Rev. Rul. 67-358

Advice has been requested whether a refund or credit of an overpayment of income tax in excess of $100,000, occasioned by application of the provisions of section 1341 of the Internal Revenue Code of 1954, may be made prior to the submission of a report thereon to the Joint Committee on Internal Revenue Taxation.

The taxpayers, a public utility company and its affiliates, repaid to their customer in December 1966, 150 x dollars of rate refunds, together with interest, pursuant to an order issued by a Federal regulatory agency. The amounts refunded had been received by the taxpayers in prior years, and had been included in gross income of such prior years under claims of right. Pursuant to section 1341 of the Code, the repayment of this amount resulted in an overpayment of income tax, which was required to be paid or credited for the taxable year 1966.

Section 1341 of the Code provides for the computation of tax when a taxpayer is required to repay an amount (in excess of $3,000) received in a prior taxable year under a claim of right. If the amount repaid is more than $3,000, the tax for the year of repayment is the lesser of (1) the tax computed by deducting the repayment or (2) the tax for the year of repayment without the deduction, minus the decrease in tax for the prior taxable year or years which would result solely from the exclusion from gross income of the amount or amounts which had been included under the claim of right. If the decrease in tax in the latter computation exceeds the tax for the year of repayment, the excess shall be refunded or credited in the same manner as if it were an overpayment for such taxable year.

Section 6405(a) of the Code requires that a report be made to the Joint Committee on Internal Revenue Taxation prior to a refund or credit of any income, war profits, excess profits, estate, or gift tax in excess of $100,000. Section 6411 of the Code provides for an income tax credit or refund resulting from a tenative carryback adjustment of the tax for the prior taxable year affected by a net operating loss carryback provided in section 172(b) of the Code, or by an investment credit carryback provided in section 46(b) of the Code. Section 6405(c) of the Code states that any credit or refund allowed or made under section 6411 of the Code shall be made without regard to the provisions of section 6405(a) of the Code.

In the instant case, the income tax overpayment did not result from a tentative carryback adjustment under section 6411 of the Code. Therefore, the refund or credit, being in excess of $100,000, may not be made prior to the submission of a report to the Joint Committee on Internal Revenue Taxation pursuant to section 6405(a) of the Code.