NOTICE: IC 4-22-7-7 permits the publication of this document in the Indiana Register. The publication of this document provides the general public with information about the Indiana Department of Revenue's official position concerning a specific set of facts and issues. The "Holding" section of this document is provided for the convenience of the reader and is not part of the analysis contained in this Memorandum of Decision.

Out-of-state business demonstrated that it timely filed its refund claims.

I. Corporate Income Tax - Notification of Federal Modification; Timeliness.

Authority: IC 6-3-4-6; IC 6-8.1-5-2; IC 6-8.1-9-1; Scopelite v. Indiana Dept. of Local Gov't Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); Indiana Dept. of State Revenue. v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Medco Health Sols., Inc. v. Indiana Dep.t of State Revenue, 9 N.E.3d 263 (Ind. Tax Ct. 2014); Smith v. Indiana Dept. of State Revenue, 122 N.E.3d 484 (Ind. Tax Ct. 2019); 45 IAC 15-9-2.

Out-of-state business with operations in Indiana protests that it timely amended its federal and state returns and was thus entitled to refund.

Taxpayer is a subsidiary of a domestic corporation ("Parent") and conducts business throughout the United States, including Indiana, as well as internationally. Taxpayer filed both federal and Indiana corporate income tax returns yearly for the amount of income tax due in each respective jurisdiction. Parent is headquartered in Japan with subsidiaries operating throughout Asia, the Americas, and Europe.

In 2020, the Osaka Regional Taxation Bureau ("ORTB") requested adjustments for Taxpayer, other subsidiaries, as well as Parent for tax years 2014, 2015, 2016, and 2017. To avoid inconsistent taxation, Taxpayer requested a Mutual Agreement Procedure ("MAP") pursuant to a United States Tax Treaty ("Treaty"). Taxpayer was granted relief through said Treaty from both the Internal Revenue Service ("IRS") and ORTB. Subsequent to the agreement, Taxpayer amended its United States federal income tax returns specific to tax years 2014, 2015, 2016, and 2017.

In April 2022, Taxpayer amended both state and federal income tax returns for reported tax years 2014, 2015, 2016, and 2017, claiming that it was entitled to refund based on MAP agreement pursuant to Treaty. The Indiana Department of Revenue ("Department") denied Taxpayer's request for refund, stating the request was outside the three-year statute of limitations.

Taxpayer protested the Department's denial of refund and requested resolution with a hearing. An administrative hearing was held, and this Memorandum of Decision results. Additional facts will be provided as necessary.

I. Corporate Income Tax - Notification of Federal Modification; Timeliness.

The Department denied Taxpayer's claim for refund on the grounds that the amended returns were not timely. The Department determined that in order to receive the refund, a claim must be filed within a period of three years after the due date of the return or date of payment, whichever is later. Taxpayer protested the Department's denial, claiming that: (1) it timely filed its amended returns for tax years 2014, 2015, 2016, and 2017, under IC 6-3-4-6(b); and (2) the Department erred in denying Taxpayer's refund claims, pursuant to MAP agreement between the IRS and ORTB.

The issue, therefore, is whether Taxpayer sufficiently demonstrated that it was entitled to the refunds and the Department erred in denying Taxpayer's refund claims. Poorly developed and non-cogent arguments are subject to waiver. Scopelite v. Indiana Dept. of Local Gov't Fin., 939 N.E.2d 1138, 1145 (Ind. Tax Ct. 2010). "[W]hen [courts] examine a statute that an agency is 'charged with enforcing. . .[courts] defer to the agency's reasonable interpretation of [the] statute even over an equally reasonable interpretation by another party.'" Indiana Dep.t of State Revenue. v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). More generally, IC 6-8.1-9-1(a) affords a taxpayer a statutory right to file a claim for refund.

The Department generally "has no legal method of generating a claim for refund. A claim for refund can only be initiated pursuant to IC 6-8.1-9-1." 45 IAC 15-9-2(b). IC 6-8.1-9-1(a) states:

Thus, a taxpayer is permitted to file a claim for refund after a modification by the Internal Revenue Service of the taxpayer's federal taxable income, federal adjusted gross income, or federal income tax liability, and the modification results in a reduction of tax legally due. Id. Further, such refund requests must be made within one hundred eighty (180) days after the date of the modification.

Determining which federal document provides the finality required under IC§ 6-3-4-6(c) is a fact sensitive inquiry. See Smith v. Indiana Dept. of State Revenue, 122 N.E.3d 484, 488 (Ind. Tax Ct. 2019).

Finally, IC 6-3-4-6(e) reaffirms that if the federal modification results in a change in the taxpayer's federal or Indiana adjusted gross income, the taxpayer shall file an Indiana amended return within 180 days after the modification is made (when the modification is made after December 31, 2010).

In summary, when a taxpayer determines that it overpaid tax, the taxpayer must timely file an Indiana income tax return or timely amend its income tax return, stating the overpayment as prescribed by the Department in order to claim a refund. In addition, the taxpayer must file the claim by amending its return within three-year statute of limitations from either the due date of the return or the date of payment. See IC 6-8.1-9-1(a). When the overpayment is a result of a modification by the IRS, the taxpayer must file within one hundred eighty (180) days after the date of the modification by the IRS. See IC 6-8.1-9-1(j); 45 IAC 15-9-2; see also Medco Health Sols., Inc. v. Indiana Dept. of State Revenue, 9 N.E.3d 263, 266 (Ind. Tax Ct. 2014). When a refund of income tax is claimed under IC 6-8.1-9-1(j), it must work in tandem with IC 6-3-4-6(c) and (d) to provide the Department adequate notice, as statutorily required, in determining timeliness of the refund.

Taxpayer, in this instance, established that it timely amended its returns to claim its refunds based on MAP, pursuant to Treaty. The IRS finalized MAP, pursuant to Treaty, on November 4, 2021. One hundred eighty days from MAP finalization was May 3, 2022. Taxpayer filed amended returns on April 28, 2022, for tax years 2014, 2015, 2016, and 2017. Taxpayer met the 180-day requirement for filing amended returns for tax years 2014, 2015, 2016, and 2017. Taxpayer's refund request was timely filed under Indiana statutes.

Taxpayer's protest is sustained.

November 15, 2023