STARR INTERNATIONAL COMPANY, INC.

Filing 110

MEMORANDUM OPINION re 109 Order. Signed by Judge Christopher R. Cooper on 1/31/2018. (lccrc1)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

STARR INTERNATIONAL
COMPANY, INC.,
Plaintiff,
Case No. 14-cv-01593 (CRC)

v.
UNITED STATES OF AMERICA,
Defendant.
UNITED STATES OF AMERICA,
Counterclaim-Plaintiff,
v.
STARR INTERNATIONAL
COMPANY, INC.,
Counterclaim-Defendant.

MEMORANDUM OPINION
In 2013, the IRS erroneously issued a $21 million refund to Starr International Company,
Inc. for the 2008 tax year. Under the applicable statute of limitations, the Government had two
years to file suit to reclaim that refund, but it failed to do so. Instead, four years after issuing the
refund, the Government filed a counterclaim in this case, which Starr originally brought to
recover taxes withheld for the 2007 tax year. The IRS contends that it is entitled to an extended
limitations period because it was induced to issue the refund by Starr’s misrepresentations of
material fact. Because the Court finds that Starr made no such misrepresentations in its refund
claim, it will apply the two-year statute of limitations and grant Starr’s motion for summary
judgment on the Government’s counterclaim.

I.

Background
A. Legal Background
Starr International Company, Inc. (“Starr”) is a privately held Swiss-based company. As

with all foreign companies, Starr owes U.S. federal income taxes on dividend income attributable
to stock held in U.S. corporations. Counterclaim ¶ 13. These taxes are typically withheld at a
rate of 30 percent and remitted directly to the IRS. 26 U.S.C. § 1442. A tax treaty between the
United States and Switzerland, however, entitles certain Swiss-resident corporations to a
significant reduction in the tax rate applied to U.S.-source dividends—from 30 percent to either 5
or 15 percent. See Convention Between the United States of America and the Swiss
Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income art.
10(2), Oct. 2, 1996, S. Treaty Doc. No. 105–8, https://www.irs.gov/pub/irs-trty/swiss.pdf
[hereinafter “Treaty”].
A Swiss corporation automatically benefits from the Treaty if it meets one of a dozen or
so enumerated criteria—for example, if it does significant business in Switzerland. See id. art.
XXII. If a corporation does not qualify for an automatic reduction, it may nevertheless be
granted benefits on a discretionary basis by “the competent authority of the State in which the
income arises . . . after consultation with the competent authority of the other Contracting State.”
Id. art. XXII(6). In the case of a Swiss corporation like Starr, this means that the Office of the
United States Competent Authority (“USCA”) will review its request for discretionary benefits
and, after mandatory consultation with the Swiss competent authority, make a final
determination. An analysis of the Treaty issued by the U.S. Treasury Department—the so-called
“Technical Explanation”—instructs the USCA, when reviewing requests for discretionary
benefits, to consider whether the corporation acted with a “principal purpose” of obtaining treaty

2

benefits. See Dep’t of the Treasury, Technical Explanation of the Convention Between the
United States of America and the Swiss Confederation for the Avoidance of Double Taxation
with Respect to Taxes on Income 72, http://www.irs.gov/pub/irs-trty/swistech.pdf; see also Starr
Int’l Co. v. United States, 2017 WL 3491802, at *8 (D.D.C. Aug. 14, 2017).
A taxpayer claiming a refund based on treaty benefits seeks those funds using a Form
1120-F—the general income tax return for foreign corporations. Treas. Reg. § 301.6402-3(a)(1).
All Form 1120-Fs must be filed with the IRS Service Center in Ogden, Utah. See Starr’s Mot.
Summ. J. on Counterclaim Ex. 11, at 4 (ECF No. 80) (2008 Instructions to Form 1120-F). If the
IRS denies or fails to act on the refund claim then—and only then—may the taxpayer bring suit
seeking a refund in federal court. See 26 U.S.C. § 7422(a). In other words, filing a refund claim
with the IRS is a jurisdictional prerequisite to seeking a refund in federal court.
Sometimes the IRS grants a refund claim but does so erroneously. When this happens,
the Government generally has two years to realize its error and initiate a lawsuit to recover the
refund. 26 U.S.C. § 6532(b). The statute of limitations is extended to five years, however, “if it
appears that any part of the refund was induced by fraud or misrepresentation of a material fact.”
Id. The Government bears the burden of proving a misrepresentation of material fact in order for
the five-year statute of limitations to apply. See Lane v. United States, 286 F.3d 723, 730 (4th
Cir. 2002).
B. Factual Background
In December 2007, Starr filed a request with the USCA seeking discretionary benefits—
specifically, a reduced rate of withholding paid on dividends it received from AIG stock—under
the U.S.-Swiss Treaty. Counterclaim ¶ 16. While that request was pending, Starr filed a refund
claim with the Ogden Service Center for the 2007 tax year, seeking a refund in the amount it

