision also requires
defining ‘payment.’” Ford Motor Co. v. United States, 2012 WL 6579598 at 9 (6th Cir.
Dec. 17, 2012). In order to determine the correct RSED under section 6511 for refund of
an overpayment, then, it is necessary to first determine the date of payment. In the
section 6603 context at issue in this case, Congress was helpful enough to address this
explicitly - in a section headed “Deposits are not payments of tax” it stated that “A deposit
is not a payment of tax prior to the time the deposit amount is used to pay a tax.” H.R.
Rep. No. 108-755, at 649 (2004) (Conf. Rep.). Further, as you noted, section 4.02(1) of
Rev. Proc. 2005-18 states that “Upon completion of an examination … an assessment
will be made and any deposit will be applied against the assessed liability as a payment
of tax…” (emphasis added). Finally section 6.01 titled “Request for return of a deposit
made pursuant to section 6603” states that “A deposit…is not subject to a claim for credit
or refund as an overpayment until the deposit is applied by the Service as payment of an
assessed tax of the taxpayer.” Only at the point of payment does the deposit become
“subject to a claim for credit or refund as an overpayment” and thus the RSED that comes
with such payment.