IRS Sought Return of $1.8 Million in Pension Refunds
Two Italian pension funds have challenged IRS notices demanding the repayment of dividend withholding tax refunds.
Updated on Oct. 2, 2026 in Taxes
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On May 5, 2026, the IRS issued deficiency notices to two Italian pension funds, seeking to recover $1.8 million in tax refunds that were originally paid out in 2023. The dispute centers on dividend withholding tax refunds issued for the 2019 tax year.
Why it matters
This legal challenge highlights the complex international oversight of cross-border dividend taxation. Households and institutional investors alike must monitor how regulators reconcile previous tax positions when auditing multi-year filings.
The IRS is seeking the recovery of $1.8 million in total refunds, with individual deficiency assessments of $660,500 for Fondo Pensione Alifond and $1.1 million for Arca Previdenza Fondo. These figures stem from tax filings initially processed in 2023.
The players
IRS
The federal agency responsible for tax collection, auditing, and enforcing international tax treaty compliance for US-sourced income.
US Tax Court
The independent judicial body that adjudicates disputes between taxpayers and the IRS regarding tax deficiencies.
Fondo Pensione Alifond
An Italian pension fund currently contesting a $660,500 deficiency assessment in US court.
Arca Previdenza Fondo
An Italian pension fund currently contesting a $1.1 million deficiency assessment in US court.
The details
The IRS issued these notices to reverse refunds previously granted for the 2019 tax year, alleging the funds are not entitled to those specific dividend withholding tax recoveries. In response, the pension funds have filed petitions in the US Tax Court to formally contest the assessments. The court proceedings will determine if the initial IRS payout was erroneous or if the funds correctly applied for the tax relief under applicable treaties.
Timeline
2019: The tax years currently subject to the dividend withholding dispute.
2023: The year the IRS originally processed and paid the tax refunds.
May 5, 2026: The date the IRS issued official Notices of Deficiency to the funds.
Money Landscape
This case sits within the broader regulatory scrutiny of international cross-border tax claims. It follows a multi-year trend of authorities reviewing tax treaty eligibility to ensure consistency with the U.S. dividend withholding tax framework.
For investors with international holdings, this dispute serves as a reminder to maintain rigorous documentation for all foreign tax credit or refund claims. Consult a tax professional regarding how changes in cross-border tax enforcement might impact your specific portfolio.
The takeaway
Large-scale tax recoveries show that even multi-year refunds remain subject to audit and potential clawback by authorities. Investors should ensure all international tax filings are reviewed by a qualified professional to confirm they align with current treaty interpretations.
Further reading
For more on how international tax policies can affect cross-border investments, visit our Taxes section.
Source note: This article includes information reported by Bloombergtax.
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