Overpayment due to minimum tax credit is attributable to NOL carryback

By James A. Beavers, CPA, CGMA, J.D., LL.M.

The IRS Office of Chief Counsel (OCC) advised that for purposes of the special limitation period under Sec. 6511(d)(2), a claim for refund is attributable to a net operating loss (NOL) where an NOL carryback triggers a payment of alternative minimum tax (AMT), which in turn generates a minimum tax credit (MTC) that is carried forward to create the overpayment on which the claim for refund is based.


Taxpayer X was the subject of asbestos-related personal injury claims. In year 10, X entered into settlement agreements with the claimants resolving present and future asbestos personal-injury claims, which were approved in year 10. Under the agreement, X was required to pay a sum of money, part of which was paid in year 11. The year 11 payment generated an NOL in year 11, and a portion of that NOL qualified as a product-liability specified liability loss under former Secs. 172(b)(1)(C) and (f)(1)(A) that could be carried back 10 years.

In year 12, X filed an amended return carrying the year 11 NOL back to year 1. The NOL carryback triggered an AMT liability for year 1, which X paid (before the NOL carryback, X had not owed AMT for year 1).

Paying the AMT for year 1 generated an MTC that X carried forward to year 3 pursuant to former Sec. 53 (it could not be used in year 2), resulting in an overpayment and claim for refund in year 3. In year 12, X filed a claim for refund of the year 3 overpayment under Sec. 6511(d)(2) as "attributable to" the NOL carryback from year 11. When X filed the refund claim, the general limitation period under Sec. 6511(a) for year 3 had expired.

IRS counsel sought advice from the OCC as to whether a claim for refund is timely where the overpayment at issue arises from an NOL carryback that triggers payment of AMT, which in turn generates an MTC, which is carried forward to create the overpayment.

Secs. 6511(d)(2) and 6501(h)

Sec. 6511 requires a taxpayer to make a claim for credit or refund of overpaid tax within three years after filing a return or two years after paying the tax, whichever is later. However, Sec. 6511(d)(2) provides that if a "claim for credit or refund relates to an overpayment attributable to a net operating loss carryback or a capital loss carryback," then instead of the general limitation period, the limitation period generally "shall be that period which ends three years after" the due date of the return for the year in which the loss arose.

Sec. 6501(h) is the companion provision to Sec. 6511(d)(2). Sec. 6501(h) provides the special limitation period for an assessment of a deficiency attributable to the application to the taxpayer of an NOL carryback or a capital loss carryback, which parallels Sec. 6511(d)(2)'s special period for a refund of an overpayment attributable to the application to the taxpayer of an NOL carryback or a capital loss carryback.

'Attributable to'

When an NOL carryback reduces income in the carryback year and that reduction in income, in turn, frees up or creates a credit that is carried forward and generates an overpayment in another year, the question arises of whether the overpayment in the other year is "attributable to" the NOL carryback under Sec. 6511(d)(2). The Code and regulations do not define how the term "attributable to" in Sec. 6511 should be interpreted, but generally three interpretations have been used:

  • An overpayment is only "attributable to" the tax attribute immediately causing the overpayment and not to attributes further up a causal chain;
  • An overpayment is "attributable to" any tax attribute to which the overpayment can be traced; or
  • An overpayment is only attributable to the tax attribute that originally started the chain of causation.
The OCC's opinion

The OCC advised that X's overpayment was "attributable to" the NOL for purposes of Sec. 6511(d)(2), and consequently X's claim for refund was timely. Although the term is not defined in the Code or regulations, the OCC based its advice on the limited case law and legislative history for Secs. 6511(d)(2) and 6501(h). It found these sources supported treating the term "attributable to" as encompassing any overpayment if it can be traced to the NOL carryback when the NOL carryback starts a chain of causation involving other tax attributes.

Case law: The OCC noted that in the only case directly on point, Marshalltown Savings and Loan Ass'n, No. 4-91-CV-10003 (S.D. Iowa 12/31/91), the court held that an overpayment is attributable to an NOL where an NOL carryback frees up a credit that is carried to another year and creates the overpayment. However, it did not provide any analysis of its holding on this point. This position was also endorsed by a district court in Trusted Media Brands, Inc., No. 15-CV-9872 (S.D.N.Y. 9/26/17), aff'd, 899 F.3d 175 (2d Cir. 2018), although the Second Circuit, in affirming the district court's decision, did not address the issue. The Federal Circuit, nonetheless, appeared to reject this interpretation of "attributable to" in Electrolux Holdings, Inc., 491 F.3d 1327 (Fed. Cir. 2007), but the OCC stated the holding in this case did not apply because it involved only a single tax mechanism, an NOL carryforward, whereas X's situation involved an NOL and a minimum tax credit carryforward.

In First Chicago Corp., 742 F.2d 1102 (7th Cir. 1984), rev'g 80 T.C. 648 (1983), the Seventh Circuit interpreted "attributable to" in Sec. 6501(h) to allow deficiencies to be traced to a tax attribute beyond the immediate cause of the deficiency and ruled that the legislative history supports reading Secs. 6511(d)(2) and 6501(h) consistently. Therefore, the OCC found that the holding in First Chicago supported the position that for purposes of Sec. 6511(d)(2), the term should be interpreted to permit an overpayment that can be traced to a tax attribute other than the immediate cause of the overpayment.

Legislative history: The OCC further determined that, consistent with case law, the legislative history of the predecessor to Sec. 6511(d)(2), Sec. 322(b)(6) of the 1939 Code, shows Congress's intent that the phrase "attributable to" be interpreted to include an overpayment that arises from a chain of causation originating from an NOL carryback. The House Report for the Tax Adjustment Act of 1945, P.L. 79-172, which enacted Sec. 322(b)(6), states:

For purposes of section 322(b)(6), as well as for purposes of all other amendments made by the bill, an overpayment of excess profits tax resulting from an unused excess profits credit carry-back which itself is produced, or which is increased in amount, by a net operating loss carry-back, is to be considered as attributable to the net operating loss carry-back to the extent it is produced or increased. [H. Rep't No. 79-849, 79th Cong. 1st Sess., 1945 C.B. 585-587]

The OCC also found that the legislative history of the predecessor to Sec. 6501(h), Sec. 276(d) of the 1939 Code, establishes that Congress intended there to be symmetry between the limitation period for the assessment of deficiencies attributable to NOL carrybacks and the limitation period for credit or refund of overpayments attributable to NOL carrybacks. Thus, because Congress intended treatment of the limitation periods for assessments and refund claims attributable to NOLs to be the same, the term "attributable to" in Sec. 6511(d)(2) is best interpreted in the same way that term in Sec. 6501(h) is interpreted.

Therefore, in the situation analyzed by the OCC, X's overpayment is "attributable to" the NOL for purposes of Sec. 6511(d)(2), and X's refund claim was timely.


Based purely on a plain-language reading of the statute, reasonable minds could differ on what the correct interpretation of "attributable to" should be. Given the ambiguity of the statutory language, and the indications in the legislative history, it is helpful that the OCC has advised IRS counsel to take the more taxpayer-favorable position on this issue.

Chief Counsel Advice 202023006

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