TAX REFUND CLAIMS:

An Overview of the Joint Committee

on Taxation’s Review Process

Prepared by the Staff of the Joint Committee on Taxation 

January 2019
Contents

 Types of refund claims and criteria for Joint 

Committee review

 Internal Revenue Service (“IRS”) and Joint Committee 

on Taxation (“Joint Committee”) review procedures

 The jurisdictional amount

 Other considerations

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Types of Refund Claims and Criteria 

for Joint Committee Review

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 A claim for refund or credit subject to Joint Committee review

can arise from:

 An examination,

 An unpaid claim, or

 Tentative allowances in excess of the Joint Committee jurisdictional 

threshold.

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Joint Committee Review of Refund Claims
 Section 6405(a) – refund claims (Form 1120X/Form 1040X)

 Refund or credit of any income, war profits, excess profits, estate, or gift tax, or any tax 

imposed with respect to public charities, private foundations, operators’ trust funds, 

pension plans, or real estate investment trusts under chapter 41, 42, 43, or 44, in excess 

of $2,000,000 ($5,000,000 in the case of a C corporation) 

 No payment or credit until 30 days from the date the IRS submits a report to the Joint 

Committee for review 

 Section 6405(b) – tentative carryback (Form 1139/Form 1045)

 Tentative carryback adjustments in excess of $2 million ($5 million in the case of a C 

corporation)

 Paid before Joint Committee review, but subject to later review 

 Taxpayer may have to repay some or all of the refund, with interest

 Section 6405(c) – refund claims attributable to section 165(i) disaster losses

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Joint Committee Review ─ Types of Refund Claims
Refund Claim vs. Tentative Carryback

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Refund Claim Tentative Carryback

 Must be filed within the time period of the 

refund statute of limitations (later of three 

years from the time the return was filed or 

two years from the time the tax was paid)

 IRS review prior to issuing refund

 Joint Committee review required for 

refunds or credits in excess of $2 million

($5 million in the case of a C Corporation) 

prior to issuing refund

 Income, war profits, excess profits, estate,

or gift taxes

 Multiple claims are aggregated

 Not technically a claim for refund, rather a 

tentative claim

 Must be filed within 12 months of the close 

of the year in which the carryback arises

 Joint Committee review after refund issued 

and IRS audit

o “[T]here shall be submitted to such 

committee a [summary of the facts and 

audit determination] at such time after the 

making of the credit or refund as the 

Secretary shall determine the correct 

amount of the tax.”
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Refund or credit of estimated or 

withheld income tax made without an 

examination

Refund or credit of unassessed advance 

payment or deposit made before a final 

determination of liability

Specified excisetaxes Refunds on original returns

Employment taxes Refund resulting from litigation

Trust fund recovery penalty cases Section 6404 abatements

Windfall profit taxes Others (see Internal Revenue Manual 

(“IRM”) secs. 4.36.2.3 and 8.7.9.3)

Exceptions to Joint Committee Review
Modeling

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IRS and Joint Committee

Review Procedures
IRS Joint Committee Review Team – IRM Sec. 4.36.4

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 Joint Committee Review Team (“Review Team”) 

 Specialized IRS team within the Large Business and International Division that 

reviews and prepares a report for each Joint Committee refund

 Reviews the case for procedural, computational, and technical accuracy 

 May return the case to the examination team (“Exam”) in the following types of 

situations: 

 Substantial error 

 Fraud or malfeasance

 Serious administrative omission

 Unprocessable cases

 Corrections favorable to the taxpayer

Note: If Exam does not agree with the Review Team, the conflict must be resolved before 

submission to Joint Committee. 
Review Team Reports - IRM Sec. 4.36.5

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 Upon completion of review, the Review Team will prepare a report and submit the report 

to the Joint Committee for approval 

 In addition to Regular Joint Committee reports, the Review Team also may submit Expedite 

Refund, Minimum Refund, Modified Expedite, Supplemental, and Foreign Sales Corporation 

reports

 A report generally includes the following types of items: 

 Taxpayer information including history and related parties 

 Proposed refunds and deficiencies (statement of years)

 Reason for the refund

 Calculation spreadsheets

 Prior examination history and current examination activity of the refunds

 Information on statutes of limitations for each refund and source year

 If applicable, Form 2848, Power of Attorney and Declaration of Representative

Note: The Review Team will also send Letter 1573P to the taxpayer and representative, if 

applicable, as notification that the case has been sent to the Joint Committee. 
Review Team ─ Types of Reports