3

would be entitled to receive if it were eligible for the treaty benefits. Starr indicated on the front
page of its Form 1120-F that the refund request was a “Protective Refund Claim” and informed
the USCA that it was filing this claim. Counterclaim ¶ 20. The USCA representative who was
reviewing Starr’s treaty benefits eligibility request, David Kosterlitz, contacted the Ogden
Service Center and instructed it not to issue a refund. Counterclaim ¶ 21.
In October 2010, the USCA issued a final determination letter denying Starr its requested
treaty benefits for the 2007 tax year. Counterclaim ¶ 22. Starr then filed a refund request with
the IRS for $21 million for the 2008 tax year and an amended claim for the 2007 tax year. On
the first page of its 2008 Form 1120-F, next to the line indicating the amount to which Starr
claimed it was owed, Starr wrote “See Statement 1,” referring to an attached 5-page statement
with several attachments. Starr’s Mot. Summ. J. on Counterclaim Ex. 1, at 12. In the first
paragraph of this statement, Starr disclosed that it had not been granted benefits by the USCA.
Id. at 19. The statement went on to detail Starr’s legal arguments about why it believed the
USCA’s determination was incorrect. Id. at 19–23. Starr also attached about 90 pages of
correspondence between Starr and the USCA, including the determination letter that set forth the
USCA’s basis for deciding that Starr did not qualify for the benefits. Id. at 41–130.
In 2011, the IRS granted Starr’s 2008 refund request and issued a refund for
$21,151,745.75. Counterclaim ¶ 29. It did not act on Starr’s 2007 amended claim.
In 2014, Starr filed suit in this Court seeking a refund of taxes paid for the 2007 tax year
on the basis that the USCA erroneously denied its request for treaty benefits. See 26 U.S.C. §
7422; 28 U.S.C. § 1346(a)(1) (providing cause of action against United States for recovery of
taxes “erroneously or illegally assessed”). The Court held that Starr’s refund claim was not
subject to judicial review because, in order to grant Starr its requested refund, the Court would

4

need to “dictate the outcome” of the Treaty’s mandatory consultation with the Swiss competent
authority and would thereby “impinge upon the Executive’s prerogative to engage in that
[consultation] process.” Starr Int’l Co. v. United States, 2016 WL 410989, at *2 (D.D.C. Feb. 2,
2016). The Court nonetheless permitted Starr to amend its complaint with a claim that the
USCA’s determination was arbitrary and capricious under the Administrative Procedure Act
(“APA”). Id. The Court ultimately ruled that the USCA’s determination did not violate the
APA, and Starr has appealed that ruling. Starr Int’l Co. v. United States, 2017 WL 3491802, at
*17 (D.D.C. Aug. 14, 2017).
Meanwhile, in 2015, the Government amended its answer to Starr’s complaint before this
Court by adding a counterclaim seeking to recover the 2008 refund as erroneously issued. Citing
IRS regulations, the Government contended that the USCA’s denial of benefits was not
administratively reviewable by the Ogden Service Center, see Rev. Proc. 2006-54 § 12.04, 20062 C.B. 1035, and so the Ogden Service Center did not have jurisdiction to issue the refund in the
first place. As the Government recognizes, because it brought suit to recover the erroneous
refund almost four years after it was issued, its counterclaim would be untimely under the default
two-year statute of limitations set forth in 26 U.S.C. § 6532(b). Thus, for the Government’s
counterclaim to succeed, it must prove that Starr induced the IRS to issue the refund “by fraud or
misrepresentation of a material fact”—only then does § 6532(b)’s extended five-year limitations
period apply. Id. The parties have accordingly filed cross-motions for summary judgment on
the issue of whether the Government’s claim is timely.
II.

