Period of limitation on filing claim
(a) Claim for credit or refund of an overpayment of any internal revenue tax imposed by this subtitle or the Virgin Islands income tax law in respect of which tax the taxpayer is required to file a return shall be filed by the taxpayer within 3 years from the time the return was required to be filed (determined without regard to any extension of time) or 2 years from the time the tax was paid, whichever of such periods expires the later, or if no return was filed by the taxpayer, within 2 years from the time the tax was paid.
Limitation on allowance of credit and refunds
(b)
(1) Filing of claim within prescribed period. No credit or refund shall be allowed or made after the expiration of the period of limitation prescribed in subsection (a) of this section for the filing of a claim for credit or refund, unless a claim for credit or refund is filed by the taxpayer within such period.
(2) Limit on amount of credit or refund.
(A) Limit to amount paid within 3 years. If the claim was filed by the taxpayer during the 3-year period prescribed in subsection (a) of this section, the amount of the credit or refund shall not exceed the portion of the tax paid within the 3 years immediately preceding the filing of the claim.
(B) Limit to amount paid within 2 years. If the claim was not filed within such 3-year period, the amount of the credit or refund shall not exceed the portion of the tax paid during the 2 years immediately preceding the filing of the claim.
(C) Limit if no claim filed. If no claim was filed, the credit or refund shall not exceed the amount which would be allowable under subparagraph (A) or (B), as the case may be, if claim was filed on the date the credit or refund is allowed.
Special rules applicable in case of extension of time by agreement
(c) If an agreement under the provisions of section 1161(c)(4) of this title extending the period for assessment of an internal revenue tax imposed by this subtitle or the Virgin Islands income tax law is made within the period prescribed in subsection (a) of this section for the filing of a claim for credit or refund—
(1) Time for filing claim. The period for filing claim for credit or refund or for making credit or refund if no claim is filed, provided in subsections (a) and (b)(1) of this section, shall not expire prior to 6 months after the expiration of the period within which an assessment may be made pursuant to the agreement or any extension thereof under section 1161(c)(4) of this title.
(2) Limit on amount. If a claim is filed, or a credit or refund is allowed when no claim was filed, after the execution of the agreement and within 6 months after the expiration of the period within which an assessment may be made pursuant to the agreement or any extension thereof, the amount of the credit or refund shall not exceed the portion of the tax paid after the execution of the agreement and before the filing of the claim or the making of the credit or refund, as the case may be, plus the portion of the tax paid within the period which would be applicable under subsection (b)(2) of this section if a claim had been filed on the date the agreement was executed.
(3) Claims not subject to special rule. This subsection shall not apply in the case of a claim filed, or credit or refund allowed if no claim is filed, either—
(A) prior to the execution of the agreement or
(B) more than 6 months after the expiration of the period within which an assessment may be made pursuant to the agreement or any extension thereof.
Special rules applicable to income taxes
(d)
(1) Seven-year period of limitation with respect to bad debts and worthless securities. If the claim for credit or refund relates to an overpayment of tax imposed by the Virgin Islands income tax law on account of—
(A) the deductibility by the taxpayer, under section 166 or section 832(c) of the Virgin Islands income tax law, of a debt as a debt which became worthless, or, under section 165(g) of the Virgin Islands income tax law, of a loss from worthlessness of a security; or
(B) the effect that the deductibility of a debt or loss described in subparagraph (A) has on the application to the taxpayer of a carryover—
in lieu of the 3-year period of limitation prescribed in subsection (a) of this section, the period shall be 7 years from the date prescribed by law for filing the return for the year with respect to which the claim is made. If the claim for credit or refund relates to an overpayment on account of the effect that the deductibility of such a debt or loss has on the application to the taxpayer of a carryback, the period shall be either 7 years from the date prescribed by law for filing the return for the year of the net operating loss which results in such carryback or the period prescribed in paragraph (2) of this subsection, whichever expires the later. In the case of a claim described in this paragraph the amount of the credit or refund may exceed the portion of the tax paid within the period prescribed in subsection (b)(2) or (c) of this section, whichever is applicable, to the extent of the amount of the overpayment attributable to the deductibility of items described in this paragraph.(2) Special period of limitation with respect to net operating loss carrybacks.
(A) Period of limitation. If the claim for credit or refund relates to an overpayment attributable to a net operating loss carryback, in lieu of the 3-year period of limitation prescribed in subsection (a) of this section, the period shall be that period which ends with the expiration of the 15th day of the 39th month following the end of the taxable year of the net operating loss which results in such carryback, or the period prescribed in subsection (c) of this section in respect of such taxable year, whichever expires later. In the case of such a claim, the amount of the credit or refund may exceed the portion of the tax paid within the period provided in subsection (b)(2) or (c) of this section, whichever is applicable, to the extent of the amount of the overpayment attributable to such carryback.
(B) Applicable rules. If the allowance of a credit or refund of an overpayment of tax attributable to a net operating loss carryback is otherwise prevented by the operation of any law or rule of law other than section 1492 of this title, relating to compromises, such credit or refund may be allowed or made, if claim therefor is filed within the period provided in subparagraph (A) of this paragraph. If the allowance of an application, credit, or refund of a decrease in tax determined under section 1131(b) of this title is otherwise prevented by the operation of any law or rule of law other than section 1492 of this title, such application, credit, or refund may be allowed or made if application for a tentative carryback adjustment is made within the period provided in section 1131(a) of this title. In the case of any such claim for credit or refund or any such application for a tentative carryback adjustment, the determination by any court, in any proceeding in which the decision of the court has become final, shall be conclusive except with respect to the net operating loss deduction, and the effect of such deduction, to the extent that such deduction is affected by a carryback which was not in issue in such proceeding.
(3) Special rules relating to foreign tax credit.
(A) Special period of limitation with respect to foreign taxes paid or accrued. If the claim for credit or refund relates to an overpayment attributable to any taxes paid or accrued to any foreign country for which credit is allowed against the tax imposed by the Virgin Islands income tax law in accordance with the provisions of section 901 of the Virgin Islands income tax law or the provisions of any treaty to which the United States is a party, in lieu of the 3-year period of limitation prescribed in subsection (a) of this section, the period shall be 10 years from the date prescribed by law for filing the return for the year with respect to which the claim is made.
(B) Exception in the case of foreign taxes paid or accrued. In the case of a claim described in subparagraph (A), the amount of the credit or refund may exceed the portion of the tax paid within the period provided in subsection (b) or (c) of this section, whichever is applicable, to the extent of the amount of the overpayment attributable to the allowance of a credit for the taxes described in subparagraph (A).