Chapter 48 Oregon Laws 2005

AN ACT

HB 2448

Relating to tax refunds; creating new provisions; amending ORS 305.270, 305.305 and 314.415 and section 3, chapter 996, Oregon Laws 1999; and prescribing an effective date.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 314.415 is amended to read:

314.415. (1)[(a)] If the Department of Revenue determines pursuant to ORS 305.270 that the amount of the tax due is less than the amount theretofore paid, the excess shall be refunded by the department with interest at the rate established under ORS 305.220, for each month or fraction of a month during a period beginning 45 days after the due date of the return or the date the tax was paid, whichever is the later, to the time the refund is made.

[(b)(A)] (2)(a) [No refund shall be allowed or made] The department may not allow or make a refund after three years from the time the return was filed, or two years from the time the tax (or a portion [thereof] of the tax) was paid, whichever period expires [the] later, unless before the expiration of [such] this period a claim for refund is filed by the taxpayer in compliance with ORS 305.270.[, nor shall a refund claimed on an original return be allowed or made in any case unless the return is filed within three years of the due date, excluding extensions, of the return in respect of which the tax might have been credited.] In any case, if the original return is not filed within three years of the due date, excluding extensions, of the return, the department may allow or make a refund only of amounts paid within two years from the date of the filing of the claim for refund. If a refund is disallowed for the tax year during which excess tax was paid for any reason set forth in this [paragraph, the excess shall not be allowed] subsection, the department may not allow the excess as a credit against any tax occurring on a return filed for a subsequent year.

(b) The department may not make a refund if the tax owed after offsets for all amounts owed the state, or a county pursuant to a judgment obtained under ORS 169.151, is less than $1[, no refund shall be made].

[(B)] (c) If a taxpayer would qualify under section 6511(h) of the Internal Revenue Code for a suspension of the running of the periods specified for filing a claim for refund of federal income tax, the period specified in [subparagraph (A) of this] paragraph (a) of this subsection shall also be suspended.

[(c)] (d) [No] The department may not pay an employee interest on a refund [to an employee] of a tax withheld by an employer [shall be paid] if the interest would be for any period prior to the time the employee [filed] files a personal income tax return for the tax year involved[, nor] or for any period prior to the day [which] that is 45 days after the date when the employee’s annual return for that year was filed or was due, whichever is [the] later.

[(d)] (e) [No] The department may not pay interest on a refund of estimated tax paid under ORS 314.505 to 314.525 or 316.557 to 316.589 [shall be paid] if the interest would be for any period prior to the time the taxpayer [filed] files a tax return for the tax year involved[, nor] or for any period prior to the day [which] that is 45 days after the date when the tax return for that year was filed or was due, whichever is later.

[(e)] (f) The amount of the refund, exclusive of interest [thereon, shall] on the refund, may not exceed the portion of the tax paid during [such] the period preceding the filing of the claim or, if no claim is filed, then during the period preceding the allowance of the refund during which a claim might have been filed. Where there has been an overpayment of any tax imposed, the amount of the overpayment and interest [thereon] on the overpayment shall be credited against any tax, penalty or interest then due from the taxpayer, and only the balance shall be refunded.

[(f)] (g) Except as provided in ORS 305.265 (12), if, pursuant to a notice of deficiency or assessment, the taxpayer pays the amount specified in the notice, or any part thereof, and if, upon appeal, the Oregon Tax Court or the Oregon Supreme Court orders that all or any part of the deficiency amount specified in the notice and paid by the taxpayer be refunded, the amount so ordered to be refunded shall bear interest at the rate established for refunds in ORS 305.220. Interest shall be computed from the date of payment to the department. Nothing in this [paragraph] subsection shall require that interest be paid upon any amount for any period for which interest upon the same amount for the same period is required to be paid under ORS 305.419.

[(2)] (3)(a) Notwithstanding any provision to the contrary in ORS 305.265 or 305.270 or subsection (1) or (2) of this section, if, prior to the expiration of the period prescribed in subsection [(1)(b)] (2) of this section, the department and the taxpayer consent in writing to the refund of tax after the expiration of the period prescribed[,]:

(A) The department shall make the refund [shall be made at any time] prior to the expiration of the period agreed upon; and

(B) The department may not make or allow a refund [no refund shall be made or allowed] after the expiration of the period agreed upon unless a claim for refund is filed by the taxpayer before the expiration of the period agreed upon in compliance with the manner prescribed by the department. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.