Standard of Review
Summary judgment is appropriately granted when “the movant shows that there is no

genuine dispute as to any material fact and the movant is entitled to judgment as a matter of

5

law.” Fed. R. Civ. P. 56(a). A factual dispute is “material” if the resolution “might affect the
outcome of the suit under the governing law” and “genuine” if “the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). When deciding a motion for summary judgment, the Court must
“examine the facts in the record and all reasonable inferences derived therefrom in a light most
favorable to the nonmoving party.” Robinson v. Pezzat, 818 F.3d 1, 8 (D.C. Cir. 2016) (citation
omitted).
III. Analysis
The sole issue presented in these cross-motions is whether the Government’s
counterclaim seeking return of the $21 million refund for the 2008 tax year is timely, given that
it was filed four years after the refund was issued. The Government contends that the
counterclaim is subject to § 6532(b)’s extended five-year limitations period, rather than the
default two-year period, because Starr made three misrepresentations of material fact that
induced the refund: (1) it indicated on line 9 of the Form 1120-F that it was entitled to a $21
million refund; (2) it failed to notify Mr. Kosterlitz at the USCA that it was filing the refund
request; and (3) it failed to notify the Ogden Service Center that it lacked jurisdiction to issue a
refund. The Court finds that none of these acts or omissions were material misrepresentations
for purposes of the statute of limitations.
Before turning to each of these alleged misrepresentations, however, it is important to
first explain the Government’s underlying theory of why they qualify as misrepresentations.
Crucial to this theory is an IRS regulation—Revenue Procedure 2006-54—which sets out
procedures for requesting treaty benefits from the USCA, and specifically section 12.04 of that
regulation, which makes clear that denials of discretionary treaty benefits are final and not

6

subject to administrative review. In the Government’s view, section 12.04 does more than
foreclose a formal administrative appeal of the USCA’s determinations: it also prevents a
taxpayer from filing a refund claim that does not “take that directive into account.” Hr’g Tr. at
25. More particularly, while the Government concedes (for reasons explained below) that Starr
acted properly in filing a refund claim in the first place, it urges that section 12.04 required Starr
to construct its claim in a way that would ensure it would not be granted. Otherwise, Starr would
be effectively seeking administrative review of the USCA’s determination in violation of the
regulation. Thus, according to the Government, Starr should have taken three particular
precautions to ensure that the refund would not be granted, and its failure to take them amounted
to misrepresentations of material fact.
This theory has a core deficiency that spells trouble for the Government’s case: A refund
claim cannot be naturally understood as an attempt to obtain administrative review of a
regulatory decision related to the claimed amount. Rather, refund claims are non-adversarial
mechanisms for taxpayers to seek money the IRS has withheld. And, as the Government
concedes, filing a refund claim is an absolute, jurisdictional prerequisite to seeking judicial
review of an IRS refund determination. 26 U.S.C. § 7422(a); see also Bartley v. United States,
123 F.3d 466, 468 (7th Cir. 1997). Specifically, while taxpayers generally have the right to sue
the government in federal court for a refund of taxes “erroneously or illegally assessed or
collected,” see 26 U.S.C. § 7422; 28 U.S.C. § 1346, the taxpayer must submit an administrative
refund claim to the IRS before filing such an action. If a taxpayer instead proceeds directly to
federal court, the court will lack subject matter jurisdiction and must dismiss the action. See
Cohen v. United States, 650 F.3d 717, 731 (D.C. Cir. 2011). Thus, the mere act of filing a

