Tax News

CCH (cch.taxgroup.com) reports:

  An assessment issued by the Montana Department of Revenue against a taxpayer for underpaid Montana corporation license (income) taxes was timely issued because the statute of limitations was tolled for five years as a result of the taxpayer's failure to timely report changes made to its federal return.

  The taxpayer argued that it was not required to report the changes because the deficiencies resulted from a stipulation between the Internal Revenue Service (IRS) and the taxpayer and it was only required to report changes stemming from litigation. However, there was no such statutory limitation. The plain language of the statute required the taxpayer to report all changes to the taxpayer's federal taxable income within 90 days of the final federal determination, not only those stemming from litigation. Under Montana law, a taxpayer's failure to timely report federal changes results in the statute of limitations being tolled for five years from the final federal determination. In the case at hand, the federal determination became final when the Ninth Circuit Court of Appeal issued its decision on the taxpayer's appeal, and the DOR's assessment was issued well within the five year period after the court's decision was issued.

  Although the Montana Supreme Court reached the same conclusion as the Montana District Court, it did so on different grounds. The lower court had determined that the limitations period was suspended because the taxpayer failed to file an amended return to report the federal changes. However, the governing statute only required that the taxpayer report the federal change and did not specify that the taxpayer report the change by filing an amended return.

Frontier Chevrolet v. Department of Revenue , Montana Supreme Court, 2008 MT 191, June 3, 2008, ¶401-083

  Other References:

  Explanations at ¶89-144