Section 6511 limits refunds of interest wrongly collected on restitution

Plain-English summary

Chief Counsel revisited whether Section 6511 applies when the IRS incorrectly assesses and collects Section 6601 interest on a restitution-based assessment. Even if the IRS should not have imposed the interest, it did assess the amount as underpayment interest and the taxpayer paid it, producing overpaid assessed interest. Citing Computervision and Section 7422(a), Counsel advised that a timely administrative refund claim is required for the recovery of overpaid assessed interest. The same result applies whether the amount is characterized as tax erroneously collected or another sum wrongfully collected. The taxpayer's claim is therefore subject to Section 6511's limitation period.

Ruling snapshot

• Question: Does Section 6511's refund limitation period apply to interest incorrectly assessed and collected on a restitution-based assessment?
• Outcome: Advice given, Section 6511 applies
• Key authorities: IRC §§ 6511, 6601, and 7422(a); Computervision Corp. v. United States

Full text (IRS public release)

ID:          CCA_2021071413384540
UILC:        6601.00-00, 6511.00-00,
             6402.00-00
Number: 202141021
Release Date: 10/15/2021
From: ---------------------
Sent: Wednesday, July 14, 2021 1:38:45 PM
To: ---------------------
Cc: ------------------------------------------------------------------
Bcc:
Subject: RE: Request for Counsel opinion - section 6511, interest, and restitution


Hi -------------. Thanks for your patience while I had the relevant subject matter experts in
Counsel take another look at this. Unfortunately, they still believe section 6511 is the
relevant timeframe for requesting a refund of an amount charged as interest that should
not have been charged as interest in light of Klein. See the attached email. Please let
me know if you need anything further.

------- - Please post in POSTN-112106-21, Restitution and Section 6511, and close
7/14. Thanks.


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ATTACHMENT 1

Hi ---------
You requested that we revisit our prior advice issued in 2019, which concluded that the
section 6511 period of limitation for claiming a refund is the applicable lookback period
for interest erroneously assessed on restitution. Specifically, you now ask if section
6511 is applicable to the return of an amount incorrectly assessed and collected as
interest on a restitution-based assessment.

In the situation at issue, regardless of whether the IRS should have assessed section
6601 (underpayment) interest, that is in fact what the IRS did. As the underpayment
interest was then paid, it resulted in overpaid assessed interest. “The requirement of a
timely claim for refund pursuant to §§ 6511 and 7422 applies to a claim for refund of
overpaid assessed interest.” Computervision Corp. v. United States, 62 Fed. Cl. 299,
310 (2004), aff'd, 445 F.3d 1355 (Fed. Cir. 2006). Section 7422(a) provides that “No
suit or proceeding shall be maintained in any court for the recovery of any internal
revenue tax alleged to have been erroneously or illegally assessed or collected, … or of
any sum alleged to have been excessive or wrongfully collected… [emphasis added]
until a claim for refund has been filed.” Therefore, whether the amount being recovered
is considered tax erroneously collected or any sum wrongfully collected, a taxpayer
seeking the return of interest on a restitution payment must first file a claim for refund of
overpaid assessed interest and is subject to the section 6511 period of limitations for
filing that claim.

Please let -------- or me know if you have any questions.
Thanks,

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