Tax refund suits in the Court of Federal Claims require the taxpayer (as plaintiff) to prove both overpayment and the exact amount of the overpayment. The IRS’s denial of a refund claim does not carry the same presumption of correctness that attaches to a notice of deficiency in Tax Court.
International refund cases frequently involve foreign tax credits (IRC § 901), treaty benefits, or withholding taxes. Taxpayers may substantiate foreign tax paid and eligibility for credit or treaty relief.
First, let’s understand the full-payment rule in refund suits before the U.S. Court of Federal Claims. Also, let’s understand how the burden of proving full payment of the tax amount falls entirely on the taxpayer, who should affirmatively establish both the fact and amount of any overpayment.
Jurisdiction requires full payment of the disputed tax before suit (Flora v. United States, 362 U.S. 145 (1960)).
In refund suits before the U.S. Court of Federal Claims (CFC), the taxpayer bears the burden of proof. Here, the taxpayer is required to affirmatively prove the amount overpaid and their entitlement to a refund. The IRS’s original assessment is presumed correct, so the taxpayer must prove otherwise.
When the government asserts counterclaims or penalties, the same allocation of burdens applies as in Tax Court. The IRS should initially support penalties, while the taxpayer may rebut them with evidence of reasonable cause and good-faith reliance on advice. Mere complexity or international character of a transaction is insufficient.
Next, let’s understand the burden of proof in the U.S. District Courts.