Section 7507 blocks recovery of a tentative refund paid to a bank in receivership

Plain-English summary

The FDIC filed Form 1139 for an insolvent bank in receivership, claimed the bank’s full 2018 alternative minimum tax credit, and received a tentative refund. The IRS later concluded that the request needed adjustment and that additional tax was due. Chief Counsel advised that the IRS could not assess and collect that amount while the bank was subject to IRC § 7507. Section 6411 gives the IRS little room to adjust a tentative-refund request, and § 6213(b)(3) normally supplies an expedited assessment procedure to recover an erroneous allowance. Section 7507 prevented use of that procedure here, and the email identified no alternative process for recovering the refund.

Ruling snapshot

• Question: Can the IRS recover an erroneous tentative refund paid to an insolvent bank in FDIC receivership while IRC § 7507 applies?
• Outcome: Advice given (no; § 7507 blocks the expedited assessment procedure, and no alternative recovery process was identified).
• Key authorities: IRC §§ 6213(b)(3), 6411, and 7507.

Full text (IRS public release)

ID: CCA_2020061111172296
UILC: 6411.00-00, 6213.07-02,
7507.00-00
Number: 202137008
Release Date: 9/17/2021
From: ------------------
Sent: Thursday, June 11, 2020 11:17:22 AM
To: ----------------------
Cc: --------------------------
Bcc:
Subject: Question: Treatment of F1139 - AMT Credits 201812 - FDIC 7507

Hi. This responds to your question about whether IRS has the ability to assess and collect the tax where FDIC files F1139 (for an insolvent bank in receivership) claiming 100% of the AMT Credit for 2018 and IRS pays the tentative refund, but later IRS determines that FDIC’s F1139 needs to be adjusted and results in additional tax due.

Our answer is: No. The IRC 6411 procedures allows for very little adjusting to the TENT request; and to compensate, IRC 6213(b)(3) provides IRS with an expedite assessment procedure to recover any erroneous allowance. However, IRC 7507 prevents the use of the IRC 6213(b)(3) procedure. There is no alternative process for recovering a TENT allowed to a bank while it’s subject to IRC 7507.

If you want back some background on the TENT adjustment process as described in the IRM (including Master File TCs and references to the IRC), just let me know.

Thanks------------------------------------------------