Recently, in Revenue Ruling 2020-8, the Internal Revenue Service (IRS) announced that it was suspending Revenue Ruling 71-533, which had addressed the interaction of two Internal Revenue Code (IRC) provisions regarding limitations periods on refund claims, pending reconsideration of the holding of the earlier Revenue Ruling.
Under IRC section 6511(d)(2)(A), a taxpayer generally must make a refund claim relating to an overpayment attributable to a net operating loss (NOL) carryback no later than three years after the taxable year in which the NOL was generated. Under IRC section 6511(d)(3)(A), a taxpayer generally must make a refund claim relating to an overpayment attributable to a foreign tax credit carryback no later than ten years after the taxable year in which the foreign taxes were paid.
Revenue Ruling 71-533 had addressed a situation that implicated both of these provisions. Specifically, the taxpayer at issue in the ruling had incurred a NOL in 1969, which it carried back to 1966. After application of the NOL, the taxpayer had excess foreign tax credits available for 1966, which it then carried back to 1964. The ruling held that the ten-year limitations period in IRC section 6511(d)(3)(A) applied to claims for refund with respect to the 1964 overpayment.
In Revenue Ruling 2020-8, the IRS noted that, even though the fact pattern in Revenue Ruling 71-533 involved both a NOL carryback and a foreign tax credit carryback, the ruling did not consider whether IRC section 6511(d)(2)(A) should apply in lieu of IRC section 6511(d)(3)(A). Therefore, the IRS stated that it was suspending Revenue Ruling 71-533 pending reconsideration of its ruling. However, the IRS also stated that this suspension would not be applied adversely to refund claims properly filed within the IRC section 6511(d)(3)(A) limitations period in accordance with Revenue Ruling 71-533 during the period in which the ruling’s holding is being reconsidered.
Practice Point: Revenue Ruling 2020-8 is particularly important to taxpayers seeking refunds under the special COVID-19 rules. We discussed those refunds here. The IRS is trying to do everything it can to facilitate getting relief to taxpayers.