- Two Italian pension funds challenged IRS refund recoupment in U.S. Tax Court, citing the U.S.–Italy tax treaty.
- The disputed deficiencies total nearly $1.8 million for dividend-withholding-tax refunds issued for tax year 2019.
- The court must decide whether the funds qualify for treaty nondiscrimination protection compared with U.S. pension arrangements.
Two Italian pension funds have asked the U.S. Tax Court to block the recovery of dividend-withholding-tax refunds, arguing that the Internal Revenue Service (IRS) violated the U.S.–Italy tax treaty’s nondiscrimination clause.
The dispute concerns refunds issued for tax year 2019. The agency sent both funds Notices of Deficiency on May 5, 2026, seeking to recover money paid in 2023.
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One petitioner, Fondo Pensione Alifond, serves workers in Italy’s food industry. The other, Arca Previdenza Fondo Pensione Aperto Comparto Altacrescita, is an open pension fund.
The notices challenge refunds the funds had already received. The petitions put the treaty’s protection against discriminatory treatment at the center of the dispute.
The funds are contesting the deficiency determinations in Tax Court. That challenge comes before the agency can collect the disputed amounts.
The fight is over recapture. It is not described as an ordinary new tax assessment.
The notices put nearly $1.8 million in dispute
| Fund | Description | Disputed deficiency |
|---|---|---|
| Fondo Pensione Alifond | Occupational pension fund for Italy’s food-industry workers | $660,500 |
| Arca Previdenza Fondo Pensione Aperto Comparto Altacrescita | Open pension fund managed by Arca Fondi SGR S.p.A. | $1.1 million |
Together, the deficiencies total nearly $1.8 million.
The treaty claim turns on how the funds compare with U.S. plans
The petitions invoke the treaty’s nondiscrimination article. The funds argue that the agency’s effort to reclaim the refunds treats them less favorably than a comparable U.S. pension arrangement.
That position puts two questions before the court: whether the funds qualify for the treaty protection they claim, and whether their circumstances match those of U.S. pension funds for purposes of the provision. The case will turn on treaty interpretation and the structure of each fund.
Treaty nondiscrimination provisions can affect whether a taxpayer receives treatment different from domestic-law rules, when the taxpayer qualifies for that protection. The funds’ argument rests on that treaty framework; the petitions do not establish that the funds have already won the dispute.
The case also involves the interaction between U.S. dividend withholding taxes and treaty-based relief. Foreign pension funds may seek treaty relief from U.S. withholding, while the agency can later revisit whether a refund claim was correct under domestic law and the treaty.
The notices concern returns for one tax year, and the refund payments came later. That timing frames the controversy as a review of prior relief, rather than a dispute over a newly imposed withholding charge.
The court has not decided whether the funds qualify
The petitions place the deficiency determinations before the U.S. Tax Court. The funds are challenging the amounts before the agency can collect them, but filing petitions does not guarantee that the court will grant relief.
The legal comparison is specific to these funds. The court will have to assess their structures against the treaty’s nondiscrimination protection and determine whether they are similarly situated to U.S. pension arrangements.
That inquiry will decide whether the treaty claim can defeat the agency’s attempt to recover the refunds. Both petitions remain pending in Tax Court.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional or CPA about your specific situation.
