FILED

United States Court of Appeals

Tenth Circuit

June 20, 2008

Elisabeth A. Shumaker

Clerk of Court

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

BARRICK RESOURCES (USA) INC.,

and SUBSIDIARIES,

Plaintiffs-Appellants,

v. No. 07-4046

UNITED STATES OF AMERICA,

Defendant-Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF UTAH

(D.C. NO. 2:03-CV-1006-DB)

Dennis P. Bedell (Alan I. Horowitz with him on the briefs), Miller & Chevalier

Chartered, Washington, D.C. (Francis M. Wikstrom, Parsons Behle & Latimer,

Salt Lake City, Utah, also with him on the briefs), for Appellants.

Steven W. Parks, Attorney (Richard Farber, Attorney, and Eileen J. O’Connor,

Assistant Attorney General, with him on the brief), Tax Division, Department of

Justice, Washington, D.C., for Appellee.

Before TYMKOVICH, McKAY, and SEYMOUR, Circuit Judges.

TYMKOVICH, Circuit Judge.

Barrick Resources argues in this appeal that the Internal Revenue Service

wrongfully applied a three-year statute of limitations to deny refunds based on
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amended tax returns it filed in 2002 and 2003. We conclude that the IRS did not

err in finding that these claims were filed out of time. 

Having jurisdiction pursuant to 28 U.S.C. § 1291 and finding no legal error,

we therefore AFFIRM the district court order granting the IRS summary

judgment. 

I. Background

Barrick’s claims arise out of a series of amended tax returns it filed in

2001, 2002, and 2003, seeking refunds based on deductions for net operating

losses that occurred in 1997 and 1998. 

Barrick sustained a series of operating losses in 1997 and 1998 that it was

unable to deduct when it filed its 1997 and 1998 tax returns. A provision of the

tax code, however, allows a business to apply net operating losses to profits

realized in prior or future tax years. See 26 U.S.C. § 172(b). “Congress enacted

the net operating loss provisions so that a taxpayer with alternating years of

profits and losses would not pay significantly higher taxes over a period of years

than a taxpayer with stable profits, where the average incomes of the two

taxpayers were equal.” 7 Mertens Law of Federal Income Taxation § 29:1 (2008). 

The net operating loss deduction accomplishes this goal by “enabl[ing] a taxpayer

to set off its lean years against its lush years and to strike something like an

average taxable income.” Id. 
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A taxpayer generally may carry back net operating losses two or three

years, depending on when the losses were incurred. 26 U.S.C. § 172(b)(1). For

instance, net operating losses incurred in 1997 may be applied against gains

realized in the prior three tax years. To qualify for a refund, the taxpayer must

file amended returns for each tax year in which it seeks to use the deduction. 

These amended returns must be submitted within three years from “the time

prescribed by law for filing the return (including extensions thereof) for the

taxable year of the net operating loss . . . which results in such carryback.” 26

U.S.C. § 6511(d)(2)(A). Thus, if the filing date of a taxpayer’s 1997 tax return

was September 15, 1998, the taxpayer must submit its amended tax returns by

September 15, 2001, to timely claim a refund based on net operating losses

incurred in 1997.

The tax code permits a longer carryback period for a special category of

losses, so-called “specified liability losses.” 26 U.S.C. § 172(f). These losses are

deemed by Congress to merit special deductibility. See id. § 172(f)(1)(A)–(B)

(listing eligible types of losses). At issue here is one type of specified liability

loss: costs associated with satisfying a state or federal law requiring reclamation

of land used for mining. Id. § 172(f)(1)(B)(i)(I). These reclamation losses may

be carried back ten years. Thus, a taxpayer sustaining reclamation losses in 1997

could amend its tax returns as far back as 1987 and offset gains incurred in each

of the intervening years. But as with ordinary net operating losses, a taxpayer
1

 The amended 1992 tax return also sought a refund based on 1998

reclamation losses. Neither Barrick nor the IRS challenges the refund Barrick

received as a result of these 1998 losses.

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still must file amended tax returns within three years of the filing date of the tax

year the losses were actually incurred to take advantage of the deduction. Id.

§ 6511(d)(2)(A).