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 Regular report – IRM sec. 4.36.5.1.1

 Default report prepared for Joint Committee after review of a surveyed or examined case 

 Expedite Refund reports – IRM secs. 4.36.5.1.2 and 4.36.5.1.4 

 Standard Expedite Refund report 

o Potentially applicable where there is net unpaid section 6405(a) refund in excess of $2 million ($5 

million for C corporations)

o Similar to regular report with additional page that is stamped by Joint Committee upon receipt and 

starts the 30-day period under section 6405(a) for refund issuance

 Refund will be issued within 30-day period even if Joint Committee has not completed review 

o All years under expedite refund process must have “live” statutes open either by the original statute of limitations or statute extension 

 If there are years that are open only by reason of a carryback, expedite refund procedure is not available

 Modified Expedite report

o Only for those cases where taxpayer has requested refund prior to completion of exam or survey 

and furnished collateral for the amount of the requested refund (and interest if applicable)

 Minimum Refund report – IRM sec. 4.36.5.1.3

 Reserved for cases where the taxpayer is entitled to a refund reportable under section 

6045(a) regardless of the outcome of the unagreed issues and the unagreed issues will take 

substantial time to resolve
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Joint Committee Refund Review (cont’d)

 Once the Review Team has submitted a report, the Joint Committee begins its 

review

 Pursuant to the review, the Joint Committee staff may: 

 Review the report and other documentation, as necessary 

 Work informally with Exam or IRS Appeals to resolve questions of fact and technical 

positions, or issue a staff review memorandum (“SRM”) for formal review 

 The Joint Committee reviews the IRS’s resolution of the issues, focusing in 

particular on the technical aspects of the analysis

 Of particular concern to the Joint Committee are cases where taxpayers claim tax 

benefits that do not appear to have been intended by the relevant statute

o In such a case, the Joint Committee may recommend a statutory amendment or ask the IRS to 

issue guidance or clarify or reconsider prior published guidance

 The Joint Committee staff refund review also permits identification of issues that, as a 

technical matter, were not handled correctly by the Exam or Appeals functions 
Joint Committee Refund Review

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 Upon completion of review, Joint Committee will issue either a clearance 

letter or SRM

 Clearance letter 

o Indicates that Joint Committee does not disagree with the IRS’s position

 SRM

o Outlines areas where Joint Committee disagrees with the IRS’s position and 

recommends a different outcome

 Joint Committee may recommend adjustments to the amount of the refund (if 

significant), but neither IRS nor the Department of Justice is bound to accept the 

recommendation(s)

o They may either agree with the Joint Committee recommendation and change their 

position or disagree with the Joint Committee’s recommendation and make no change
The Jurisdictional Amount

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Jurisdictional Amount ─ General Rules

 Type of taxpayer – jurisdictional amount 

 Section 6405 requires Joint Committee review of refunds and credits in excess of the jurisdictional threshold 

(“Jurisdictional Amount”)

 Historically, the Jurisdictional Amount was the same amount for all taxpayers 

 The Tax Increase Prevention Act of 2014 (Pub. L. No. 113-295, December 19, 2014) increased the 

Jurisdictional Amount for only C corporations from $2 million to $5 million

 Effective on December 19, 2014, for reports made to Joint Committee on or after such date

 General rules

 Joint Committee jurisdiction over each class of refunds is determined separately 

 Section 6405(a) and (b) refund amounts cannot be aggregated to determine if the Jurisdictional Amount 

is met 

Note: The two classes of refunds may be addressed in one report, but the amounts are not aggregated 

to determine if Joint Committee review is required. 
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Example 1:

Determining Jurisdictional Amount

Assumption:

$5M threshold

Tentative allowances – sec. 6405(b):

2012 net operating loss (“NOL”) carryback to 2010 $4,800,000

Audit results – sec. 6405(a):

2011 exam refund $450,000

Jurisdictional Amount – sec. 6405(b) $4,800,000

Jurisdictional Amount – sec. 6405(a) $450,000

Conclusion: No report is required because the section 6405(a) and (b)

refunds or credits are not aggregated.
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Example 2:

Determining Jurisdictional Amount (cont’d)

Assumption:

$5M threshold

Tentative allowances – sec. 6405(b):

2012 NOL carryback to 2010 $4,700,000

2011 NOL carryback to 2009 $500,000

Jurisdictional amount – sec. 6405(b): $5,200,000

Previous tentative allowance – sec. 6405(b)

