This article delves into a recent decision by the United States Court of Federal Claims in Estate of Robert F. Armitage, Deceased, Robert H. Armitage and Adam M. Green, Executors v. The United States, No. 24-1687, filed April 7, 2025. This case serves as a critical reminder for tax practitioners regarding the fundamental jurisdictional requirements that taxpayers must satisfy before seeking judicial intervention in tax refund matters. Understanding these prerequisites is paramount in advising clients and ensuring the proper pursuit of refund claims.

Factual Background

The matter originated with Robert F. Armitage ("Mr. Armitage") filing a Complaint against the United States seeking a federal tax refund for the 2017 tax year. His claim was predicated on a purported right to a foreign tax credit. Mr. Armitage had initially filed his 2017 individual income tax return (Form 1040) on November 5, 2018, reporting an adjusted gross income of $69,841.00 and listing himself as the sole owner of a Canadian corporation, Armbo Consultants, Inc..

Subsequently, on December 26, 2019, Mr. Armitage filed an amended tax return for 2017 (Form 1040X). This amended return reported a significant increase in gross income of $779,966.00, resulting in a $251,241.00 tax increase attributed to the transition tax under 26 U.S.C. § 965. This section, enacted as part of the Tax Cuts and Jobs Act of 2017, imposed a one-time tax on accumulated foreign earnings to encourage repatriation of foreign investments.

On his amended return, Mr. Armitage claimed an indirect foreign tax credit of an equal amount ($251,241.00) under 26 U.S.C. § 960, effectively neutralizing the transition tax liability. He also elected to pay the net tax liability in installments pursuant to 26 U.S.C. § 965(h)(1). Additionally, the amended return included an $877.00 net investment income tax under 26 U.S.C. § 1411, which Mr. Armitage remitted with the amended return.

The Internal Revenue Service (IRS) initiated an appraisal of an additional tax of $252,118.00 (the aggregate of the transition tax and net investment income tax) in August 2020 and opened an examination. Following Information Document Requests and Mr. Armitage’s failure to provide the requested information, the IRS issued a Report of Income Tax Examination Change (Form 4549-A) in August 2022, allowing a foreign tax credit of $10,106.00 and noting a $0.00 balance.

On October 18, 2022, the IRS officially denied Mr. Armitage’s “refund” claim, rejecting the Section 960 indirect foreign tax credits. The IRS cited the lack of an election statement requirement under 26 U.S.C. § 962 and the late filing of the amended return beyond the extended due date without proper substantiation as reasons for disallowance.

Mr. Armitage subsequently filed an action in the Court of Federal Claims on October 18, 2024, alleging his entitlement to a tax refund for the 2017 taxable year under 26 U.S.C. § 7422(a), arguing that his amended return satisfied the requirement for filing a claim with the Secretary. Following Mr. Armitage’s passing, his executors were substituted as the Plaintiff.

Taxpayer’s Request for Relief

The Estate of Robert F. Armitage, through its executors, sought to recover a 2017 federal tax refund based on the Section 960 indirect foreign tax credit claimed on the amended tax return. The plaintiff argued that the amended federal income tax return, where the credit was claimed, satisfied the administrative claim requirement under 26 U.S.C. § 7422(a). Despite not having paid the full amount of the assessed transition tax due to the offsetting foreign tax credit claim, the plaintiff contended that this should be treated as a "denial of a refund" claim.

Court’s Analysis of the Law

The United States moved to dismiss the Complaint for lack of subject-matter jurisdiction under Rule 12(b)(1) of the Rules of the Court of Federal Claims (RCFC). The core of the government’s argument rested on Mr. Armitage’s failure to prepay his assessed tax liability and adhere to the prerequisites for filing an administrative claim with the IRS as outlined in 26 U.S.C. § 7422(a).

The court began its analysis by reiterating the fundamental principle that the burden of establishing subject-matter jurisdiction lies with the plaintiff, citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992) and Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 748 (Fed. Cir. 1988).

