Bill Text: AZ HB2611 | 2011 | Fiftieth Legislature 1st Regular | Introduced
Bill Title: Tax audits; statute of limitations
Spectrum: Partisan Bill (Republican 4-0)
Status: (Failed) 2011-02-17 - House WM Committee action: Held [HB2611 Detail]
Download: Arizona-2011-HB2611-Introduced.html
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REFERENCE TITLE: tax audits; statute of limitations |
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State of Arizona House of Representatives Fiftieth Legislature First Regular Session 2011
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HB 2611 |
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Introduced by Representatives Stevens, Gowan: Montenegro, Vogt
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AN ACT
Amending sections 42-1104 and 42-2075, Arizona Revised Statutes; relating to state tax statutes of limitations.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 42-1104, Arizona Revised Statutes, is amended to read:
42-1104. Statutes of limitation; exceptions
A. For the taxes to which this article applies every notice of every additional tax due shall be prepared on forms prescribed by the department and mailed within four years after the report or return is required to be filed or within four years after the report or return is filed, whichever period expires later.
B. The following are exceptions to the general rules prescribed by this section, and a deficiency assessment may be issued in any of the following cases:
1. The department may assess the tax or begin a proceeding in court for the collection of the tax at any time:
(a) In the case of a false or fraudulent return with the intent to evade tax.
(b) In the case of failure to file a return.
2. If a taxpayer omits from gross income, gross receipts, gross proceeds of sales or Arizona adjusted gross income, as defined for purposes of chapter 5 of this title or title 43, an amount which that is properly includible and which that is in excess of twenty‑five per cent of the amount of gross income stated in the return, the tax may be assessed at any time within six years after the return was filed.
3. If a taxpayer during a taxable year sells at a gain property used as the taxpayer's principal residence, the statutory period for the assessment of any deficiency attributable to any part of the gain does not expire before the expiration of four years from the date the taxpayer notifies the United States internal revenue service pursuant to the United States internal revenue code.
4. If a claim for credit or refund relates to an overpayment on account of the deductibility of a debt as one which became worthless, a loss from worthlessness of a security, an erroneous inclusion of an amount attributable to the recovery of a bad debt, prior tax or delinquency amount due to an adjustment of a bad debt deduction or a loss deduction from worthlessness of a security, the period of limitation is seven years from the date prescribed by law for filing the return for the year with respect to which the claim is made.
5. If a taxpayer fails to report a change or correction by the commissioner of internal revenue or other officer of the United States or other competent authority or fails to file an amended return as required by section 43‑327, the department may assess any deficiency resulting from such adjustments within four years after the change, correction or amended return is reported to or filed with the United States internal revenue service regardless of any previous examinations by the department.
6. If a taxpayer is required to report reports a change or correction by the commissioner of internal revenue or other officer of the United States or other competent authority or to file files an amended return as required by section 43‑327 and does report the change or files the return, any deficiency resulting from the adjustments may be assessed, and if the change results in an increase in additional income tax owed under title 43, the department may assess additional tax due under title 43, limited to those items changed on the federal income tax return that affect the income tax liability under title 43, within six months from the date the notice of amended return is filed with the department by the taxpayer, or within the period provided in subsection A of this section or paragraph 1 or 2 of this subsection, whichever period expires last.
7. Except as provided in paragraph 8 of this subsection if a taxpayer agrees with the United States commissioner of internal revenue for an extension or renewals of the period for proposing and assessing deficiencies in federal income taxes for any year, the period for mailing a notice of a proposed income tax deficiency is four years after the return was filed or six months after the date of the expiration of the agreed period for assessing deficiencies in the federal income tax, whichever period expires later.
8. If a taxpayer agrees with the United States commissioner of internal revenue for a limited extension or renewals of the period for proposing and assessing deficiencies in federal income taxes for any year, then, solely with respect to those items specifically enumerated in this agreement, the period for mailing a notice of a proposed income tax deficiency, or claiming a refund, is four years after the return was filed or six months after the date of the expiration of the agreed period for assessing deficiencies in the federal income tax, whichever period expires later.
9. 7. If, before the expiration of the time prescribed for the mailing of a notice of a proposed deficiency assessment, the taxpayer consents in writing to an assessment after that time, the assessment may be made at any time before the expiration of the period agreed on. The period agreed on may be extended by subsequent written agreements made before the expiration of the period previously agreed on.
C. Notwithstanding subsection A of this section and subsection B, paragraphs 1 and 2 of this section, a taxpayer who has a duty to collect use tax shall not be assessed tax pursuant to chapter 5, article 4 of this title for any retail sales to purchasers who were licensed pursuant to section 42‑5005 or registered pursuant to section 42‑5154 and who filed use tax returns for the reporting period in which the sale was made, if the reporting period in which the sale was made is more than four years from the notice of proposed deficiency. If, before the expiration of this time limitation, the taxpayer consents in writing to an assessment after that time for the transactions, a subsequent assessment may include any transaction within the agreed extended period. The period agreed to may be extended by subsequent written agreements made before the expiration of the period previously agreed to.
Sec. 2. Section 42-2075, Arizona Revised Statutes, is amended to read:
42-2075. Audit duration; definition
A. An audit of a taxpayer's return or claim for refund shall not exceed two years from the date of initial audit contact to the issuance of a notice of proposed deficiency assessment or proposed overpayment, except:
1. An audit of a fraudulent tax return.
2. An audit delayed as the result of the taxpayer's bankruptcy proceeding.
3. An audit in which the department has issued a letter to the taxpayer or the taxpayer's representative citing the potential imposition of the penalty described in section 42‑1125, subsection C for the taxpayer's failure or refusal to provide information pursuant to the department's written request.
4. An audit involving proceedings concerning the enforcement or validity of a subpoena or subpoena duces tecum issued pursuant to section 42‑1006, subsection C.
5. An audit involving a proceeding under section 42‑2056.
6. An audit where a taxpayer has filed a petition pursuant to section 43‑1148, but only in relation to the effect of the petition request.
7. An audit in which the taxpayer provides a written request to extend the audit beyond the two‑year period. A request for extension under this paragraph is not a substitute for a waiver of the statute of limitations pursuant to section 42‑1104, subsection B, paragraph 9 7. However, a waiver of the statute of limitations is considered to be a written request to extend the audit beyond the two‑year period under this paragraph.
B. This section applies to audits conducted by the department and to joint audits conducted by the department and cities and towns pursuant to section 42‑6005.
C. For the purposes of this section, "initial audit contact" means:
1. For a field audit, the date of the first meeting between the taxpayer or the taxpayer's representative and a member of the department's audit staff.
2. For a desk or office audit, the date of the first letter to the taxpayer regarding the audit.
Sec. 3. Retroactivity
Section 42-1104, subsection B, paragraph 6, Arizona Revised Statutes, as amended by this act, applies retroactively to taxable years beginning from and after December 31, 2007.