Amended Tax Returns Filed in 2001

In 1997, Barrick sustained over $19.8 million in net operating losses,

including $1.1 million in reclamation losses. In 1998, Barrick incurred an

additional $15.6 million in operating losses, including $14.2 million in

reclamation losses. Barrick subsequently filed a series of amended tax returns

seeking to use these losses to offset profits from previous years. 

Accordingly, in 2001, Barrick filed two timely amended tax returns

applying the 1997 losses to the tax years 1994 and 1995. In these returns, it

offset income from 1994 and 1995 with $13.2 million in 1997 net operating

losses.

Amended Tax Returns Filed in 2002

Realizing the potential for additional offsets it missed earlier, in 2002

Barrick filed amended 1991 and 1992 returns attempting to apply 1997

reclamation losses to earlier years under the special ten-year rule.1

 It sought

refunds for an additional $215,463 based on the 1997 reclamation losses. The

IRS approved the amended returns and granted Barrick the requested refunds.
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Amended Tax Return Filed in 2003

Upon receiving these refunds, Barrick determined it overlooked substantial

unused reclamation losses from both 1997 and 1998. Accordingly, it filed a

second 1991 amended return in May 2003, this time requesting a refund of an

additional $1,120,411. The IRS rejected Barrick’s claim, concluding the threeyear statute of limitations had expired (1) in 2001 for refund claims based on

1997 losses, and (2) in 2002 for claims based on 1998 losses. 

Summary

The following chart summarizes the tax returns filed by Barrick. 

Chronology 

1998 Filed 1997 tax return reporting $19.8 million in

net operating losses, including $1.1 million in

reclamation losses

1999 Filed 1998 tax return reporting $15.6 million in

net operating losses, including $14.2 million in

reclamation losses

2001 Timely filed amended 1994 and 1995 tax returns

within three years of reporting 1997 losses

2002 Filed amended 1991 tax return attempting to apply

unused 1997 reclamation losses

2002 Filed amended 1992 tax return attempting to apply

unused 1997 and 1998 reclamation losses

2003 Filed second amended 1991 tax return attempting

to apply unused 1997 and 1998 reclamation losses 
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District Court Proceedings

Barrick sued the IRS, challenging its refusal to approve the second

amended 1991 tax return. The IRS realized the three-year statute of limitations

had also run on the amended 1991 and 1992 tax returns Barrick filed in 2002. It

then filed a separate suit to recover the $215,463 it had refunded for the 2002

claims. The court consolidated the two lawsuits.

 While agreeing the three-year statute of limitation applied, Barrick argued

that it was eligible for an exception to the limitations period. Rejecting Barrick’s

argument, the district court granted the IRS summary judgment on both claims. 

Barrick v. United States, 464 F. Supp. 2d 1443 (D. Utah 2006). 

This timely appeal follows.

II. Standard of Review

We review de novo the grant of summary judgment to determine whether

any genuine issues of material fact were in dispute and, if not, whether the district

court correctly applied the substantive law at issue. Viernow v. Euripides Dev.

Corp., 157 F.3d 785, 792 (10th Cir. 1998). “Because the parties do not dispute

the facts, we have before us a purely legal question, and thus we review the

matter de novo.” Locke v. Saffle, 237 F.3d 1269, 1270–71 (10th Cir. 2001).

III. Discussion

The central issue on appeal is whether Barrick filed its amended tax returns

within the applicable limitations period. It contends that the returns filed in 2002
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and 2003 are not time-barred because they merely amend previous timely-filed

claims. The parties agree that the issue of timeliness is controlled by our decision

in United States v. Ideal Basic Industries, Inc., 404 F.3d 517 (10th Cir. 1968).

A. Ideal Basic

Ideal Basic allows an exception to the applicable limitations period. As we

discussed above, taxpayers seeking to use net operating losses to offset profits

from prior years must ordinarily file amended tax returns within three years from

the filing date of the tax year the losses occurred. 26 U.S.C. § 6511(d)(2)(A). If

a taxpayer fails to file a timely claim with the IRS, the taxpayer is barred from

subsequently pursuing such a claim in any court. Id. § 7422(a). The Supreme

Court, however, has long recognized an exception to this general rule: under

limited circumstances, a taxpayer may seek additional deductions by amending a

timely pending claim after the statute of limitations expired so long as the

requested deductions are fairly encompassed in the original claim. See United

States v. Andrews, 302 U.S. 517, 524 (1938). 

