Extended three-and-a-half-year lookback permits the overpayment refund

Plain-English summary

Chief Counsel considered whether a taxpayer's overpayment refund was barred by the Tax Court lookback rules. Section 6512 generally limits a refund to tax paid within the period that would apply under section 6511 if a claim had been filed when the notice of deficiency was mailed. Under the statutory flush language and Borenstein, a taxpayer who had a six-month filing extension and received the notice during the third year plus that extension receives a three-and-a-half-year lookback from the notice date. The notice here fell within that window. Because the withheld taxes deemed paid were within the extended lookback period, Chief Counsel advised that the overpayments were not barred.

Ruling snapshot

• Question: Does the section 6512 lookback rule bar the taxpayer's overpayment refund?
• Outcome: Advice given, the overpayments fall within the three-year-and-six-month lookback and are not barred
• Key authorities: IRC §§ 6511(b)(2), 6512(b)(3); Borenstein v. Commissioner

Full text (IRS public release)

ID: CCA_2023111710452917 [Third Party Communication:

UILC: 6512.02-01 Date of Communication: Month DD, YYYY]

Number: 202444005
Release Date: 11/1/2024
From: -------------------
Sent: Friday, November 17, 2023 10:45:29 AM
To: ------------------------
Cc: ----------------------
Bcc:
Subject: RE: Possible Barred Overpayment

Hi ---------,

The question presented is whether the taxpayer’s ------------------ refund claim for an
overpayment of tax in -------------------is barred under Section 6512.

Section 6512(b)(3)(B) limits the Tax Court’s jurisdiction to award refunds by limiting the
amount of the refund to only the tax paid within the period which would be applicable
under section 6511(b)(2), (c), or (d), if on the date of the mailing of the notice of
deficiency a claim had been filed (whether or not filed) stating the grounds upon which
the Tax Court finds that there is an overpayment. Section 6511(b)(2) limits the amount
of a taxpayer’s refund claim depending on whether the refund claim was filed within the
three year period after they filed their return. If their refund claim was filed within the
three year period, then their claim is limited to the amount of tax they paid in the three
years (plus extensions) immediately preceding the filing of their claim. If their claim was
not filed within the three year period or they never filed a return, then their claim is
limited to the amount they paid in the two years (not including extensions) immediately
preceding their claim. If they didn’t file a claim, then you pretend that they filed a claim
on the date the refund was allowed and then look to whether the claim would have been
filed in the three year period.

In 1997, Congress added the following flush language under section 6512(b)(3): “In a
case described in subparagraph (B) where the date of the mailing of the notice of
deficiency is during the third year after the due date (with extensions) for filing the return
of tax and no return was filed before such date, the applicable period under subsections
(a) and (b)(2) of section 6511 shall be 3 years.” The purpose of this addition was to give
taxpayers the benefit of the lookback rule under section 6511(b)(2)(A) that applies to
taxpayers who filed a claim for refund within the three year period after filing their return:
a lookback of three years plus extensions in situations in which a taxpayer fails to file a
return prior to receiving a SNOD. See H.R. Rep. No. 105-220, at 701 (1997) (Conf.
Rep.).

In Borenstein v. Comm’r of Internal Revenue, 919 F.3d 746, 750 (2d Cir. 2019), the
court further addressed the application of the section 6512(b)(3) flush language and its

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reference back to section 6511. In Borenstein, the taxpayer’s return was due on April
15, 2013, and by that date, she had made income tax payments for 2012, which ended
up resulting in an overpayment. The taxpayer was granted a six-month extension (until
October 15, 2013); however, she failed to file her return by that date and the IRS sent
her a SNOD on June 19, 2015. The IRS argued that the flush language under section
6512(b)(3) applied only to taxpayers who received their SNOD in the third year after the
extended due date for filing their return. This interpretation held that the three year
period did not apply to taxpayers who received an extension, were issued a SNOD
before filing a claim, and the SNOD was issued within between 1.5 and 2 years from the
extended due date. Taxpayers in that situation had only a two-year lookback, which did
not allow them to claim a refund if they paid their tax on the (non-extended) filing date.
However, the court held that the section 6512(b)(3) flush language applies to taxpayers
who received an extension to file and received a SNOD during the third year plus six
months after the (non-extended) filing date. Taxpayers in this situation have a lookback
of 3.5 years from the date on which the SNOD was issued.

---------------- claim here, falls within the six-month extension period after the third year.
Under Borenstein, the flush language of 6512(b)(3) applies to any SNOD that is sent
during the third year (plus extensions) after the original filing deadline. In this case, the
flush language would apply to any SNOD sent to -------------- between ------------------,
and -----------------------. Because the SNOD was sent on ----------------------, it falls within
that time period and the applicable lookback period under section 6511(b)(2) would be 3
years and 6 months.

Therefore, even though ---------------- taxes were deemed paid on ------------------,
because they were withheld from ----------------------, these overpayments were within the
3 year and 6 month lookback period from when the SNOD was mailed and are thus, not
barred.

Please let us know if you have any questions.

Thanks,

Attorney
IRS, Office of Chief Counsel