Federal Circuit: Refund claims relating to foreign tax credits

Refund claims relating to foreign tax credits

The U.S. Court of Appeals for the Federal Circuit today affirmed the federal claims court’s dismissal of a tax refund action because the taxpayer had failed to file the refund claim, relating to foreign tax credits, within the special 10-year period established under section 6511(d)(3)(A).

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The case is: Albemarle Corp. v. United States, 2015-5015 (Fed. Cir. August 13, 2015)

The Federal Circuit held that, under these circumstances, the taxpayer must file the refund claim within 10 years of the date prescribed for filing the return for the subject year.


Read the Federal Circuit’s decision [PDF 127 KB]


In 1996, the taxpayer’s Belgian subsidiary issued 20-year debentures, with interest payments made on the debentures from 1997 through October 2001. The Belgian subsidiary, however, did not pay Belgian withholding taxes on the interest payments because it believed the payments to be tax-exempt.In 2001, Belgian tax authorities issued a notice of adjustment to the taxpayer for the tax years 1996 through 1998, asserting that the debenture interest payments made between 1997 and 2001 were subject to Belgian withholding tax (at a rate of 25%).

The taxpayer filed a protest, but eventually, in January 2002, the parties reached an agreement, with the taxpayer agreeing to pay withholding tax at the rate of 15% on all interest paid from 1997 through 2001. The taxpayer made two payments to the Belgian authorities in January 2002 and August 2002 that satisfied the tax liability.

The taxpayer on May 15, 2009, filed an amended consolidated U.S. income tax return for the 2002 tax year, in which it claimed refunds of approximately $1.4 million in foreign tax credits attributable to the withholding taxes it had paid under the agreement with the Belgian tax authorities.

The IRS allowed the refund claims for the years 1999, 2000, and 2001, but disallowed the refund claims for 1997 and 1998, finding that the 1997 and 1998 refund claims were not filed within the 10-year limitations period under section 6511(d)(3)(A). The IRS’s position was for the refund claims to be timely, the taxpayer’s refund claim for 1997 was due on or before March 15, 2008, and the 1998 refund claim was due on or before March 15, 2009 (not the May 15, 2009 date when the amended return was filed).

The taxpayer initiated a refund action in the U.S. Court of Federal Claims, seeking to recover a total refund of approximately $826,000 attributable to the foreign tax credits for its 1997 and 1998 Belgian withholding taxes. The claims court agreed with the government, finding the refund claims for the 1997 and 1998 tax years were untimely.

Today, the Federal Circuit affirmed.

Federal Circuit

The Federal Circuit explained that in determining whether the taxpayer’s refund claims were timely depended on section 6511(d)(3)(A)—the provision that provides a special 10-year limitations period for filing a refund claim for foreign taxes.

Noting that this Code provision was amended in 1997, the Federal Circuit found that both the pre-1997 and the post-1997 versions of the statute were at issue in—the refund claim for 1997 was governed by the pre-1997 version, and the refund claim for 1998 is governed by the post-1997 version.

Concerning the refund claim for 1998, the taxpayer asserted that the 10-year limitations period started to run only after the tax liability had been finalized. However, the Federal Circuit disagreed and held that the 10-year limitations period relating to the taxpayer’s 1998 Belgian withholding tax payment started to run on March 15, 1999—i.e., the “date prescribed by law for filing the return for” 1998.

Concerning the refund claim for 1997, the Federal Circuit looked to the prior version of the law and found that the 10-year limitations period started to run on March 15, 1998—the due date for filing the return for the year 1997. Thus, the taxpayer’s claims filed on May 15, 2009, were held to be untimely.

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