Rev. Rul. 61-11

Advice has been requested whether S.M. 5632, C.B. V-I, 193 (1926), still represents the position of the Internal Revenue Service insofar as it allows refunds of taxes that were paid by an Indian superintendent or other officer of the United States on tax-exempt income directly derived from allotted and restricted Indian lands to be made without regard to the statute of limitations.

Revenue Ruling 56-342, C.B. 1956-2, 20, in accordance with the decision of the Supreme Court of the United States in Squire v. Horton Capoeman et ux. , 351 U.S. 1, Ct. D. 1796, C.B. 1956-1, 605, holds that income held in trust for or received by the patent holder which is derived directly from allotted and restricted Indian lands while such lands are held by the United States, as trustee, in accordance with section 5 of the General Allotment Act of 1887, 24 Stat. 388, as amended, is exempt from Federal income tax.

Section 6511(a) of the Internal Revenue Code of 1954 provides, in part, that a claim for credit or refund of an overpayment of any tax imposed in respect of which tax the taxpayer is required to file a return shall be filed by the taxpayer within three years from the time the return was filed or two 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 two years from the time the tax was paid.

S.M. 5632 holds, in part, that the Commissioner of Internal Revenue may refund an overpayment of income tax to the Indian superintendent, without reference to the statute of limitations, where the tax was paid by the superintendent on income of an Indian ward directly derived from allotted tax-exempt land, out of funds which would eventually belong to the ward. The conclusion that the Government could not plead the statute of limitations in these circumstances was based on the reasoning that for it to do so would be at variance with its obligations as conservator and guardian of such Indian taxpayers.

S.M. 5632 follows an opinion of the Attorney General of the United States dated August 14, 1924, 34 Op. 302, and, as interpreted in G.C.M. 762, C.B. VI-1, 123 (1927), applies only where taxes have been paid by an Indian superintendent or other officer of the United States on behalf of restricted Indians.

The Service has not expressed itself whether the conclusions contained in S.M. 5632 and G.C.M. 762 are still applicable or are no longer being followed. Accordingly, it is held that where a claim for refund is filed for taxes that were paid by an Indian superintendent or other officer of the United States on tax-exempt income directly derived from allotted and restricted Indian lands, the claim may be allowed without reference to the statute of limitations under the circumstances set forth in S.M. 5632 and G.C.M. 762. It should be noted that any refund of taxes properly due should be made to the Indian superintendent for the benefit of the Indian ward or of his successor beneficially entitled to the refund.

S.M. 5632, C.B. V-1, 193 (1926), and G.C.M. 762, C.B. VI-1, 123 (1927), are hereby affirmed.