Taxpayer filed its 2007
Indiana corporate income tax return on October 15, 2008 after having duly
requested an extension. Taxpayer paid the amount of tax due.
On February 15, 2010,
Taxpayer filed an amended 2007 Indiana corporate income tax return. The return
"carried back" a net operating loss ("NOL") generated
during 2008. The 2007 return generated a refund request of approximately
$1,200,000. The refund was granted and Taxpayer received the money.
Thereafter, the IRS audited
Taxpayer. The IRS audit resulted in a downward adjustment of the available 2008
NOLs. In December 2011, Taxpayer filed a second amended 2007 return reflecting
the fact that Taxpayer had fewer 2008 NOLs to carry back to 2007. As a result,
Taxpayer owed approximately $440,000 in tax. Taxpayer calculated the interest
due on that amount. Taxpayer calculated that it owed approximately $56,000 in
interest and paid that amount. Taxpayer calculated interest as running from the
date it received the $1,200,000 refund on May 2010 to the date it paid Indiana
the $440,000.
...
IC 6-8.1-10-1 states in part as follows:
(a) If a person fails to
file a return for any of the listed taxes, fails to pay the full amount of tax
shown on the person's return by the due date for the return or the payment, or
incurs a deficiency upon a determination by the department, the person is
subject to interest on the nonpayment.
(b) The interest for a
failure described in subsection (a) is the adjusted rate established by the
commissioner under subsection (c) from the due date for payment.
Under IC 6-8.1-10-1, interest runs from the
"due date for payment." The 2007 tax dollars at issue were due on
April 15, 2008. As noted above, Taxpayer filed for an extension and paid the
tax on October 15, 2008; it may be useful to note that, despite the extension,
Taxpayer would have owed interest on the amount it paid October 15 because the
payment was due on April 15, 2008.
In this particular
instance, Taxpayer makes the argument that the interest amount it paid was
correct because – from October 15, 2008, until it filed the first amended
return February 15, 2010 – the state of Indiana had possession and benefit of
the full amount of the original tax during that 16 month period. Under
Taxpayer's logic, it should only be required to pay interest from the date it
had use of the $440,000 which was the date that the Department issued Taxpayer
the $1,200,000 until the date that Taxpayer returned the $440,000.
On the surface, Taxpayer
makes a somewhat compelling argument but only if one treats the Department as a
lending institution. In the case, the $440,000 was – and always was – tax that
was due on April 15, 2008 and IC 6-8.1-10-1(b) plainly states that interest
runs on that amount from the date that the tax was due. Under IC 6-3-4-5, the 2007 tax was due April 15,
2008, and any interest runs from that date until the liability is paid.
