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TAX CLINIC

additional time to make a timely elec- This item discusses the general
tion to be treated as a QOF, including Procedure & Administration requirements for refund claims, how
any necessary revisions to the entity’s those requirements apply to protective
operating agreement to satisfy the re- Protecting contingent claims, and some common reasons for
quirement that its purpose be to invest refund claims refund claims.
in QOZP. Similarly, Letter Rulings Taxpayers have a limited time to file
202116011 (April 23, 2021); 202103013 refund claims with the IRS. Occasion- Refund claim requirements
(Jan. 22, 2021); and 202019017 (May ally, this time limit may expire before the Generally, taxpayers must file a refund
8, 2020) granted an extension of time taxpayer’s right to the refund claim is claim with the IRS within three years of
for an entity to self-certify as a QOF on finalized and determinable (e.g., during filing the tax return to which it relates or
Form 8996. pending litigation). To preserve its right two years of paying the tax, whichever
From Adam Wallwork, J.D., LL.M., to claim a refund, the taxpayer must file is later (Sec. 6511(a)). After that, Sec.
Washington, D.C. a protective claim. 6511(b)(1) explicitly prohibits the IRS
from issuing a refund or credit.
In addition to being timely, a refund
claim must meet the specificity require-
ment in Regs. Sec. 301.6402-2(b). The
refund claim must describe in detail each
ground supporting the claim and include
sufficient facts to apprise the IRS of the
basis of the claim. In addition, a refund
claim must be on the “appropriate income
tax return” (Regs. Sec. 301.6402-3(a)).
If it does not meet these regulatory
requirements, it may still qualify as an
“informal” refund claim (see Pala, Inc.
Employees Profit Sharing Plan and
Trust Agreement, 234 F.3d 873 (5th Cir.
2000); Internal Revenue Manual (IRM)
§4.10.11.2.1.1(3)).
A timely filed informal refund claim
will toll the statute of limitation until the
taxpayer can properly file a formal refund
request (Pala, 234 F.3d at 880). To be
valid, an informal claim must apprise the
IRS that a refund is sought, inform the
IRS with enough particularity of the tax
and year at issue to allow it to investigate,
describe the refund’s legal and factual
basis, and include a written component
(id.; AmBase Corp., 731 F.3d 109 (2d Cir.
2013)). Additionally, the defects in the
informal claim must later be remedied
by a formal amendment to the timely
informal refund claim (see Pala, 234 F.3d
at 880 (the informal claim doctrine is
“predicated on an expectation that these IMAGE BY MIRAGEC/GETTY IMAGES
formal deficiencies will at some point be
corrected”)). One type of informal refund
claim is a protective claim (see AmBase
Corp., 731 F.3d at 118 (“As a type of

26 March 2023 The Tax Adviser