(b) The department [shall have the power to consent to such refund only where] may consent to extend the period during which a refund may be made only if the taxpayer has consented to the assessment of additional tax, if [such be] additional taxes are determined upon audit, after the expiration of the applicable three-year or five-year period prescribed in ORS 314.410 (1) and (2).

[(3)] (4)(a) If the claim for credit or refund relates to an overpayment on account of the deductibility by the taxpayer, or by a partnership, of the worthlessness of a share of stock in a corporation, of the right to subscribe for or to receive a share of stock in a corporation, or of a debt, in lieu of the three-year period of limitation prescribed in subsection [(1)] (2) of this section, the period shall be seven years from the date prescribed by law for the filing of the return for the year with respect to which the claim is made.

(b) [; provided, that] If the claim described in paragraph (a) of this subsection is made [in reliance upon this subsection] after the expiration of the three-year period prescribed in subsection [(1)(b)] (2) of this section, [no interest shall be allowed] the department may not allow interest with respect to any credit or refund determined to be due upon [such] the claim for the period beginning at the close of the three-year period prescribed in subsection [(1)] (2) of this section and ending at the expiration of six months after the date on which the claim is filed.

[(4)(a)] (5)(a) If the claim for credit or refund relates to an overpayment attributable to a net operating loss carryback or a net capital loss carryback, in lieu of the three-year period of limitation prescribed in subsection [(1)] (2) of this section, the period shall be [that period which] the period that ends three years after the time prescribed by law for filing the return (including extensions [thereof]) for the taxable year of the net operating loss or net capital loss [which] that results in such carryback. In the case of such a claim, the amount of the credit or refund may exceed the portion of the tax paid within the period provided in subsection [(1)(a) or (b) of this section or subsection (2)] (1), (2) or (3) of this section, whichever is applicable, to the extent of the amount of the overpayment attributable to [such] the carryback. If the allowance of a credit or refund of an overpayment of tax attributable to a net operating loss carryback or a net capital loss carryback is otherwise prevented by the operation of any law or rule of law other than ORS 305.150, relating to closing agreements, [such] the credit or refund may be allowed or made[,] if the claim [therefor] for credit or refund is filed within the period provided in this subsection. To the extent that the carryback was not an issue in any proceeding in which the determination of a court, including the Oregon Tax Court, has become final, the claimed credit or refund applicable to that carryback may be allowed or made under this subsection.

(b) For purposes of subsection (1) or (2) of this section, if any overpayment of tax results from a carryback of a net operating loss or net capital loss, [such] the overpayment shall be deemed not to have been made prior to the later of:

(A) The due date of the return for the taxable year in which such net operating loss or net capital loss arises;

(B) The date the return for the year in which the net operating loss or net capital loss arises is filed; or

[(5)] (6) Notwithstanding any provision to the contrary in ORS 305.265 or 305.270[,] or [other provisions of] this section, if the taxpayer has agreed with the United States Commissioner of Internal Revenue for an extension, or [renewals thereof] a renewal of an extension, of the period for proposing and assessing deficiencies in federal income tax for any year, the period within which a claim for credit or refund may be filed or credit or refund allowed or made if no claim is filed shall be the period provided within subsections (1) to [(4)] (5) of this section or six months after the date of the expiration of the agreed period for assessing deficiency in federal income tax, whichever period expires [the] later.

[(6)] (7) The department may make separate refunds of withheld taxes upon request by a [husband or wife] spouse who has filed a joint return, the refund payable to each spouse being proportioned to the gross earnings of each shown by the information returns filed by the employer or otherwise shown to the satisfaction of the department.

[(7)] (8) If a taxpayer entitled to a refund under subsection (1) of this section dies, the department may issue a draft for payment of such refund under the terms and conditions set out in ORS 293.490 to 293.500 exercising the same powers and subject to the same restrictions pursuant to which the State Treasurer is authorized to pay the amounts of warrants, checks or orders under those statutes.

SECTION 2. ORS 305.270 is amended to read:

305.270. (1) If the amount of the tax shown as due on a report or return originally filed with the Department of Revenue with respect to a tax imposed under ORS chapter 118, 308, 308A, 310, 314, 316, 317, 318 or 321, or collected pursuant to ORS 305.620, or as corrected by the department, is less than the amount theretofore paid, or if a person files a claim for refund of any tax paid to the department under such laws within the period specified in subsection (2) of this section, any excess tax paid shall be refunded by the department with interest as provided in this section and ORS 314.415.

