Nominal Refund Claims

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Chief Counsel’s office issued Program Manger Technical Assistance (PMTA) 2023-001 to address the issue of a $1 claim filed in order to try to protect the statute of limitations for filing claims.  The advice concludes that the $1 or any nominal claim will not protect the taxpayer but it also distinguishes nominal claims from protective claims.  The distinction can be quite important.

The PMTA comes from an expert in Chief Counsel’s National Office and is written to the Director (Examination – Specialty Policy) person in the headquarters office of the IRS.  In this case the author (aka the expert) has a narrow practice within the Procedure and Administration Division of Chief Counsel.  The author will generally field all questions and appeal decisions within the narrow scope of their duties.  So, the person brings significant knowledge to the question.  Chief Counsel’s Office has made this type of advice public for about 25 years.  Because it does not receive a high level of review, this advice does not bind the IRS.  Still, it provides excellent insight into the thinking of the IRS on the specific issue addressed and the likely litigating position should the issue move forward.


The question coming from the IRS to Chief Counsel is:

whether the Service may allow and make a refund of an overpayment of excise taxes requested on a claim for refund that is filed after the section 6511(a) claim-filing period if, shortly before the period elapsed, the taxpayer had filed an identical request for only $1 or for some other nominal amount.

The advice notes that the IRS cannot make an administrative refund nor may the taxpayer successfully bring a suit to recover a refund if the claim filing period has lapsed before the taxpayer files the claim.  Citing a 90-year-old case, the opinion states that a claim that calculates the amount of the overpayment claimed by the taxpayer for the first time that is filed after the time for filing a claim would not be considered.

A taxpayer filing before the deadline with a less than fulsome claim wants the ability to supplement the timely filed document after the deadline for filing a claim.  The advice provides that:

A late-filed claim will not be treated as an amendment or “supplement” to an original claim if it would require the investigation of new matters that would not have been disclosed by the investigation of the original claim.

Providing further explanation of this statement, the PMTA states that:

a late-filed claim that alleges a large increase from an earlier mere nominal request would represent the first formal indication of the ballpark in which the controversy lies. Such a nominal request, therefore, would not provide the Service the opportunity to make an informed decision regarding where to invest its examination resources (e.g., into examining the support for the amount of the alleged overpayment, as opposed to the merits of a legal assertion or argument). And the Service cannot be said to be on notice with respect to a claim for refund or credit until it is in a position to make such an informed decision.

Essentially, the PMTA takes the position that putting down a nominal amount does not create the type of informal claim a taxpayer can later fix.  The timely claim must give the IRS a fair change to know the problem for which the taxpayer seeks a refund.  The PMTA cites to the “substantial variance” rule as a reason for its position.  Variance in the refund setting is all about providing the IRS with the opportunity to administratively determine the correctness of a claim – an exhaustion of administrative remedies doctrine issue.

Having laid down the strict rule, the PMTA then, however, begins to offer hope in certain situations.  In this section of hope, it first describes a situation in which and incomplete or nominal claim might start a conversation:

For example, if the calculation of an overpayment is burdensome or expensive, the Service may allow a taxpayer initially to file a request that might not otherwise be treated as a complete claim.3 But any consideration of the request would be at the discretion of the Service and the Service may reject such a request as being unprocessible as a claim. Such a request will not preserve the taxpayer’s right to sue for refund if the matter becomes controversial or otherwise remains unresolved. To the extent the Service does not both allow and make a refund before the section 6511(a) claim-filing period elapses, the above-referenced statutes prohibit the Service from doing so afterwards and prohibit the controversy from proceeding to suit (except, perhaps, merely to the extent of the nominally claimed amount). This is true regardless of whether the denial or mere Service inaction is because the Service disagrees with the position, an interpretation of law, or with the alleged facts. It also would be true when a denial has nothing to do with the merits of the claim, but instead is issued solely because the Service treats the request as being a defective and non-processible claim. It is not the case that a taxpayer has the absolute right to file a $1 claim, or a “$1-plus” claim, and simply refrain from calculating the correct amount of an alleged overpayment, to then later be afforded administrative or litigation refund rights.

The PMTA then discusses those situations in which the claimed overpayment cannot be currently calculated.  It describes this situation as one involving protective claims.

The concept of a “protective” claim being sufficient to satisfy the section 6511(a) claim-filing period, to allow for a complete and formal claim at the end of some existing, known, and identified contingency, is established by case law. See United States v. Kales, 314 U.S. 186 (1941).

Protective claims resulted from judicial doctrine created by the courts to avoid situations in which taxpayers faced an almost impossible situation in trying to timely submit a meaningful claim.  According to the PMTA the protective claim doctrine helps courts in interpreting the meaning of the term “claim” in certain situations.

the satisfaction of the contingency after the section 6511(a) claim-filing period elapses is necessary to enable this later-in-time-determination of what the overpayment had been as of the close of the tax period at issue. Accordingly, in a situation in which the exact amount of an alleged overpayment is not subject to precise determination, a taxpayer may both satisfy the section 7422 “duly-filed” requirement, and also avoid any section 6514 considerations, by timely-filing a “protective” claim.

A protective claim should satisfy four elements:

(1) must have a written component; (2) must identify and describe the contingencies affecting the claim; (3) must be sufficiently clear and definite to alert the Service as to the essential nature of the claim; and (4) must identify a specific year or years for which a refund is sought.

In filing a protective claim, the taxpayer should describe the right to the overpayment clearly and explain the contingency that exists which makes the determination of the precise amount impossible.

So, timely filed claims with a nominal dollar amount can be amended after the expiration of the statute of limitations if the taxpayer can demonstrate why the amount cannot be calculated at the time of the submission of the claim.  If the taxpayer cannot demonstrate why the amount cannot be calculated, the taxpayer had better do their best to timely file a claim and put in an amount that as closely as possible calculates the claimed overpayment.  The PMTA sheds light on the times when a nominal claim will work and when it will not but the line between the two situations will not always be a clear line.


  1. Jerry Borison says

    It is worth noting that the “Effectively Representing…” book discusses Protective refund claims at paragraph 9.5.8 and a sample is in Appendix A.

  2. Norman Diamond says

    “If the taxpayer cannot demonstrate why the amount cannot be calculated, the taxpayer had better do their best to timely file a claim and put in an amount that as closely as possible calculates the claimed overpayment.”

    However, the taxpayer is not allowed to report that the amount they put in is an estimate. Even though the taxpayer knows and believes that the amount is an estimate, the taxpayer is required to declare under penalty of perjury that to the best of their knowledge and belief the amount is true and correct.

    A common example is not knowing what portion of tax accruing to the country of residence which should be carried out or in on Form 1116. A less common example is not knowing the amount of income, and the amount of tax paid to the country where sourced, when not residing in the source country.

    After the end of the Bretton Woods system every calculation of US dollar equivalents is an estimate anyway, but you can’t say so on a US tax return. Sometimes I’ve seen a rate change more than 5% within a single day.

  3. Kenneth H. Ryesky says

    During my time with the IRS in Estate & Gift, protective claims were not unknown; I had some in my own caseload. Each of them entailed litigation either (1) in which a decedent had been entangled during his/her lifetime, where a recovery might reduce the value of an investment might be a significant pot of gold at the end of the rainbow; or (2) same type of of litigation initiated by or against the estate of such a decedent.

    I am informed (and would have logically suspected had I not been so informed) that the numbers of such protective claims have increased since my days in the service, what with Mr. Madoff, and now, the FTX fiasco with Sam-I-Am and Sweet Caroline.

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