We applied this exception in Ideal Basic, 404 F.2d at 124, and explained it

applies only to deductions based on facts that were “necessarily” before the IRS

in the pending claim. We then adopted the following two-part test:

The test applied to determine . . . whether a new ground of recovery

may be introduced after the statute has run by amending a pending

claim filed in time depends upon the facts which an investigation of

the original claim would disclose. Where the facts upon which the

amendment is based would necessarily have been ascertained by the
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commissioner in determining the merits of the original claim, the

amendment is proper.

Id. 

To qualify for this exception, therefore, the taxpayer must satisfy the

following two elements: (1) it amended a timely pending claim, and (2) the IRS

would have necessarily ascertained the facts upon which the new deduction is

based when determining the merits of the original claim. 

This exception is carefully delineated to promote fairness, administrative

efficiency, and finality. It promotes fairness by “providing no arbitrary limit on

the amendment of claims previously filed.” See id. at 125. Moreover, it fosters

administrative efficiency. By permitting taxpayers to clarify timely pending

amended returns and claim all of their allowed deductions, the rule helps the IRS

to more quickly and accurately resolve otherwise ambiguous or inaccurate claims. 

The Ideal Basic exception also ensures finality by deterring taxpayers from

sleeping on their rights. By permitting taxpayers only to amend timely pending

claims, this rule creates a strong incentive for taxpayers to promptly submit

amendments to the IRS. 

B. Application to the Amended Returns Filed in 2002 and 2003

Applying Ideal Basic to the claims here, we conclude that the amended

returns filed in 2002 and 2003 were time-barred. 
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1. The amended tax returns filed in 2002 were untimely 

Barrick argues it is entitled to the Ideal Basic exception for the returns it

filed in 2002 because these claims satisfied both prongs of the Ideal Basic test.

First, Barrick states the 2002 filings merely amend the pending 2001 claims. 

Second, it argues a reasonable investigation by the IRS into the net operating

losses applied to the 2001 claims would have revealed Barrick was also entitled to

apply unused reclamation losses to previous tax years. We disagree. 

The 2002 claims did not amend the 2001 pending claims. 

Barrick argues its 2002 claims simply amended the pending returns it

timely filed in 2001. As noted above, in 2001, Barrick filed amended returns for

1994 and 1995, seeking to use 1997 net operating losses to offset income in those

years. In 2002, however, Barrick filed a new series of returns, amending its 1991

and 1992 returns, relying on the ten-year carryback rule for reclamation losses. 

This, it claims, was merely an amendment to its 2001 filing. 

We reject this logic. The 1991 and 1992 tax returns filed in 2002 neither

referred to nor altered the 1994 and 1995 tax returns filed in 2001. Rather than a

simple amendment, Barrick’s 2002 claim encompasses wholly different tax years

and applies entirely different carryback rules: the 1991 and 1992 returns only

apply the ten-year carryback rule for reclamation losses, while the 1994 and 1995

amended returns only apply the three-year carryback rule for ordinary net

operating losses. Barrick never attempted to apply the ten-year carryback rule for
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reclamation losses in its 1994 and 1995 tax returns. We thus agree with the

district court that Barrick has not amended a pending refund claim. It instead

filed an entirely new claim. Therefore, we conclude Barrick does not satisfy

Ideal Basic’s first prong. 

The IRS did not necessarily ascertain the facts upon which the 2002 claims

were based. 

Even if we construed the 2002 claims to properly amend the 2001 returns,

the Ideal Basic exception still would not apply. Under Ideal Basic’s second

prong, “the facts upon which the amendment is based” must “necessarily have

been ascertained by the commissioner in determining the merits of the original

claim.” Ideal Basic, 404 F.2d at 124. Barrick contends the IRS should have

concluded after a reasonable investigation that Barrick intended to assert claims

for refunds for years prior to 1994 and 1995. 

In support of this argument, Barrick points to Ryan v. Harrison, 146 F.

Supp. 671 (N.D. Ill. 1956)—a case in which a district court applied the exception

to the statute of limitations. In Ryan, a partnership accrued a net operating loss in

1946. It timely filed an amended tax return for 1945, carrying back the 1946 loss

and requesting a refund. After the statute of limitations expired, the taxpayer

realized it should have carried back the 1946 losses to tax year 1944 rather than

1945. The partnership filed an amendment to the claim, explaining that “[o]ur

refund in the amount of $12,509.10 was based on carry back to 1945 and should
2

 Barrick also cites Pearl Assurance Co. v. United States, 324 F.2d 512 (Ct.