(2) The claim shall be made on a form prescribed by the department, except that an amended report or return showing a refund due and filed within the time allowed by this subsection for the filing of a claim for refund, shall constitute a claim for refund. The claim shall be filed within the period specified in ORS 314.415 [(1)(b)] (2) for taxes imposed under ORS chapters 310, 314, 316, 317 and 318, or collected pursuant to ORS 305.620 (except where any applicable ordinance specifies another period), within the period specified in ORS 118.100 (2) for taxes imposed under ORS chapter 118 and within two years of the payment of any tax under ORS chapter 308, 308A or 321.

(3) Upon receipt of a claim for refund, or original report or return claiming a refund, the department shall either refund the amount requested or send to the claimant a notice of any proposed adjustment to the refund claim, stating the basis upon which the adjustment is made. A proposed adjustment may either increase or decrease the amount of the refund claim or result in the finding of a deficiency. If the proposed adjustment results in a determination by the department that some amount is refundable, the department may send the claimant the adjusted amount with the notice.

(4)(a) The notice of proposed adjustment shall be accompanied by a statement explaining the claimant’s right to make written objections to the refund adjustment, the claimant’s right to request a conference and the procedure for requesting a conference. The statement, and an accompanying form, shall also explain that conference determinations are routinely transmitted via regular mail and that a claimant desiring to have conference determinations transmitted by certified mail may do so by indicating on the form the claimant’s preference for certified mail and by returning the form with the claimant’s written objections as described in paragraph (b) of this subsection.

(b) The claimant may, within 30 days of the date of the notice of proposed adjustment, advise the department in writing of objections to the refund adjustment and may request a conference with the department, which shall be held within one year of the date of the notice. The department shall notify the claimant of a time and place for the conference, and appoint a conference officer to meet with the claimant for an informal discussion of the claim. After the conference, the conference officer shall send a determination of the matter to the claimant. The determination letter shall be sent by regular mail, or by certified mail if the claimant has indicated a preference for transmission of the determination by certified mail. The department shall issue either a notice of refund denial or payment of any amount found to be refundable, together with any applicable interest provided by this section. If the conference officer determines that a deficiency exists, the department shall issue a notice of assessment.

(5) If no conference is requested, and the adjustments have not resulted in the finding of a deficiency, the following shall apply:

(a) If written objections have been made by the claimant, the department shall consider the objections, determine any issues raised and send the claimant a notice of refund denial or payment of any amount found to be refundable, together with any interest provided by this section.

(b) If no written objections are made, the notice of any proposed adjustment shall be final after the period for requesting a conference or filing written objections has expired.

(6) If no conference is requested, and the notice of proposed adjustment has asserted a deficiency, the department shall consider any objections made by the person denied the refund, make a determination of any issues raised, pay any refunds found due, with applicable interest, or assess any deficiency and mail a notice thereof within one year from the date of the notice of deficiency, unless an extension of time is agreed upon as described in subsection (7) of this section.

(7) If, prior to the expiration of any period of time prescribed in subsection (6) of this section for giving of notice of assessment, the department and the person consent in writing to the deficiency being assessed after the expiration of such prescribed period, such deficiency may be assessed at any time prior to the expiration of the period agreed upon. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period agreed upon.

(8) If the department refunds the amount requested as provided in subsection (3) of this section, without examination or audit of the refund claim, the department shall give notice of this to the claimant at the time of making the refund. Thereafter, the department shall have one year in which to examine or audit the refund claim, and send the notice of proposed adjustment provided for in subsection (3) of this section, in addition to any time permitted in ORS 314.410 or 314.415.

(9) The failure to hold a requested conference within the one-year period prescribed in subsection (4) of this section shall not invalidate any assessment of deficiency made within the one-year period pursuant to subsection (8) of this section or within any extension of time made pursuant to subsection (7) of this section, but shall invalidate any assessment of interest or penalties attributable to the deficiency. After an assessment has been made, the department and the person assessed may still hold a conference within 90 days from the date of assessment. If a conference is held, the 90-day period under ORS 305.280 (2) shall run from the date of the conference officer’s written determination of the issues.

(10) The claimant may appeal any notice of proposed adjustment, refund denial or notice of assessment in the manner provided in ORS 305.404 to 305.560. The failure to file written objections or to request or have a conference shall not affect the rights of appeal so provided. All notices and determinations shall set forth rights of appeal.

