The Court of Federal Claims on Oct. 15 dismissed a taxpayer's refund suit, for erroneously calculated large corporate underpayment (LCU) interest resulting from certain partnership adjustments, because the taxpayer's claim was not made within the special limitations period of Section 6230.
The issue before the court in General Mills v. U.S., No. 14-89T (Fed. Cl. 2015), was whether a partnership controlled by the taxpayer was timely in seeking a refund of LCU interest assessed by the IRS during examinations of multiple tax years of the partnership. During the examination, which covered the partnership's 2002 through 2006 tax years, the IRS assessed LCU interest, which, under Section 6621(c), says that deficiencies of $100,000 or more are charged an interest rate of 2% higher than the standard rate of interest.
The partnership ultimately settled the examination with the IRS in April 2011, paying additional taxes and interest attributable to the IRS's adjustments. Thereafter, the IRS assessed the partnership with additional interest, including the LCU interest. In March 2013, the partnership filed a refund claim with the IRS for the LCU interest paid, alleging that the IRS used the wrong applicable date to assess the accrual of interest.
Under Section 6511(a), a taxpayer claiming a refund or credit must file a claim within two years of payment of the tax or three years from the filing of the original return, whichever is later. The taxpayer and the government agreed that the taxpayer's claim for refund was filed within this two- year period, but the IRS argued that Section 6230(c), which provides for a six-month limitations period, governed the refund claim in this case.
Section 6230(c) says that a partner may file a claim for refund "on the grounds that . . . [the IRS] erroneously computed any computational adjustment necessary . . . to apply to the partner a settlement." Such a claim must be filed within six months after the day on which the IRS mailed the notice of computational adjustment to the partner, under Section 6230(c)(2)(A).
The court determined that LCU interest is a computational adjustment that is directly assessed by the IRS. Treas. Reg. Sec. 301.6231(a)(6)-1(b) states that a computational adjustment includes "any interest due with respect to any underpayment." In addition, Section 6511(g) states that with respect to taxes attributed to any partnership item, Sections 6227 and 6230(c) and (d) apply in lieu of Section 6511.
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