Alaska: Amended Federal Return does not Extend State Statute of Limitations for Refund Claim

Listen to a brief overview of state tax developments this week, including Alaska, or read full Alaska development below.

Detailed Alaska Development

An Administrative Law Judge (ALJ) for the Alaska Office of Administrative Hearings recently addressed whether the filing of an amended federal return in some manner extended the statute of limitations for filing a state refund claim. The taxpayer timely filed its Alaska corporate tax return on December 15, 2015. On November 9, 2018, a timely amended federal return was filed. On December 31, 2018 the taxpayer filed an amended Alaska return claiming a refund. The Department later denied the refund claim as untimely.

Before the ALJ, the taxpayer asserted that the authority governing the issue was a statute that required a taxpayer to notify the Department of any alteration or modification of the taxpayer’s federal income tax return within a 60-day period of the final determination. The Department, in contrast, argued that the matter was governed by the general statute of limitations, which requires a claim for credit or refund be filed before the later of: three years from the date of the original return; or two years from the time the tax was paid.  The ALJ held that the statute requiring the taxpayer to notify the Department of a federal change was not a statute of limitation but was merely a provision to ensure that the state was made aware of federal changes affecting the state tax base. The general statute of limitations provides that there may be an exception to the extent provided for through Alaska’s adoption of the IRC. However, while Alaska has adopted large parts of the IRC, the ALJ noted that this does not mean that the deadline for federal action will always be identical to the deadline for state action. The deadline for a state refund claim was keyed to the state return, which had a limitations period that differed from the federal return. The ALJ observed that nothing in state law or the IRC required that they run concurrently. Therefore, the ALJ concluded that the amended return was untimely as it was filed outside the statute of limitations of three years from the original return. Please contact Johnathan Drugge at 206-913-4422 with questions on In Re. Bed, Bath, & Beyond Inc.

This Week's Developments

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Sarah McGahan

Sarah McGahan

Managing Director, State & Local Tax, KPMG US