SECTION 3. ORS 305.305 is amended to read:

305.305. (1) As used in this section, “appeal” means an appeal to the Internal Revenue Service or any federal court or an appeal to another state’s taxing authority or any state court having jurisdiction over the other state’s tax matters that are the subject of the appeal.

(2) If a deficiency is based wholly or in part upon an Internal Revenue Service revenue agent’s report made upon any audit or adjustment of the person’s federal income tax return or upon an audit report of another state’s taxing authority, the following procedures shall apply:

(a) If the person has filed a timely appeal from the deficiency asserted by the service or other state taxing authority, the person may file proof of the appeal with the Department of Revenue. If proof of the appeal is received before the tax is assessed, the deficiency shall be assessed without penalty for failure to pay the tax at the time the tax became due.

(b) If the department assesses the deficiency before receipt of proof of the filing of a timely appeal, the person may file the proof with the department. If the proof is filed after the tax has been assessed with a penalty for failure to pay the tax at the time the tax became due, the penalty shall not be waived.

(3) Notwithstanding any other provision of law, filing of proof of a timely appeal under subsection (2) of this section shall extend the time for filing a complaint or petition with the tax court in accordance with this subsection. The person shall notify the department in writing within 30 days after the appeal is finally resolved. The department shall review the issues raised by the appeal and shall make a determination of the effect upon the person’s state income or excise tax liabilities. The department shall then issue a refund, notice of denial of refund or notice of assessment, as appropriate, to the person. If the person disagrees with the department’s action, the person may file a complaint or petition with the tax court within 90 days after the date of the department’s action as provided under ORS 305.404 to 305.560. Notwithstanding ORS 314.835 or any other law relating to confidentiality, the department may notify the magistrate division of the tax court if proof of a timely appeal is filed with the department or if the department determines that an appeal has been finally resolved.

(4) Except as provided in ORS 314.440 (2), when the department receives proof of a timely appeal, the department shall suspend action to collect the deficiency until the issues are resolved.

(5) If interest imposed by the federal government on a federal deficiency or partnership settlement agreement has been suspended under section 6601(c) of the Internal Revenue Code, interest imposed on a corresponding deficiency determined under ORS 305.265 and this section shall also be suspended. The suspension of interest imposed under ORS 305.265 shall be effective as of the date the federal interest is suspended and for the duration for which the federal interest is suspended.

(6) Except as provided in ORS 314.415 [(5)] (6), the provisions of this section shall constitute the exclusive remedy of a person whose notice of deficiency is based wholly or in part upon a federal revenue agent’s report or the audit report of another state’s taxing authority.

SECTION 4. Section 3, chapter 996, Oregon Laws 1999, is amended to read:

Sec. 3. A refund under section 2, chapter 996, Oregon Laws 1999, [of this 1999 Act] of tax that had been imposed upon the federal pension income of a deceased federal retiree or the deceased pension beneficiary of a federal retiree shall be allowed:

(1) To the personal representative of the estate of the deceased federal retiree or deceased federal pension beneficiary if the estate probate proceedings are still pending.

(2) To the person who has filed a small estate affidavit relating to the deceased federal retiree or deceased federal pension beneficiary under ORS 114.505 to 114.560.

(3) If the estate is not to be administered in a court having probate jurisdiction or if the estate has been closed, to a person in a group listed in ORS 293.490 (3) that is permitted to receive a refund under ORS 314.415 [(7)] (8). For purposes of this subsection:

(a) The monetary limitations in ORS 293.490 to 293.500 shall not apply;

(b) The last illness and funeral expense payment provisions in ORS 293.495 (1)(e) shall not apply;

(c) The refund claim filed for payment pursuant to ORS 293.495 need not state whether there are other survivors in the group that includes the claimant, and the claim need not be in the form of a notarized affidavit; and

(d) The person receiving the refund shall be required to distribute the refund in equal shares to all persons in the group under ORS 293.490 (3) that is entitled to the refund.

SECTION 5. The amendments to ORS 305.270, 305.305 and 314.415 and section 3, chapter 996, Oregon Laws 1999, by sections 1 to 4 of this 2005 Act apply to refunds made on or after the effective date of this 2005 Act.

SECTION 6. This 2005 Act takes effect on the 91st day after the date on which the regular session of the Seventy-third Legislative Assembly adjourns sine die.

Approved by the Governor May 13, 2005

Filed in the office of Secretary of State May 13, 2005

Effective date November 4, 2005

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