North Carolina § 105-241 - 7. Procedure for obtaining a refund.

§ 105-241. 7. Procedure for obtaining a refund.

Initiated by Department. - The Department must refund an overpayment made by a taxpayer if the Department discovers the overpayment before the expiration of the statute of limitations for obtaining a refund. Discovery occurs in any of the following circumstances: The automated processing of a return indicates the return requires further review. A review of a return by an employee of the Department indicates an overpayment. An audit of a taxpayer by an employee of the Department indicates an overpayment. Initiated by Taxpayer. - A taxpayer may request a refund of an overpayment made by the taxpayer by taking one of the actions listed in this subsection within the statute of limitations for obtaining a refund. A taxpayer may not request a refund of an overpayment based on a contingent event as defined in G.S. 105-241.6(b)(5) until the event is finalized and an accurate and definite request for refund of an overpayment may be determined. The actions are: Filing an amended return reflecting an overpayment due the taxpayer. Filing a claim for refund. The claim must identify the taxpayer, the type and amount of tax overpaid, the filing period to which the overpayment applies, and the basis for the claim. The taxpayer's statement of the basis of the claim does not limit the taxpayer from changing the basis. Action on Request. - When a taxpayer files an amended return or a claim for refund, the Department must take one of the actions listed in this subsection within six months after the date the amended return or claim for refund is filed. If the Department does not take one of these actions within this time limit, the inaction is considered a proposed denial of the requested refund. Send the taxpayer a refund of the amount shown due on the amended return or claim for refund. Adjust the amount of the requested refund by increasing or decreasing the amount shown due on the amended return or claim for refund and send the taxpayer a refund of the adjusted amount. If the adjusted amount is less than the amount shown due on the amended return or claim for refund, the adjusted refund must include a reason for the adjustment. The adjusted refund is considered a notice of proposed denial for the amount of the requested refund that is not included in the adjusted refund. Deny the refund and send the taxpayer a notice of proposed denial. Send the taxpayer a letter requesting additional information concerning the requested refund. If a taxpayer does not respond to a request for information, the Department may deny the refund and send the taxpayer a notice of proposed denial. If a taxpayer provides the requested information, the Department must take one of the actions listed in this subsection within the later of the following: The remainder of the six-month period. 30 days after receiving the information. A time period mutually agreed upon by the Department and the taxpayer. Action on Request Regarding Statute of Limitations. - When the taxpayer files an amended return or a claim for refund which the Department determines to be outside the statute of limitations, the Department must deny the refund and send the taxpayer a notice of denial. Notice. - A notice of a proposed denial of a request for refund issued pursuant to subsection (c) of this section and a notice of denial of a request for a refund issued pursuant to subsection (c1) of this section must contain the following information: The basis for the denial or the proposed denial. The statement of the basis of the denial does not limit the Department from changing the basis. The circumstances under which a proposed denial will become final. Restrictions. - The Department may not refund any of the following: Until a taxpayer files a final return for a tax period, an amount paid before the final return is filed. An overpayment setoff under Chapter 105A, the Setoff Debt Collection Act, or under another setoff debt collection program authorized by law. An income tax overpayment the taxpayer has elected to apply to another purpose as provided in this Article. An individual income tax overpayment of less than one dollar ($1.00) or another tax overpayment of less than three dollars ($3.00), unless the taxpayer files a written claim for the refund. Effect of Denial or Refund. - A proposed denial of a refund and a denial of a refund by the Secretary are presumed to be correct. A refund does not absolve a taxpayer of a tax liability that may in fact exist. The Secretary may propose an assessment for any deficiency as provided in this Article. History (2007-491, s. 1; 2011-4, s. 1; 2013-414, s. 47(b); 2016-76, s. 2(a); 2017-204, s. 4.1(a).) Editor's Note. - Session Laws 2011-4, s. 2(a), (b), provides: "(a) The General Assembly makes the following findings concerning the application of the statute of limitations to a refund initiated by the Department of Revenue: "(1) The statute of limitations is satisfied when the Department is on notice that a refund may be due. "(2) The Department is on notice that a refund may be due when the Department's automated processing of a return indicates that the return requires further review, regardless of when an employee of the Department verifies whether a refund is in fact due. "(3) Former G.S. 105-266 and G.S. 105-241.7 are consistent with the findings in this section and require the Department to refund an overpayment of tax if, before the statute of limitations expires, the Department discovers through its automated processing that a return requires further review. "(b) The Department of Revenue is directed to issue refunds the Department discovered within the statute of limitations as applied in accordance with subsection (a) of this section." Session Laws 2017-204, s. 4.9, provides in part: "The remainder of this part is effective when it becomes law [August 11, 2017] and applies to requests for review filed on or after that date and to requests for review pending on that date for which the Department reissues a request for additional information, allows the taxpayer time to respond by the requested response date, and provides notification to the taxpayer that failure to timely respond to the request will result in the request for review being subject to the provisions of G.S. 105-241.13 A." Session Laws 2017-204, s. 7.1, is a severability clause. Effect of Amendments. - Session Laws 2011-4, s. 1, effective March 9, 2011, rewrote subsection (a), relating to circumstances regarding refunding of an overpayment. Session Laws 2013-414, s. 47(b), effective January 1, 2014, in subsection (b), substituted "actions listed in this subsection" for "following actions" in the first sentence, and added the second and third sentences. For applicability, see editor's note. Session Laws 2016-76, s. 2(a), effective June 30, 2016, added subsection (c1). Session Laws 2017-204, s. 4.1(a), effective August 11, 2017, in subsection (d), inserted "issued pursuant to subsection (c) of this section and a notice of denial of a request for a refund issued pursuant to subsection (c1) of this section" in the introductory language, and inserted "denial or the" in subdivision (d)(1), and made a minor stylistic change; and in the first sentence of subsection (f), inserted "and a denial of a refund" and substituted "are presumed" for "is presumed". For applicability, see editor's note.