7

refund claim is not a “misrepresentation” in the sense that it improperly seeks administrative
review of the USCA’s determination.
As a result of this (proper) concession, the Government is forced to walk a more
precarious line: the taxpayer may file a refund claim, yet must construct the claim in such a way
so as to avoid having the refund issue—otherwise, there has been a material misrepresentation of
fact in the return. That position is circular (a refund claim impermissibly seeks review of the
USCA’s determination whenever the refund issues) and it is unfair to taxpayers (what if, despite
the taxpayer’s best efforts to ensure the refund is not paid, the refund nevertheless issues?). It
cannot be that section 12.04 imposes a generalized duty on taxpayers to file refund claims that
will not result in refunds.
The case would be different if the taxpayer made some particular misrepresentation
beyond successfully filing a refund claim—for example, by disregarding an express instruction
on Form 1120-F, by ignoring a disclosure requirement created by statute or regulation, or
perhaps by failing to disclose information it understood was necessary for the IRS to reach an
informed decision. Specifically, if Starr had not submitted a statement accompanying its Form
1120-F explaining the USCA’s denial of discretionary benefits—or its statement had omitted key
information—this case would be more like Lane v. United States, 286 F.3d 723 (4th Cir. 2002).
There, the Fourth Circuit found a material misrepresentation where a taxpayer in his refund
claim characterized payments as “compensation” rather than “gifts,” yet omitted the “critical fact
that [taxpayer] thought of the payments as gifts and so characterized them on his [prior] gift tax
returns.” Id. at 732. This omission, the court held, was at least grossly negligent, and thus it
triggered § 6532(b)’s extended limitations period. Id. at 732–33. The Government alleges no

8

similar failure here, as Starr attached a fulsome statement that repeatedly highlighted the
USCA’s denial.1
With that context, the Court will now turn to the three specific misrepresentations that the
Government contends Starr made beyond merely filing a refund claim.2
A. First Alleged Misrepresentation: Starr Should Have Requested $0 on Its Refund or
Left Line 9 Blank
The Government argues that Starr’s “representation on line 9 of its return that it was due
a refund of over $21 million was a misrepresentation of material fact.” Gov’t’s Cross-Mot.
Summ. J. & Opp’n 33 (ECF No. 95). In the Government’s view, even if Starr had to file the
request to preserve its ability to seek judicial review of the USCA’s treaty benefits
determination, it should have either requested $0 or left line 9 of the form blank. According to
the Government, taking “this precaution would have allowed [Starr] to litigate the merits of the
USCA denial determination in court” without inducing the Ogden Service Center to actually
issue the refund. Id. at 36. While it is true that requesting $0 or leaving line 9 blank may have in
fact prevented the Ogden Service Center from issuing the refund, Starr’s decision to note the

1

The Government’s theory might also be more compelling if there were evidence that
Starr knew that the Ogden Service Center would not review the attached statement in evaluating
its claim. But there is no such evidence in the record, and in its absence the Court is not willing
to assume that Starr was somehow trying to game the system. Quite the contrary, the
instructions accompanying Form 1120-F require the taxpayer to submit a statement along the
lines of what Starr provided. See Starr’s Mot. Summ. J. on Counterclaim Ex. 11, at 3 (ECF No.
80) (requiring corporation to attach a “statement that describes the basis for the claim for refund”
and “[a]ny additional documentation to support the claim”).
2

Also coloring the disputes regarding these three alleged misrepresentations is a broader
debate about what sort of mental state must accompany an action or omission for it to be a
“misrepresentation.” While the resolution of this question may be important in certain cases, it is
not here. The Court finds that—as a matter of undisputed fact—none of Starr’s actions or
omissions were misrepresentations at all, let alone negligent, grossly negligent, or reckless ones.
9

