U. Reporting Federal Changes (G.S. 105-130.20,G.S. 105-241.1)
- Requirement for Reporting Changes
If the amount of taxable income of any corporation subject to
tax in this State, as reported or reportable to the United States
Treasury Department, is changed by the U.S. Government, such corporation
must file a return under oath reflecting such change within two
years after receipt of the Federal report.
- Assessments or Refunds
When a corporation files an amended return reflecting a federal
determination, an assessment of tax must be proposed within one
year after the return is filed or within three years of when the
original return was filed or due to be filed, whichever is later.
When the amended return reflecting a federal determination results
in an overpayment of tax, the period in which a refund must be
demanded or discovered is one year after the return reflecting
the federal determination is filed or three years after the original
return was filed or due to be filed, whichever is later.
If there is a federal determination and the taxpayer does not
file the required return to report the federal changes, an assessment
of tax must be proposed within three years from the date of the
receipt by the Department of Revenue of the final report of federal
determination from the U.S, government.
If the corporation fails to file an amended return reflecting
a federal determination, or no final report is received from the
Internal Revenue Service, no statute of limitations shall apply.
In such case, the corporation shall be subject to all penalties
provided in G.S. 105-236 and shall forfeit its right to any refund
due because of the federal changes.
- Extent of Changes Which May Be Made When the Department of Revenue
receives an amended return or report reflecting changes made in
the net income of a corporation, the Secretary may assess tax
or additional tax based on Federal changes and may also make any
other adjustments based on any facts or evidence brought to his
attention or shall otherwise acquire, whether or not such facts
or evidence were considered by the Federal Government. This is
the case regardless of whether or not an adjustment has been made
previously for the taxable year affected by the federal changes.
- Fraud Provisions on Federal Changes
When there is a Federal adjustment made in a corporation's income
tax return and a fraud penalty is assessed by the Federal Government,
the State may open the year for adjustments on the basis of either
fraud or the Federal assessment. The penalty for fraud is fifty
percent (50%) of the total deficiency. In such case and if the
corporation has not filed a State return, the fraud penalty and
delinquency penalty of five percent (5%) per month (25% maximum
– $5.00 minimum) may be assessed. The fact that no return has
been filed, either Federal or State, does not prevent the State
from opening the taxable year on the basis of Federal changes.