Current through Register Vol. 63, No. 9, September 1, 2024
(1) The provisions of this rule that apply to
a federal change or correction apply to reports that are received by the
department on or after October 4, 1997. The provisions of this rule that apply
to another state's change or correction apply to changes or corrections made on
or after October 23, 1999.
(2) The
department may mail a Notice of Deficiency at any time within two years after
the department receives notification of a change or correction contained in:
(a) A report received from the Internal
Revenue Service;
(b) A report
received from another state's taxing authority; or
(c) The written report filed by the taxpayer
as required by ORS 314.380(2)(a)(A).
Example 1 : Ron filed his 1996 federal and
state returns on time. The Internal Revenue Service (IRS) audited and adjusted
his federal return in March 2000. The department may mail a Notice of
Deficiency within two years of receiving the report of the Internal Revenue
Service adjustment.
(3) The department may mail a Notice of
Deficiency if, at the time the change or correction by the Internal Revenue
Service or another state's taxing authority was made, an assessment or issuance
of a refund of federal or other state's tax based on the change or correction
was within the time permitted by federal tax law or the tax law of the other
state, as applicable. This provision applies regardless of whether an
adjustment to the return is allowable under any other provision of Oregon law.
Example 2 : ABC Corporation was audited by
the IRS for tax year 1991. ABC Corporation signed an agreement with the IRS to
extend the period of time for assessing federal tax. No separate extension
agreement was signed with Oregon. Following completion of the federal audit,
the department may mail a Notice of Deficiency at any time within two years of
receiving the report of the Internal Revenue Service adjustment.
Example 3 : Sally filed a timely 1993 tax
return. In 1999, the IRS determined that Sally had omitted an item of income
that was more than 25 percent of the gross income shown on the return. The IRS
assessed additional tax based on Internal Revenue Code section 6501(e), which
allows an assessment to be issued within six years of the filing of the return
when there is such an omission. The department may mail a Notice of Deficiency
based on the federal RAR within two years of receiving that report.
(4) The department may not mail a
Notice of Deficiency based on a federal adjustment or the audit report of
another state if, at the time of the change or correction, the tax year was
closed to adjustment for Oregon purposes and also closed for adjustment under
federal tax law, or the law of the other state, whichever applies.
Example 4 : Lester filed timely 1995, 1996
and 1997 federal and state tax returns. In 1999, the Internal Revenue Service
issued an adjustment that indicated Lester had incorrectly figured a capital
loss for 1995. However, the IRS did not assess additional federal tax for 1995
because the year was not open to adjustment under any provision of federal law.
Because both the federal and state returns were closed to adjustment, the
department may not use the provisions of ORS
314.410(3)(b)
to issue a Notice of Deficiency based on the Internal Revenue Service
adjustment.
(5) When
the department is notified of a change or correction, the department is not
limited to the adjustments reflected in the IRS report, the report of the other
state's taxing authority, or the taxpayer's written report submitted in the
format required by OAR 150-314.380(2)-(B). The department may make any
adjustments deemed necessary to properly reflect Oregon taxable income or
Oregon tax liability for the year in question.
Example
5 : Paul, a California resident, worked temporarily in Oregon in
1995 before returning to California. In April 1996, Paul filed a nonresident
Oregon return for 1995 and claimed a credit for taxes paid to California. In
March 2000, California audited his 1995 California return and in July 2000 Paul
paid additional tax to California based on additional wages earned in Oregon.
Paul filed a claim for refund with Oregon in November 2000, as allowed by ORS
314.380(2)(b).
In reviewing the claim, the department allowed the increase in the credit for
taxes paid to another state based on the increased wages. However, the
department determined Paul had incorrectly calculated the political
contribution credit and issued an adjusted refund.
Stat. Auth.: ORS
305.100
Stats. Implemented: ORS
314.410
