Revenue Finds Settlement of Net Operating Loss Issue in does not Bind Department in Later Tax Years

Taxpayer is a business with operations in Indiana, across the country, and in foreign nations. As the result of an audit, the Indiana Department of Revenue ("Department") determined that Taxpayer's adjusted gross income tax ("AGIT") returns for the tax years 2007 and 2008 did not fairly reflect its Indiana income. The Department therefore reduced Taxpayer's available net operating losses ("NOLs").
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Taxpayer states that it does not question the Department's authority to make adjustments to Taxpayer's Indiana AGIT, but rather it questions the Department's reasoning to make adjustments. Taxpayer states that it had been audited by the Department for the years 2000 through 2002 which concerned the same issue under protest in this LOF. Taxpayer states that it went through the protest process and that the Letter of Findings (LOF 02-20060067, the reasoning of which is hereby incorporated into this LOF) in that case denied the protest, but that the Department and Taxpayer reached a settlement agreement which covered those protest years of 2000-02, plus the years of 2004-06 for which Taxpayer had been conducting its business in the same manner as the protest years…

In the instant protest, Taxpayer states that it would be equitable for the Department to follow the same terms as in the settlement agreement for the years under protest. The Department notes that the settlement agreement limited itself to the years 2000 through 2002 and 2004 through 2006, and that in the instant case the Department did not make any changes to the years 2006. The only changes were made to the NOL calculations for the subsequent years of 2007 and 2008. As explained at the hearing, it is beyond the scope of a Letter of Findings to answer Taxpayer's question. Rather, the protest process is a taxpayer's opportunity to present its reasoning and supporting documentation behind its protest of a particular proposed assessment.

In conclusion, Taxpayer has protested that the Department should follow the same settlement guidelines it agreed to for 2000-02 and 2004-06. The Department notes that each tax year stands on its own merits and that the settlement agreement terms only applied to one year (2006) of the current audit period. The Department followed the terms of the settlement agreement for 2006 and then considered the other years (2007 and 2008) as it would any years for any taxpayer. A Letter of Findings is not the forum for addressing Taxpayer's arguments of equity.

http://www.in.gov/legislative/iac/20120627-IR-045120297NRA.xml.html