Cl. 1963), which involves facts and analysis similar to Ryan. We conclude Pearl

(continued...)

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have read $8,796.61 based on carry back to 1944.” Id. at 672. The district court

held that the exception to the statute of limitations applied because “the first

claim could not have been denied or allowed without an inquiry into taxpayers’

returns for the years 1944 through 1946.” Id. at 674. Because the second claim

merely amended a pending timely claim, the district court awarded the taxpayer

the refund it requested. 

Ryan is distinguishable because Barrick’s 1994 and 1995 amended tax

returns could be denied or allowed without an inquiry into the taxpayer’s 1991

and 1992 tax returns. In 1997, Barrick reported $19.8 million in total losses, and

reclamation expenses accounted for only $1.1 million of that amount. In its 2001

filings, Barrick sought to carry back only $13.2 million from these 1997 losses,

and its filing does not even mention its entitlement to reclamation losses. 

Because sufficient non-reclamation losses existed to account for the $13.2 million

Barrick claimed, the IRS did not “necessarily” ascertain the validity of the 1997

reclamation costs when determining the merits of the 2001 refund claims. In

other words, the existence or validity of eligible reclamation losses was simply

not an issue before the IRS in resolving Barrick’s 2001 filings. Because they

were not an issue, the IRS did not need to determine whether Barrick should have

offset 1991 and 1992 profits with the 1997 reclamation losses.2
2

(...continued)

Assurance is distinguishable from the present case for the same reasons we

distinguish Ryan.

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This conclusion is confirmed by tax code provisions which explain the

application of the net operating loss deduction. Where sufficient ordinary net

operating losses are available to satisfy a claimed deduction, the IRS does not

need to evaluate the accuracy of other types of losses. For example, with respect

to “specified liability losses,” the tax code requires they “shall be treated as a

separate net operating loss for such taxable year to be taken into account after the

remaining portion of the net operating loss for such taxable year.” 26 U.S.C.

§ 172(f)(5) (emphasis added). In other words, ordinary net operating losses must

be distributed before specified liability losses. Reclamation losses—a type of

specified liability losses—are therefore treated this way. Id. § 172(f)(1)(B)(i)(I). 

Because sufficient ordinary net operating losses existed to account for the $13.2

million in losses claimed in Barrick’s 2001 filings, the IRS did not need to

evaluate the validity of the reported reclamation losses and other potentially

available specified liability losses.

This conclusion is amplified by the requirement that a taxpayer must carry

back specified liability losses—including reclamation losses—and ordinary net

operating losses to the earliest year in which they can be used. See 26 U.S.C. 

§ 172(b)(2). Unlike ordinary net operating losses, reclamation losses have a tenyear carryback period. Id. § 172(f)(1)(B)(i)(I). For Barrick to have carried back
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the $1.1 million in reclamation losses for less than ten years—to 1994 and

1995—it would have first needed to file an election waiving the ten-year

carryback. See 26 U.S.C. § 172(f)(6). It did not do so. When evaluating the

1994 and 1995 amended returns, therefore, the IRS would have properly

determined that Barrick only carried back ordinary net operating losses from

1997. Because the IRS did not need to ascertain the validity of the reclamation

losses Barrick reported in 1997, we conclude Barrick did not satisfy Ideal Basic’s

second prong.

Ideal Basic does not require the amended claim to be based on the same

facts and theory as the original timely claim. 

Barrick also suggests the Ideal Basic exception should apply only when the

amended claim is based on the same facts and theory as the original timely claim. 

