Equitable recoupment

Equitable recoupment is a judicially created defense most commonly applied in legal cases in the federal and state tax systems of the U.S..^[1][2] This doctrine can allow, under specific circumstances, the government to defeat a refund claim or a taxpayer to avoid an assessment on the basis of an past underpayment or overpayment that is outside the statute of limitations period.^[3]

Although many of the applications are in cases involving tax law, it also has been applied to cases where revenue from the use of city property had been overpaid in terms of revenue due to the city, as was found in Grace v. City of Carlsbad.^[4]