amount it believed it was owed on line 9 of its 1120-F was not a misrepresentation of material
fact.
First, Starr was required to report the full amount it believed it was owed according to the
IRS’s own regulations and instructions. Treasury Regulations require that refund claims
“contain[] a statement setting forth the amount determined as an overpayment.” Treas. Reg. §
301.6402-3(a)(5). Starr also followed the plain instructions on Form 1120-F, which ask the
taxpayer to “enter amount overpaid” in line 9 of the form. Starr’s Mot. Summ. J. on
Counterclaim Ex. 1, at 12. Accepting the Government’s argument would imply that taxpayers—
many of whom are less sophisticated as Starr—should ignore this plain instruction, lest they be
accused of making a misrepresentation. See Br. of Leslie Book et al. as Amicus Curiae Supp.
Counterclaim-Def. (ECF No. 106).
The surrounding law and the Government’s litigation strategy in other cases also
illustrate why it would have been imprudent for Starr to ask for a refund of $0 or leave line 9
blank. The Government has argued in other cases that a taxpayer cannot ask for more than they
initially requested in the refund request if they are later successful in challenging the IRS’s
determination. This argument is drawn from the “variance doctrine,” which is based on a
Treasury Regulation that prohibits judicial consideration of any basis for a refund that was not
raised at the time the refund was requested. Treas. Reg. § 301.6402-2(b)(1) (“No refund or
credit will be allowed after the expiration of the statutory period of limitation applicable to the
filing of a claim therefor except upon one or more of the grounds set forth in a claim filed before
the expiration of such period.”); see Cencast Servs., L.P. v. United States, 729 F.3d 1352, 1367
(Fed. Cir. 2013) (holding that “new claims or theories raised subsequent to the initial refund
claim are not permitted where they substantially vary from the theories initially raised in the

10

original claim for refund”); Smith v. United States, 2006 WL 1984646, at *5 (W.D. Pa. July 13,
2013) (Government arguing that a court may not award a greater amount than sought in the claim
for refund). The Government has also challenged taxpayers’ ability to obtain refunds where they
did not list the amount to be refunded. See, e.g., Wagner v. United States, 2003 WL 691029, at
*5 (M.D. Fl. Jan. 21, 2003) (holding taxpayer’s refund claim invalid because it failed to list an
amount to be refunded).3 Based on the Government’s previous litigation strategy, it would have
been irresponsible for Starr to request $0 or leave line 9 blank—either action may have
precluded it from later seeking $21 million if this Court (or an appeals court) had ruled in its
favor on the treaty benefits issue.
The Government argues that to counter this effect, Starr could have included attachments
explaining why it put $0 on line 9. Gov’t’s Reply Supp. Mot. Summ. J. on Counterclaim 13
(ECF No. 102). At least in theory, this would have prevented a court from applying the variance
doctrine to preclude Starr from receiving a refund to which it was entitled. But regardless of
whether it had included an explanation, Starr would have ended up in one of the following
positions had it written $0 on line 9: (1) the IRS would “grant” the $0 request, in which case
Starr has no further right to seek the $21 million it believes it is owed; or (2) the IRS would deny
the refund claim, in which case it could at least argue (as it has in the past) that Starr cannot seek

3

The Government has also taken the position that a taxpayer cannot ask for a higher
refund than the initial request after the time for filing a refund claim has expired. For instance, in
Keneipp v. United States, 184 F.2d 263 (D.C. Cir. 1950), the Government sought to invalidate a
taxpayer’s second refund claim filed outside the limitations period, which added to an original
refund claim filed within the limitations period. Id. at 267. Though the D.C. Circuit rejected this
position, it is another example of the Government challenging a taxpayer’s ability to recover
more than it claimed in its initial, timely refund request.
11

more than it initially requested. Either way, Starr would have risked not being able to receive its
$21 million refund had a court agreed that it was entitled to treaty benefits.
In the end, the amount of money Starr requested on line 9 reflects Starr’s colorable legal
position on what it is owed—a position that Starr supported with a thorough statement explaining
the basis for its claim. While it is possible to imagine situations where the dollar amount
requested on line 9 would be a material misrepresentation (e.g., a taxpayer subjectively believed
she was owed $1,000 but instead requested $150,000), here it is not. Starr simply stated the
amount it would be owed if it ultimately obtained treaty benefits through this litigation. And
Starr’s position was (and continues to be) that it is entitled to those benefits. The IRS is of
course free to disagree and decline to issue the refund, but Starr’s legal position that it was
entitled to that refund despite the USCA’s decision was not a misrepresentation of a fact. Under
the Government’s theory, a taxpayer would be misrepresenting a material fact every time she
asked for a refund the Government believed she was not entitled to. And if that were so, there
would be no need for an extended limitations period for misrepresentations of material fact
because every erroneously issued refund would be the product of a misrepresentation. That
cannot be right.
B. Second Alleged Misrepresentation: Starr Should Have Informed the USCA that
It Was Filing the 2008 Refund Request
The Government next argues that Starr misrepresented a material fact by not informing
the USCA (specifically, Mr. Kosterlitz, the USCA analyst handling Starr’s treaty benefits
request) that it had filed its 2008 refund claim with the Ogden Service Center. The Government
has good reason to believe that informing Mr. Kosterlitz would have prevented the Ogden
Service Center from issuing the refund because it was Mr. Kosterlitz who called the Ogden
Service Center in 2010 and prevented it from issuing the 2007 refund. Starr’s Mot. Summ. J. on

