Mr. Bass filed his 2012 federal tax return electronically, but unintentionally failed to file his state return. In July 2016, the North Carolina Department of Revenue (“NCDOR”) sent Mr. Bass a Notice of Intent to Assess for Failure to File North Carolina Return (“the Notice”) and then Mr. Bass filed his 2012 return on August 4, 2016, contending a refund was due. The NCDOR denied the refund, as the return was beyond the 3-year statute of limitations. Mr. Bass sought review with the Office of Administrative Hearings (“OAH”) and after it ruled in his favor, holding that while N.C.G.S. § 105-241.8(a) provides as 3 year limit on seeking a refund, N.C.G.S. § 251(b) applied when the Notice was sent with the statute of limitations then running from the date of the notice. The NCDOR appealed , with the case assigned to the North Carolina Business Court.
While it was uncontested that there was substantial evidence to support the OAH holding the Mr. Bass had unintentionally failed to file his 2012 state tax return, the Business Court rejected the OAH interpretation as an absurd reading that “would inevitably result in the DOR being at risk for a stale claim of refund whenever it contacted a purported non-filer more than three years after the due date of the return….”
Further, the finding by the OAH that the NCDOR was aware that a Mr. Bass was entitled to a refund from the data it had from the IRS was not supported by any evidence introduced.
Accordingly, the refund was barred by the statute of limitations.
This does not stand for the proposition that if the NC DOR had actually received information from the IRS regarding Mr. Bass sufficient to calculate taxes, that he might not have been entitled to a refund, but merely that Mr. Bass, a pro se litigant, had not introduced such evidence. Perhaps if he had questioned the NCDOR, he could have established that it had, in fact, assessed his tax liability earlier and determined that a refund was due. This could potentially be useful in bankruptcy, both for Trustee’s seeking to recover tax refunds, but also as the date of assessment of taxes is pertinent in determining dischargeability.
While the amount of the tax refund is not mentioned, nothing in this opinion indicates a that it was particularly large. (That Mr. Bass did not have an attorney, also supports that it might not have been.) This makes the assignment of a dispute over an individual’s tax refund to the N.C. Business Court somewhat surprising, since it has no obvious hallmarks of being a “complex business” case.
For a copy of the opinion, please see: