The U.S. Court of Appeals for the Second Circuit today affirmed the judgment of a federal district court that the special 10-year statute of limitations for refunds claimed under section 6511(d)(3)(A) applies only to credits, and not deductions, relating to the foreign taxes paid.
The case is: Trusted Media Brands, Inc. v. United States, No. 17‐3733‐cv (2d Cir. August 10, 2018). Read the Second Circuit’s decision [PDF 190 KB]
The taxpayer originally claimed a credit for foreign taxes paid but on an amended return filed in 2011, the taxpayer changed that credit and instead claimed a deduction for foreign taxes paid on an amended tax return for 2002. This caused a “daisy chain” of adjustments and eventually resulted in the taxpayer’s claim for a refund of an overpayment of tax from the 1995 tax year. The taxpayer claimed that the special 10-year statute of limitations of section 6511(d)(3)(A) applied in this situation to allow the refund (that is, that the special 10-year period started to run from its 2002 tax return). The IRS denied this refund claim as untimely, and asserted that the standard three-year statute of limitations applied. The taxpayer eventually filed a refund action in federal district court.
The federal district court denied the taxpayer’s claim as untimely concluding that: (1) the special 10-year statute of limitations for refund claims for foreign taxes applies only to credits and not deductions; and (2) the taxpayer’s overpayment claim for its 1995 tax year was not properly “attributable to” its 2002 tax year, and therefore, even if the claim for the 10‐year limitation period applied, the claim (filed in December 2011) was untimely.
Today, the Second Circuit affirmed, holding that the special 10-year statute of limitations for refund claims for foreign taxes applies only to credits, and not deductions, Thus, the Second Circuit agreed with the lower court that the taxpayer’s refund claim was time‐barred.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.