German Billionaire Schaeffler Loses U.S. Foreign Credit Claim

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By Erin McManus

Billionaire Georg Schaeffler couldn’t tie a $5.17 million U.S. income tax overpayment to a reduction in his German tax liability to take advantage of the extended foreign tax-related refund limitations period.

Schaeffler, a German citizen and U.S. resident with an international auto and industrial parts business, couldn’t attribute the overpayment to adjustments to his foreign tax credit—and use the 10-year limitations period to claim a refund after the original return was filed—because his overpayment was the result of an alternative minimum tax credit carryforward that was subject to, and outside of, a two- or three-year limitations period, a federal trial court in Dallas ruled April 25 ( Schaeffler v. United States , 2017 BL 135942, N.D. Tex., No. 3:15-cv-04090, 4/25/17 ).

Schaeffler’s lower German tax liability reduced his eligible foreign tax credits by $1.5 million, which would have resulted in a net underpayment for the tax year if not for an increased minimum tax credit carried forward from a prior year, said Chief Judge Barbara M.G. Lynn of the U.S. District Court for the Northern District of Texas.

In addition, Schaeffler sought a refund for an overpayment that resulted from the alternative minimum tax credit, a computational credit designed to reduce tax liability because of AMT paid in prior years. Tax code Section 6511(a), under which Schaeffler was claiming the refund, requires a payment of taxes in cash. Schaeffler provided “no authority to indicate that the calculation, or even the claiming, of a minimum tax credit carryforward constitutes a payment for the purposes of § 6511(a),” Lynn said.

Todd Welty of McDermott Will & Emery LLP in Dallas was lead attorney for Schaeffler. Joshua David Smeltzer of the Department of Justice Tax Division was lead attorney for the government.

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To contact the editor responsible for this story: Meg Shreve at

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