12

Counterclaim Ex. 3. However, Starr was under no legal obligation to inform the USCA that it
had filed the 2008 refund claim, and its failure to do so was not a misrepresentation of material
fact.
The Government urges that section 4.08 of Revenue Procedure 2006-54 imposes such a
duty. That provision states:
[1] The taxpayer must keep the U.S. competent authority informed of all material
changes in the information or documentation previously submitted as part of, or in
connection with, the request for competent authority assistance. [2] The taxpayer also
must provide any updated information or new documentation that becomes known or is
created after the request is filed and which is relevant to the resolution of the issues under
consideration. (Emphasis added.)
Specifically, the Government argues that filing the refund claim constituted a “material change”
in the information Starr had previously sent the USCA within the meaning of the first sentence of
section 4.08. It also argues that the refund claim was “updated information” within the meaning
of the second sentence of the regulation. The Court disagrees on both counts.
For one, the second sentence of section 4.08 does not require taxpayers to keep the
USCA apprised of information after the USCA has adjudicated a request for treaty benefits, as
the text explicitly refers to information relevant to “issues under consideration.” When Starr
filed its refund claim for 2008, the USCA had already issued its final decision, so no issues
related to the USCA’s benefits determination remained “under consideration.” Thus, the second
sentence of 2006-54 did not compel Starr to inform the USCA about its filing.
The Government argues that, nevertheless, Starr should have updated the USCA based on
the first sentence of section 4.08. In its view, the 2008 refund claim was a material change “in
connection with” a request for competent authority assistance because it effectively challenged
the USCA’s denial of benefits. This argument also fails. The regulation is clearly aimed at
requiring the disclosure of changes that are relevant specifically to the USCA’s decisionmaking

13

process, not to the IRS generally. And there is no suggestion that the existence of Starr’s refund
claim would in any way have affected the USCA’s treaty benefits determination—which, as just
explained, was completed by the time Starr filed its 2008 refund request. Rather, to the extent
that informing the USCA would have had any effect, it would be because it would have spurred
one official, Mr. Kosterlitz, to halt the payment of a refund from the Ogden Service Center. This
is not the sort of disclosure that section 4.08 compels.4
Moreover, while the plain text of the first sentence of section 4.08 is less clear than the
second sentence with respect to the timing of required disclosures, the regulation as a whole is
more naturally read to require a taxpayer to keep the USCA apprised of material changes while it
makes its determination, and not after. Forcing the taxpayer to keep the competent authority
apprised of changes indefinitely—even after it has made its decision—would impose a
significant burden on the taxpayer and defy common sense. The regulation therefore did not
impose a duty on Starr to disclose to the USCA that it had filed its refund claim with the IRS.
C. Third Alleged Misrepresentation: Starr Should Have Informed the Ogden
Service Center That It Did Not Have Jurisdiction to Overturn the USCA’s
Determination and Issue the Refund
The Government’s third alleged misrepresentation is that Starr did not affirmatively
inform the Ogden Service Center that it lacked jurisdiction to issue the refund. But no statute,
regulation, or IRS instruction requires taxpayers to inform the IRS of its own jurisdictional
boundaries. And absent a duty to take this step, failing to do so is not a misrepresentation. See,

4

Indeed, the Revenue Procedures themselves list the kind of “information” the USCA
requires from the taxpayer. That list includes items that would help the USCA make its
determination, such as a description of the issues and any prior discussions the taxpayer may
have had with the IRS Appeals Office. See Rev. Proc. 2006-54 § 4.05.

