More Guidance on CARES Act Refund Claims

By and on April 14, 2020

On April 8, 2020, the Internal Revenue Service (IRS) released a statement telling taxpayers that guidance would be forthcoming on refund claims related to the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act. Consistent with that promise, on April 13, 2020, the IRS issued guidance describing temporary procedures permitting the submission via fax of Form 1139, Corporation Application for Tentative Refund, and Form 1045, Application for Tentative Refund. For our prior discussion of CARES Act refund guidance issued by the IRS, see here.

Before the new guidance, Forms 1139 and 1045 could be filed only via paper copy delivered through the USPS or by a private delivery service. However, per the newly issued guidance, the IRS stated that, starting on April 17, 2020, and until further notice, the IRS will accept submissions via fax of eligible refund claims on Forms 1139 and 1045. The claims, however, must be filed pursuant to sections 2303 and 2305 of the CARES Act, and not for any other purpose.

  • Section 2303 requires a taxpayer with a net operating loss arising in a 2018, 2019, or 2020 taxable year to carry that loss back to each of the five preceding years unless the taxpayer elects to waive or reduce the carryback; and
  • Section 2305 modifies the credit for prior-year minimum tax liability of corporations, including to accelerate the recovery of remaining minimum tax credits of a corporation for its 2019 taxable year from its 2021 taxable year and to permit a corporation to elect instead to recover 100% of any of its remaining minimum tax credits in its 2018 taxable year.

If after March 27, 2020, a corporation has already mailed a hard copy of its Form 1139, or an individual, estate, or trust has already mailed a hard copy of its Form 1045, that same claim can be re-submitted via fax. All submitted claims, including those received before the IRS’s processing centers were closed, will be processed in the order of receipt. The IRS also noted that if a document faxed according to the temporary fax procedures is deemed an ineligible refund claim under the temporary fax procedures, then that claim will be processed after normal operations resume.

The purpose of the change allowing for submission via fax is to permit the IRS to make the CARES Act relief available to taxpayers before IRS processing centers are able to reopen by providing an additional submission option. The procedures to process claims will otherwise remain the same. The IRS has also stated that it has no intention to make the faxing option a permanent way to file a refund claim. As quickly as possible, taxpayers eligible to file claims under sections 2303 and 2305 of the CARES Act should take advantage of the temporary faxing procedures to receive refunds provided under the CARES Act.

In addition to describing the temporary faxing procedure, the IRS also discussed how taxpayers may disregard the instructions for those forms which prohibit taxpayers from using those forms to apply for refunds for years subject to Internal Revenue Code (Code) section 965. The IRS noted that conforming changes to the instructions to Forms 1139 and 1045 are forthcoming. The IRS also noted though that, because the CARES Act added Code section 172(b)(1)(D)(iv) to provide that a taxpayer who has a carryback to a Code section 965 year is deemed to have made a Code section 965(n) election that limits the amount of the loss that can be carried back to each such year, net operating losses (NOLs) can be carried back only to reduce income in excess of the amount of the net Code section 965(a) inclusion (i.e., the one-time inclusion into a U.S. shareholder’s income of untaxed foreign earnings of certain specified foreign corporations as if those earnings had been repatriated to the United States). The IRS further noted that it expects to issue additional instructions on filing requests for tentative refunds for taxpayers with outstanding Code section 965(h) net tax liabilities (i.e., unpaid amounts of taxes due under Code section 965), so that those requests and liabilities can be identified, routed, and tracked appropriately, and so that payment schedules can be adjusted to avoid unintentional or erroneous acceleration of deferred Code section 965(h) installment payments, delays in refunds or other processing complications.

Kevin Spencer
Kevin Spencer focuses his practice on tax controversy issues. Kevin represents clients in complicated tax disputes in court and before the Internal Revenue Service (IRS) at the IRS Appeals and Examination divisions. In addition to his tax controversy practice, Kevin has broad experience advising clients on various tax issues, including tax accounting, employment and reasonable compensation, civil and criminal tax penalties, IRS procedures, reportable transactions and tax shelters, renewable energy, state and local tax, and private client matters. After earning his Master of Tax degree, Kevin had the privilege to clerk for the Honorable Robert P. Ruwe on the US Tax Court. Read Kevin Spencer's full bio.

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