Rev. Rul. 57-82

Advice has been requested regarding the computation of interest on an overpayment of income tax under the circumstances set forth below.

A Federal income tax refund allowed a taxpayer was transmitted by the Internal Revenue Service to the General Accounting Office for set-off against an indebtedness claimed by another Government agency. In a subsequent court action brought by the taxpayer, this claim was ruled groundless and dismissed. As a result, the General Accounting Office authorized payment to the taxpayer of the original amount of refund including interest. A Treasury Department check issued upon authority of the General Accounting Office, payable from an appropriation other than that made available to the Internal Revenue Service, was drawn in favor of the taxpayer for the amount of refund including interest only to the date of transmittal of the refund check by the Service to the General Accounting Office.

The taxpayer contends he is entitled to additional interest for the period from the date of transmittal of the check to the General Accounting Office to the date of the refund check actually issued to him.

Section 6611 of the Internal Revenue Code of 1954 relates to interest on overpayments. Subsection (b)(2) thereof provides that in the case of a refund interest shall be allowed and paid from the date of the overpayment to a date (to be determined by the secretary or his delegate) preceding the date of the refund check by not more than 30 days, whether or not such refund check is accepted by the taxpayer after tender of such check to the taxpayer.

In Revenue Ruling 55-477, C. B. 1955-2, 498, it was pointed out that there is no provision of law for the payment of interest on a tax refund for any period subsequent to the date of the refund check. Accordingly, claims for additional interest, which are filed by taxpayers as a result of a delay in the delivery of their refund checks, will be rejected except in cases where the refund check, because it was erroneously drawn, could not be negotiated upon receipt by the taxpayer. In the latter cases, a new check is issued by the Treasury Department with interest allowable to a date preceding the date of issuance of the new check by not more than 30 days.

In the instant case, the Treasury Department check originally issued was used to credit the taxpayer's account with another Government agency in order to satisfy a claim which later proved to be invalid.

Therefore, under the present facts, the check ultimately issued to the taxpayer under authority of the General Accounting Office does not change the character of the amount paid back as a refund of an overpayment of tax dully allowed under provisions of the Internal Revenue Code. Nor does the fact that the amount of such refund was credited to another Government agency and then paid back from a different account seriously affect its character, since the funds used to credit and debit these accounts were first obtained from the proper Internal Revenue Service appropriation.

Accordingly, the check authorized by the General Accounting Office and paid from an appropriation other than that made available to the Internal Revenue Service constitutes a refund check within the purview of section 6611 of the Code and interest is properly payable under authority of that section to a date 30 days preceding the date of the issuance of the refund check.