The court then addressed the jurisdictional requirements for tax refund suits under the Tucker Act. Citing United States v. Clintwood Elkhorn Mining Co., 553 U.S. 1, 4 (2008), the court emphasized two key prerequisites:

The full payment rule: This requires the plaintiff to have fully paid the principal tax deficiency before filing suit. The court cited 26 U.S.C. § 6511(a), which imposes a statute of limitations from when the tax was paid, as well as Flora v. United States, 357 U.S. 63, 68 (1958), Shore v. United States, 9 F.3d 1524, 1526–27 (Fed. Cir. 1993), and Diamond v. United States, 603 F. App’x 947, 950 (Fed. Cir. 2015).
The due filing of a tax refund claim with the IRS: This requirement is explicitly stated in 26 U.S.C. § 7422(a), which provides that no suit shall be maintained for the recovery of any tax alleged to have been erroneously assessed until a claim for refund has been "duly filed" with the Secretary of the Treasury. The court noted that this administrative filing requirement is jurisdictional, citing Brown v. United States, 22 F.4th 1008, 1011 (Fed. Cir. 2022) and United States v. Dalm, 494 U.S. 596, 609–10 (1990).

The court also briefly addressed the argument regarding the propriety of the IRS assessment, stating that this issue goes to the merits of Mr. Armitage’s claims and cannot be addressed at the jurisdictional stage. Furthermore, the court clarified that it lacks jurisdiction over disputes regarding the Declaratory Judgment Act, citing 28 U.S.C. § 2201.

Application of the Law to the Facts

Applying these legal principles, the court found that Mr. Armitage had failed to meet the crucial full payment rule. While Mr. Armitage asserted that he had "paid all tax due per his Amended Return," the court emphasized that this payment was based on his own calculations, which included the offsetting foreign tax credit. The court underscored that Mr. Armitage was required to pay the $252,118.00 tax assessment made by the IRS before challenging its validity in court, citing Actavis Lab’ys FL, Inc. v. United States, ___ F.4th. __, No. 2023-1320, 2025 WL 876911, at *1 (Fed. Cir. Mar. 21, 2025). The court stated that Mr. Armitage’s self-assessed liability did not supersede the IRS’s official assessment.

Regarding the $0.00 balance reflected on some tax documents, the court deemed it immaterial to the jurisdictional issue because Mr. Armitage’s dispute was essentially about challenging a tax liability without having paid it. The court reiterated that it could not award a refund for money that was never actually paid, citing Flander v. United States, 737 Fed. Appx. 530, 532 (Fed. Cir. 2018) and Ackerman v. United States, 643 F.Supp.2d 140, 146 (D.D.C. 2009). The only potential relief would be a declaratory judgment on the tax liability, which the court lacks jurisdiction to issue under 28 U.S.C. § 2201, citing Rice v. United States, 31 Fed. Cl. 156, 164 (1994), aff’d, 48 F.3d 1236 (Fed. Cir. 1995).

Court’s Conclusions

Based on the foregoing analysis, the Court of Federal Claims concluded that it lacked subject-matter jurisdiction over Mr. Armitage’s claim due to his noncompliance with jurisdictional prerequisites, specifically the full payment rule. Consequently, the court granted the United States’ Motion to Dismiss. The decision reinforces the well-established principle that taxpayers seeking a refund in the Court of Federal Claims must first fully pay the disputed tax liability and duly file an administrative claim with the IRS, citing Skillo v. United States, 68 Fed. Cl. 734, 740–41 (Fed. Cl. 2005).

Implications for Tax Practitioners

This case serves as a critical reminder for tax professionals advising clients on potential tax refund claims. It underscores the absolute necessity of adhering to the jurisdictional requirements for bringing suit in the Court of Federal Claims. Specifically, practitioners must ensure that clients have fully paid the assessed tax liability before pursuing a refund claim in this forum. The existence of offsetting credits or a dispute regarding the validity of the assessment does not circumvent this fundamental requirement. Furthermore, properly and timely filing an administrative refund claim with the IRS, in accordance with 26 U.S.C. § 7422(a) and relevant regulations, remains an indispensable prerequisite. Failure to meet these jurisdictional hurdles will result in the dismissal of the taxpayer’s case, regardless of the potential merits of the underlying tax dispute. This case highlights the importance of meticulous planning and adherence to procedural requirements in tax controversy matters.

Prepared with the assistance of NotebookLM.