Reconsideration allowed when refund grounds were overlooked

Plain-English summary

Chief Counsel explained that a supplemental refund claim generally cannot amend an original claim after the IRS has taken final action. A narrow exception applies when the IRS's disallowance did not fully consider every ground for refund and the taxpayer asks for reconsideration of the overlooked grounds. The advice relied on Bemis Bros. Bag Co. v. United States, where the IRS rejected one stated ground but overlooked two others and the Supreme Court treated the amended claim as timely. The Internal Revenue Manual adopts the same exception.

Ruling snapshot

• Question: Can a taxpayer supplement a refund claim after disallowance when the IRS did not consider all grounds stated in the original claim?
• Outcome: advice given
• Key authorities: IRC § 6511; Bemis Bros. Bag Co. v. United States, 289 U.S. 28 (1933); IRM 25.6.1.10.2.6.4(2)(b)

Full text (IRS public release)

ID:      CCA_2017090108275854
UILC:    6511.05-00

Number: 201739014
Release Date: 9/29/2017
From:
Sent: Friday, September 01, 2017 8:27:58 AM
To:
Cc:
Bcc:
Subject: RE: TAMIS CF 6360881


Here’s some analysis to get you started. If you need additional help, let me know.

        A supplemental claim will not generally be considered an amendment if the IRS
        took final action on the original claim. But there are certain narrow exceptions to
        the rule concerning final action by the IRS. For example, the IRS’s disallowance
        of a claim will not constitute final action by the IRS if the IRS did not fully consider
        all grounds for the refund. Bemis Bros. Bag Co. v. United States, 289 U.S. 28
        (1933). In Bemis Bros. Bag Co., the IRS denied a claim for refund by rejecting
        one of the three grounds stated in the claim, while overlooking two independent
        grounds for the claim. Id. at 31-32. The taxpayer then submitted an amended
        claim, reiterating the grounds stated in the original claim. The Supreme Court
        held that the claim as amended was timely. The IRS has adopted this
        exception. In this regard, IRM 25.6.1.10.2.6.4(2)(b) contains the following:

               Exception Where the Service’s Final Action Was Insufficient. There is a
               narrow exception to the rule concerning the effect of the Service’s
               disallowance of a claim. The disallowance will not constitute final action if
               the Service did not fully consider all grounds for the refund and the
               taxpayer asks for “reconsideration” of those grounds. Bemis Bros. Bag Co.
               v. United States, 289 U.S. 28 (1933) (the Service overlooked two
               independent grounds for the claim).

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