14

e.g., In re Time Warner Inc. Sec. Litig., 9 F.3d 259, 267 (2d Cir. 1993) (“[A]n omission is
actionable under the securities laws only when the corporation is subject to a duty to disclose the
omitted facts.”); Weisblatt v. Minn. Mut. Life Ins. Co., 4 F. Supp. 2d 371, 380 (E.D. Pa. 1998)
(“[A]n omission or nondisclosure is only actionable under the [tort] of negligent
misrepresentation if there is a duty to speak”).
Absent any concrete duty to inform the IRS of its jurisdictional limits, it would be
extraordinary for the Court to invent one of its own accord. And the situation here is not so
extraordinary that it warrants invention: As Starr’s counsel noted in the hearing, there are
numerous other contexts in which the IRS processes refund claims for which it lacks authority to
actually issue a refund. For example, the IRS National Office issues “Technical Advice Memos”
setting forth legal conclusions that reflect the IRS’s final position on particular tax issues. Like
the USCA’s determination here, the conclusions in these memos are not administratively
reviewable by other entities within the IRS. Treas. Reg. § 301.6110-2(f); Tax Analysts v. IRS,
117 F.3d 607, 616 (D.C. Cir. 1997). Yet when a taxpayer who has received an unfavorable
Technical Advice Memo files a refund claim in order to preserve her right to appeal the adverse
legal conclusion in federal court, she is under no obligation to call the IRS and tell them they do
not have the authority to overturn the IRS National Office’s decision. Taxpayers are not
obligated to predict how the IRS’s internal procedures could potentially lead it to issue an
erroneous refund, and then take affirmative steps to inform the IRS of its own jurisdictional
limits.
Finally, the Government does not explain how Starr should have informed the Ogden
Service Center that it did not have jurisdiction to issue the refund. If it had included this
information in the refund claim itself, it may not have made a difference: the Government

15

acknowledges that its review of Form 1120-F “consists mainly of verifying certain line items”
rather than reading the return. Gov’t’s Cross-Mot. Summ. J. & Opp’n 19. In other words,
because IRS employees were trained to only look at a very specific part of the refund claim, it is
far from clear that Starr’s failure to inform the Ogden Service Center that it did not have
jurisdiction to issue the refund “induced” it to erroneously issue the refund. The only other
alternative would have been for Starr to try to contact the Ogden Service Center some other way,
such as via telephone or email, and hope the information got to the right person. It would be
unreasonable to impose a duty on taxpayers to take matters into their own hands and find a way
to tell the Ogden Service Center about its own regulatory limitations in order to avoid
misrepresenting a material fact.
IV. Conclusion
Starr properly completed and filed its 2008 Form 1120-F, accurately indicating the
amount it believed it was due while repeatedly alerting the IRS to the fact that the USCA had
denied it treaty benefits. The Ogden Service Center’s erroneous payment of the refund claim
does not mean that Starr misrepresented a material fact. True, Starr could have gone above and
beyond its legal obligations by contacting someone who would have personally ensured that the
refund would not be issued, or by risking its ability to later file a refund suit by claiming a $0
refund, or by declining to file the refund at all. But its failure to take such precautionary
measures was not a misrepresentation for purposes of § 6532(b).5 The Court will therefore apply

5

Having concluded that Starr did not make any misrepresentations within the meaning of
the statute, it need not resolve Starr’s alternative argument that any alleged misrepresentations
were immaterial to the IRS’s decision to award a refund.
16

the standard two-year statute of limitations to the Government’s counterclaim, rendering it
untimely.
Accordingly, the Court will grant Starr’s motion for summary judgment on the
Government’s counterclaim (ECF No. 80) and will deny the Government’s cross-motion (ECF
No. 95). A separate Order will accompany this Memorandum Opinion.

CHRISTOPHER R. COOPER
United States District Judge
Date: January 31, 2018

17