(A) Except as otherwise provided in this section, taxes must be determined and assessed within thirty-six months from the date the return or document was filed or due to be filed, whichever is later.
(B) Except as otherwise provided in this section:
(1) if a tax, except for a penalty described in item (2), is not required to be remitted with a return or document, the amount of taxes must be determined and assessed within thirty-six months after the later of the date the tax was due or the first date on which any part of the tax was paid; and
(2) a penalty that is not associated with the assessment of a tax must be determined and assessed within thirty-six months after the date of the violation giving rise to the penalty.
(C) Taxes may be determined and assessed after the thirty-six month limitation if:
(1) there is fraudulent intent to evade the taxes;
(2) the taxpayer failed to file a return or document as required by law;
(3) there is a twenty percent understatement of the total of all taxes required to be shown on the return or document. The taxes in this case may be assessed at any time within seventy-two months from the date the return or document was filed or due to be filed, whichever is later. For the purpose of this item, the total of all taxes required to be shown on the return is the total of all taxes required to be shown on the return before any reduction for estimated payments, withholding payments, other prepayments, or discount allowed for timely filing of the return and payment of the tax due, but that amount must be reduced by another credit that may be claimed on the return;
(4) the person liable for any taxes consents in writing, before the expiration of the time prescribed in this section for assessing taxes due, to the assessment of the taxes after the time prescribed by this section; or
(5) the tax is a use tax imposed under Chapter 36 of this title, or a local use tax administered and collected by the department on behalf of a local jurisdiction, and the assessment of the use tax is the result of information received from, or as a result of exchange agreements with, other state or local taxing authorities, regional or national tax administration organizations, or the federal government. The use taxes in this case may be assessed at any time within twelve months after the department receives the information, but no later than seventy-two months after the last day the use tax may be paid without penalty.
(D)(1) Taxes due to an understatement of taxes resulting from adjustments of the Internal Revenue Service also may be determined and assessed after the thirty-six month limitation if:
(a) except as provided in subitem (b), in the case of income, estate, and generation skipping transfer taxes, the taxes are assessed before one hundred eighty days after the department receives notice from the taxpayer of a final determination of a tax adjustment made by the Internal Revenue Service; or
(b) in the case of individual income tax returns described in subitem (4)(c) below, the taxes are assessed before one hundred eighty days after the department receives notice of the tax adjustment from the Internal Revenue Service or the taxpayer, whichever occurs first.
(2) A person, including a pass-through entity, who conducts a trade or business, other than a trade or business of being an employee, shall notify the department in writing of all changes in taxable income reported to the Internal Revenue Service when the taxable income is changed by the Internal Revenue Service. Notification to the department must be made before one hundred eighty days after a final determination of a tax adjustment is made by the Internal Revenue Service.
(3) Notwithstanding a restriction on filing a claim for refund provided in subsection (F), a person may file a claim for refund resulting from an overpayment due to changes in taxable income made by the Internal Revenue Service, if the claim for refund is filed no later than one hundred eighty days after the date a final determination of a tax adjustment is made by the Internal Revenue Service. The refund described in this subsection applies only to the overpayment of taxes resulting from adjustments of the Internal Revenue Service.
(4) For the purposes of this subsection (D):
(a) the date the Internal Revenue Service makes a final determination of a tax adjustment is the federal assessment date;
(b) underpayments and overpayments resulting from adjustments of the Internal Revenue Service include both the year for which the adjustments were made and other tax years affected by the adjustments; and
(c) the individual income tax returns referred to in subsection (D)(1)(b) are those individual income tax returns that do not include income, deductions, or credits from a trade or business, other than the trade or business of being an employee.
(E) A tax may not be collected by levy, warrant for distraint, or proceedings in court, unless the:
(1) levy, warrant for distraint, or proceedings in court were begun within ten years after the assessment of the tax;
(2) taxpayer has agreed to extend this period; or
(3) running of this period is suspended in accordance with this section.
For property tax purposes, the "assessment of the tax" occurs on the later of the last day the tax may be paid without penalty or the date of the tax notice.
(F)(1) Except as provided in subsection (D), claims for credit or refund must be filed within three years from the time the return was filed, or two years from the date the tax was paid, whichever is later. If no return was filed, a claim for credit or refund must be filed within two years from the date the tax was paid. A credit or refund may not be made after the expiration of the period of limitation prescribed in this item for the filing of a claim for credit or refund, unless the claim for credit or refund is filed by the taxpayer or determined to be due by the department within that period.
(2) If the claim was filed by the taxpayer during the three-year period prescribed in item (1), the amount of the credit or refund may not exceed the portion of the tax paid within the period, immediately preceding the filing of the claim, equal to three years plus the period of any extension of time for filing the return.