2010 capital loss carryback to 2007 $300,000

Conclusion: The 2009 and 2010 refunds must be reported. If the 2007 refund is not 

barred by statute of limitations and was not considered in prior examination, then it is 

included in determining the Jurisdictional Amount.
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Determining the Jurisdictional Amount (cont’d)

 Multi-year exams with net deficiency (IRM sec. 4.36.2.4.3) 

 Not subject to JCT review – no report necessary

 Multi-year exams with net refund (IRM secs. 4.36.2.4.4 and 8.7.9.6.5)

 Four-step process:

1. Apply the deficiency for each year against the smallest refund category (sec. 

6405(a) or (b)) for that year and then apply the remaining deficiency, if any, 

against the other refund category for that year;

2. Determine the aggregate deficiency (i.e., add the deficiencies of net 

deficiency years);

3. Determine the aggregate overpayment by refund category (i.e., add each 

remaining refund category for all years); and

4. Apply the aggregate net deficiency against the least aggregate refund 

category and then apply the remaining aggregate deficiency, if any, against 

the other aggregate refund category.
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Example 3: Multi-year exam with net refund – C corp.

Determining Jurisdictional Amount (cont’d)

Year Deficiency Sec. 6405(a)

refund

Sec. 6405(b)

refund

2010 $1,005,000 ($5,005,000)

2011 ($5,005,000)

2012 $600,000

Sub-total deficiency/refund $1,605,000 ($5,005,000) ($5,005,000)

Same year offset (2010) ($1,005,000) $1,005,000

Subtotal $600,000 ($5,005,000) ($4,000,000)

Offset of least refund type ($600,000) $600,000

Net deficiency/refund $0 ($5,005,000) ($3,400,000)

In excess of jurisdictional amount? Yes No
Step 1 ─ Same Year Offset: Offset the 2010 deficiency of $1,005,000 against the 2010 section 6405(b) refund of 

$5,005,000 

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Example 3: Multi-year exam (cont’d)

Computing the Jurisdictional Amount (cont’d)

Year Deficiency Sec. 6405(a)

refund

Sec. 6405(b)

refund

2010 $1,005,000 ($5,005,000)

Offset $1,005,000

Total ($4,000,000)

Step 2 ─ Net Deficiency: After Step 1, there is a deficiency of $600,000 in 2012, thus there is a net deficiency 

Year Deficiency

2010

2011

2012 $600,000

Total $600,000
Step 3 ─ Aggregate Overpayments: The aggregate section 6405(a) overpayment is $5,005,000. The aggregate 

section 6405(b) overpayment is $4 million (i.e., $5,005,000 refund ─ $1,005,000 deficiency).

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Example 3: Multi-year exam (cont’d)

Computing the Jurisdictional Amount (cont’d)

Year Sec. 6405(a)

refund

Sec. 6405(b)

refund

2010 ($4,000,000)

2011 ($5,005,000)

2012

Total ($5,005,000) ($4,000,000)
Step 4 ─ Offset: Net deficiency of $600,000 is applied against the section 6405(b) refund of $4 million, as it is the 

lowest amount of refund type. After offset, the section 6405(b) refund is $3,400,000.

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Example 3: Multi-year exam (cont’d)

Computing the Jurisdictional Amount (cont’d)

Year Sec. 6405(a)

refund

Sec. 6405(b)

refund

Refunds ($5,005,000) ($4,000,000)

Net Deficiency $600,000

Net Refunds ($5,005,000) ($3,400,000)

Conclusions:

• No net deficiency.

• The section 6405(a) refund will be reportable because it exceeds the threshold.

• The section 6405(b) refund is not reportable because the amount after deficiency offset 

does not exceed the threshold.
Other Considerations

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Joint Committee Review ─ Other Considerations 

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 IRS may delay or stop the anticipated refund due to reviews by the Review Team and 

Joint Committee staff. 

 The IRS may request a statute extension to ensure that sufficient time remains on the 

statute for both source and carryback years: 

 12 months for refund cases in examination (IRM sec. 4.36.3.5), or

 6 months for refund cases in Appeals (IRM sec. 8.7.9.5.3)

 Taxpayer is under exam for purposes of Form 3115, Application for Change in 

Accounting Method

 See Rev. Proc. 2015-13 

 Denial of a refund claim constitutes a determination under section 1313 of the 

mitigation provisions