Thus, it contends its general use of § 172 net operating losses was enough to put

the IRS on notice that it intended to use all of its losses in whatever year they

might apply. Ideal Basic does not set forth this additional requirement. In other

jurisdictions courts have sometimes permitted taxpayers to file amended claims,

even though the amended claims add an additional theory of recovery. See, e.g.,

H.B. Zachry Co. v. United States, 168 F. Supp. 777 (Ct. Cl. 1958); see generally

15 Mertens Law of Federal Income Taxation § 58:38 (“An amendment should be

allowed if it . . . adds grounds based on facts stated in the claim as originally

filed.”). Because Barrick fails to satisfy the two requirements we articulated in
3

 The IRS alternatively argues Barrick’s “claims for refund for 1994 and

1995 could not be amended to add claims for refund for other years, because the

governing regulation specifically requires that ‘a separate claim shall be made for

each type of tax for each taxable year or period.’” Aple. Br. 24 (quoting Treas.

Reg. § 301.64002-2(d)). Because we conclude the 2002 claims do not satisfy

Ideal Basic and are therefore untimely, it is unnecessary for us to address this

additional argument. 

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Ideal Basic, it is unnecessary for us to decide whether the amended claim must

also be based on the same theory as the original timely claim. 

In sum, Barrick’s 2002 claims do not amend its 2001 filings, and the IRS

did not “necessarily” ascertain the validity of the reclamation losses when

evaluating the 2001 claims. Because Barrick failed to satisfy the requirements set

forth in Ideal Basic, the district court properly concluded the 2002 claims were

untimely.3

2. The amended tax return filed in 2003 was also untimely 

In 2003, Barrick filed a second amended 1991 tax return, seeking an

additional $1,120,411 refund. Part of that refund, $758, was based on the

carrying back of 1997 reclamation losses. Barrick argues the Ideal Basic

exception applies because the 2003 claim properly amends the 2002 filings. 

Barrick concedes, however, that if the 2002 claims are not timely, then the

requested refund is also untimely. Because we conclude the 2002 claims are

untimely, we agree this portion of the 2003 claim is also time-barred. 

The remainder of the claimed 1991 refund, $1,119,653, was based on the

carrying back of 1998 reclamation losses whose three-year limitations period
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would not expire until 2002. In 2002, Barrick submitted a timely 1992 amended

tax return carrying back reclamation losses from 1998. Although Barrick

submitted its 2003 refund claim after the statute of limitations expired, Barrick

contends the Ideal Basic exception applies because the 2003 claim amends a

timely 1992 return filed in 2002. We disagree. The 2003 claim does not amend

the timely 1992 return; as discussed above, the 2003 claim asserts a refund claim

for the 1991 tax year, but does not make any changes to the 1992 amended return.

Nor was a timely-filed 1992 amended return pending at the time Barrick

filed its 2003 claim. By the time Barrick filed its 2003 claim, the IRS had already

taken final action on the 1992 refund claim, resolving it in Barrick’s favor and

closing the matter.

To overcome this obstacle, Barrick makes one last argument to escape the

limitations period. It asks us to adopt the reasoning of the Eleventh Circuit in

Mutual Assurance, Inc. v. United States, 56 F.3d 1353, 1356 (11th Cir. 1995). In

that case, the court allowed the taxpayer to amend a prior timely claim after the

statute of limitations expired, even though the IRS had already allowed the

original claim and paid the refund. 

We reject this invitation. Such a rule would damage the careful balance we

struck in Ideal Basic by undermining administrative efficiency and failing to deter

the filing of stale claims. Because amendments would be permitted even after the

IRS allowed or disallowed the claim, taxpayers would have little incentive to
4

 Other courts agree. As the Federal Circuit noted in Computervision Corp.

v. United States, 445 F.3d 1355, 1372 (Fed. Cir. 2006), “Mutual Assurance is

untenable since it would allow amendments submitted after filing the refund suit

to extend the limitations period indefinitely.” An open-ended amendment period

is not contemplated by the statutory scheme, and Barrick cannot rely on

undeveloped facts that might be somewhere buried in a timely filed, but closed

claim.

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promptly bring amendments to the IRS’s attention. Under Mutual Assurance, if

the IRS denied a taxpayer’s claim, the taxpayer could take a second bite at the

apple by filing an amended claim.4

 

For these reasons, we find Mutual Assurance unpersuasive. We conclude,

therefore, that Barrick’s 2003 refund claim is also barred by the statute of

limitations. 

IV. Conclusion

In sum, Barrick’s 2002 and 2003 claims do not satisfy the Ideal Basic test. 

Because these filings are untimely, we conclude the district court properly

granted the IRS summary judgment on both claims. We therefore AFFIRM the

district court’s order.