(3) If the claim was not filed within the three-year period, the amount of the credit or refund may not exceed the portion of the tax paid during the two years immediately preceding the filing of the claim.
(4) If no claim was filed, the credit or refund may not exceed the amount which would be allowable under item (2) or (3), as the case may be, as if a claim were filed on the date the credit or refund is allowed.
(5) For the purposes of this subsection:
(a) A return filed before the last day prescribed for the filing is considered as filed on the last day. Payment of any portion of the tax made before the last day prescribed for the payment of the tax is considered made on the last day. The last day prescribed for filing the return or paying the tax must be determined without regard to any extension of time.
(b) Any tax actually withheld at the source in respect of the recipient of income, is considered to have been paid by the recipient on the last day prescribed for filing his return for the taxable year, determined without regard to any extension of time for filing the return, with respect to which the taxpayer would be allowed a credit for the amount withheld.
(c) Any amount paid as estimated income tax for any taxable year is considered to have been paid on the last day prescribed for filing the return for the taxable year, determined without regard to any extension of time for filing the return.
(6) In the case of an individual, the running of the period specified in this subsection is suspended for a period of the individual's life during which he is financially disabled. For purposes of this item, an individual is financially disabled if he is unable to manage his financial affairs by reason of a medically determinable physical or mental impairment that is expected to result in death or which has lasted or is expected to last for a continuous period of not less than twelve months. An individual must not be treated as financially disabled for a period during which his spouse or another person is authorized to act on his behalf in financial matters. An individual must not be considered financially disabled unless the following statements are submitted as part of the claim for credit or refund:
(a) a written statement signed by a physician qualified to make the determination that provides the:
(i) name and a brief description of the physical or mental impairment;
(ii) physician's medical opinion that the physical or mental impairment prevented the taxpayer from managing his financial affairs;
(iii) physician's medical opinion that the taxpayer's physical or mental impairment resulted in, or is expected to result in, death, or that it has lasted, or is expected to last, for a continuous period of not less than twelve months; and ( iv) specific time period during which the taxpayer was prevented by the physical or mental impairment from managing his financial affairs, to the best of the physician's knowledge; and
(b) a written statement by the taxpayer or the person signing the claim for credit or refund that the person, including the taxpayer's spouse, was not authorized to act on his behalf in financial matters for the period during which he was unable to manage his own financial affairs. Alternatively, if a person was authorized to act on the taxpayer's behalf in financial matters during part of that period of disability, the statement must contain the beginning and ending dates of the period of time the person was authorized; and
(c) other information the department may require.
The department, in its discretion, may adopt a determination made by the Internal Revenue Service with respect to an individual, and may follow rules issued by the Internal Revenue Service or Department of Treasury with regard to interpreting Internal Revenue Code Section 6511(h).
(G) The running of the period of limitations provided in subsections (A), (B), (C), (D), and (E) of this section is suspended:
(1) for ninety days after the date the taxpayer gives notice of termination of a waiver or extension of the assessment period;
(2) for ninety days after the date of a proposed assessment, property tax assessment notice, or tax notice;
(3) from the date of a proposed assessment, property tax assessment notice, or tax notice, until ninety days after a decision becomes final, if a taxpayer protests the proposed assessment, property tax assessment notice, or tax notice;
(4) from the date when an action is stayed by injunction, order of a court, or statutory prohibition, until ninety days after the injunction or prohibition is lifted; and
(5) during the pendency of a stay ordered by the Taxpayers' Rights Advocate.
HISTORY: 1995 Act No. 60, Section 4D(1); 1996 Act No. 456, Section 5; 1997 Act No. 86, Section 1; 1998 Act No. 386, Section 3; 1998 Act No. 442, Section 4D; 1999 Act No. 114, Section 3; 2000 Act No. 399, Sections 3(U)(1) and (2), eff August 17, 2000; 2001 Act No. 89, Sections 33, 34, eff July 20, 2001, applicable to tax periods beginning after December 31, 1997; 2007 Act No. 110, Section 28.A, eff June 21, 2007; 2007 Act No. 116, Section 34.A, eff June 28, 2007.
Editor's Note
2005 Act No. 17, Section 2, provides as follows:
"This act takes effect upon approval by the Governor and applies for property tax years beginning after 2001. The time limitations provided in Section 12-54-85(F) of the 1976 Code do not apply for purposes of computing refunds pursuant to Section 12-37-220(B)(7) of the 1976 Code as amended in this act."
2007 Act No. 116, Section 34.B, provides as follows:
"This section takes effect upon approval by the Governor and applies to all assessments issued after that date."