Rev. Rul. 85-37

1985-1 C.B. 362, 1985-13 I.R.B. 10.

LIMITATION PERIOD; WINDFALL PROFIT TAX

Published: April 1, 1985

Section 6501.-Limitations on Assessment and Collection, 26 CFR 301.6501(a)-1: Period of limitations upon assessment and collection.

(Also Sections 4986, 4995, 4997, 6511, 6513; 51.4986-1, 51.4995-1, 51.4997-1, 301.6511(a)-1, 301.6513-1.)

  Limitation period; windfall profit tax. The periods of limitation for assessment of, or for credit or refund of, windfall profit tax are discussed in four situations.

ISSUE

  For purposes of the crude oil windfall profit tax imposed by section 4986 of the Internal Revenue Code, what are the appropriate periods of limitation for assessment and collection and for credit or refund in the situations described below?

FACTS

  SITUATION 1. A producer of crude oil subject to the crude oil windfall profit tax received a Form 6248, Annual Information Return of Windfall Profit Tax, showing an underwithholding of windfall profit tax. The producer timely filed annual return, Form 720, Quarterly Federal Excise Tax Return, to report and pay the balance due. It was later determined that, although the producer had been underwithheld, the tax liability reported by the producer on the Form 720 was in excess of the actual tax liability and that an overpayment existed.

  SITUATION 2. The facts are the same as in SITUATION 1, except that it was later determined that the windfall profit tax had been underpaid.

  SITUATION 3. A producer of crude oil received a Form 6248 showing that the correct amount of windfall profit tax was withheld. Therefore, the producer did not file an annual Form 720. It was later determined the windfall profit tax had been overpaid.

  SITUATION 4. The facts are the same as SITUATION 3, except that it was later determined that the tax had been underpaid.

LAW AND ANALYSIS

  Section 4986 of the Code imposes an excise tax on the windfall profit from taxable crude oil removed from the premises during each taxable period. The tax is to be paid by the producer.

  Section 4995(a)(1)(A) of the Code provides generally that the first purchaser of any domestic crude oil shall withhold a tax equal to the amount of tax imposed by section 4986 with respect to the oil from amounts payable by the purchaser to the producer of the oil.

  Under section 4995(a)(4) of the Code, any amount of windfall profit tax withheld is treated as having been paid by the producer. The payment is deemed to be made on the last day of the first February after the calendar year in which the oil is removed from the premises.

  Under section 4995(a)(5) of the Code, except to the extent provided in regulations, a producer of crude oil with respect to which withholding is required shall not be required to file a return of the tax imposed by section 4986 with respect to that oil.

  Section 4997 of the Code provides that each taxpayer liable for tax under section 4986 shall make such returns as the Secretary may by regulations prescribe.

  Section 51.4997-1(a)(2) of the Excise Tax Regulations provides that a return for each calendar year shall be made by each producer of crude oil whose liability for tax with respect to crude oil that was removed during the four taxable periods of the calendar year exceeds the amount of tax withheld with respect to that crude oil. Pursuant to section 6076(a) of the Code and section 51.6076-1 of the regulations, the annual return is required to be filed not later than May 31 of the year following the removal year.

  Under section 6501(a) of Code, except as otherwise provided, the amount of any tax must be assessed within 3 years after the return is filed (whether or not such return is filed on or after the date prescribed).

  Under section 6501(b)(1) of the Code a return of tax filed before the last day prescribed for the filing thereof shall be considered as filed on such last day.

  Section 6501(c)(3) of the Code provides that in the case of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time.

  Section 6501(p) of the Code provides that in the case of any oil to which section 4995(a) applies and with respect to which no return is required, the return referred to in section 6501 is the producer's income tax return for the taxable year in which the removal year ends.

  Section 6511(a) of the Code provides that a claim for credit or refund of an overpayment of any tax for which a return is required must be filed within three years from the time the return was filed or two years from the time the tax was paid, whichever is later.

  Under section 6511(b) of the Code, if a claim for credit or refund is filed within three years from the time the return was filed, the amount of the credit or refund is limited to the portion of the tax paid within a period of three years preceding the claim plus any extension of time for filing the return.

  Section 6511(h) of the Code provides that in the case of any oil to which

section 4995(a) applies and with respect to which no return is required, the return referred to in section 6511(a) is the producer's income tax return for the taxable year in which the removal year ends.

  Under section 6513(a) of the Code, for purposes of section 6511, any return filed before the last day prescribed for filing thereof is considered filed on such last day and payment of any portion of the tax before the last day prescribed for payment is considered made on such last day, which under section 6151 is the due day of the return.

  In SITUATION 1, the producer, having been underwithheld, was required to file an annual return as provided in section 51.4997-1(a)(2) of the regulations. Because the return was timely filed and the tax was timely paid, the period of limitation for seeking a credit or refund under sections 6511(a) and 6513(a) of the Code runs from the last day prescribed for filing the annual return (May 31 of the year following the removal year).

  Section 6511(b) of the Code limits the amount of the credit or refund to payments made by the producer within three years preceding the date the claim is filed. Section 4995(a)(4) treats amounts of windfall profit tax withheld as having been paid by the producer on the last day of February of the year following the removal year. Section 6513(a), however, provides that, for purposes of section 6511(a), advance payments of tax are considered to have been made on the last day prescribed for filing the return, in this case, May 31 of the year following the removal year.

  The purpose of section 6513(a) of the Code is to assure that the period of limitations for filing a claim for credit or refund will not be effectively foreshortened for a taxpayer who makes a payment of tax before the due date. See S. Rep. No. 1631, 77th Cong., 2d Sess. 156 (1942), 1942-2 C.B. 504, 619. Accordingly, for purposes of section 6511(b), payments made in advance of the due date of the annual return, including payments deemed made under section 4995(a)(4), are considered to be made on the last day for filing the annual return, that is, May 31 of the year following the removal year.

  In SITUATION 2, the producer also underwithheld, was required to file and timely file an annual return. Therefore, pursuant to sections 6501(a) and 6501(b)(1) of the Code, the period of limitation on assessment runs from the last day prescribed for filing the return, that is, from May 31 of the year following the removal year.

  In SITUATION 3, the producer's tax liability did not exceed the amount of tax withheld and no annual return was required, the period of limitations for credit or refund under sections 6511(a) and 6511(h) of the Code runs from the last day prescribed for filing the producer's income tax return for the taxable year in which the removal year ends. Pursuant to sections 6513(a) and 6511(b), payments made in advance of the due date for the producer's income tax return for the taxable year in which the removal year ends, including payments deemed made under section 4995(a)(4), are considered to be made on the last day for filing the income tax return.

  In SITUATION 4, since an annual return was required but not filed, section 6501(p) of the Code does apply and, under section 6501(c)(3), there is no period of limitation on assessment.

HOLDINGS

  SITUATION 1. The producer must file a claim for credit or refund of the overpayment within three years of the due date of the annual return, Form 720, for the calendar year to which the overpayment pertains. For this purpose, amounts of windfall profit tax withheld are treated as having been paid by the producer on the due date of the annual return.

  SITUATION 2. The amount of underpaid tax must be assessed within three years of the due date of the annual return, Form 720.

  SITUATION 3. The producer must file claim for credit or refund of tax within three years of the due date of the income tax return for the taxable year in which the removal year ends. For this purpose, amounts of windfall profit tax withheld are treated as having been paid by the producer on the due date of the income tax return.

  SITUATION 4. The amount of underpaid tax may be assessed at any time.

Rev. Rul. 85-37, 1985-1 C.B. 362, 1985-13 I.R.B. 10.