United States

Pennsylvania: Statute Of Limitations for Refund Claim begins upon Return Filing, not Return Due Date

Dec 21, 2015
From KPMG TaxWatch

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Recently, the Commonwealth Court of Pennsylvania considered when the three-year statute of limitations commences for filing a refund claim. Under Pennsylvania law, a petition for refund must be filed “within three years of actual payment of tax.” For calendar year corporate taxpayers, final payment is due along with a return on April 15 of the year following the applicable tax year. The taxpayer at issue made quarterly estimated tax payments throughout the relevant tax year. Without having sought an extension, the taxpayer filed its 2007 return late on September 19, 2008. On this return, the taxpayer reported a tax liability that was less than the total estimated payments already submitted to the state. After a late filing fee was applied, the remaining overpayment was applied to the next tax year. On September 16, 2011, the taxpayer filed a petition for refund with the Board of Appeals. The petition was dismissed as untimely by the Department of Revenue and the Board of Finance and Revenue. In the Board’s view, April 15, 2008 (the due date of the return) was the date the taxpayer made its actual payment of tax. The taxpayer subsequently appealed to the Commonwealth Court. 

Before the court the taxpayer argued that its refund claim was timely-filed because September 19, 2008 was the date it made it actual payment of tax. The court first considered the meaning of the phrase “actual payment of the tax” and concluded that it meant the delivering of money in the acceptance and performance of an obligation, rather than the mere depositing of money on account for potential future use. In the court’s view, the Pennsylvania Tax Code made clear that a corporation's tax liability is not established until the corporation's annual return is filed. Although April 15 is the date upon which taxes are due without interest and, perhaps, penalty, the Code expressly afforded corporate taxpayers the opportunity to make their final tax payments with their annual reports, whenever actually submitted to the state. Finally, the court reasoned that had the legislature intended for refund petitions to be filed within three years of April 15 following the applicable tax year, rather than within three years of when the taxpayer actually filed its annual return, it would have expressly stated so. For more information on Mission Funding Alpha v. Pennsylvania please contact Howard Sklaroff at 267-256-2891.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.