GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1993

H	1 

HOUSE BILL 80

Short Title:  Federal Determination/Withholding.	(Public)
─────────────────────────────────────── 
Sponsors: Representatives Gamble, Jarrell, Justus, Luebke, and Tallent.
─────────────────────────────────────── 
Referred to:  Finance.
─────────────────────────────────────── 

February 9, 1993

A BILL TO BE ENTITLED
AN ACT TO REINSTATE AN INADVERTENTLY DELETED PROVISION RELATING TO ASSESSMENTS FOR EMPLOYER WITHHOLDING BASED ON FEDERAL DETERMINATIONS AND TO CLARIFY THE ASSESSMENT STATUTES.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 105-159 reads as rewritten:
"§ 105-159.  Federal corrections.
If a taxpayer's federal taxable income is corrected or otherwise determined by the federal government, the taxpayer must, within two years after being notified of the correction or final determination by the federal government, file an income tax return with the Secretary reflecting the corrected or determined taxable income.  The Secretary shall determine from all available evidence the taxpayer's correct tax liability for the taxable year.  As used in this section, the term 'all available evidence' means evidence of any kind that becomes available to the Secretary from any source, whether or not the evidence was considered in the federal correction or determination.
The Secretary shall assess and collect any additional tax due from the taxpayer as provided in Article 9 of this Chapter.  The Secretary shall refund any overpayment of tax as provided in Article 9 of this Chapter. A taxpayer who fails to comply with this section is subject to the penalties in G.S. 105-236 and forfeits the right to any refund due by reason of the determination.
."
Sec. 2.  G.S. 105-130.20 reads as rewritten:
"§ 105-130.20.  Federal corrections.
If a taxpayer's federal taxable income is corrected or otherwise determined by the federal government, the taxpayer must, within two years after being notified of the correction or final determination by the federal government, file an income tax return with the Secretary reflecting the corrected or determined taxable income.   	The Secretary shall determine from all available evidence the taxpayer's correct tax liability for the income year.  As used in this section, the term 'all available evidence' means evidence of any kind that becomes available to the Secretary from any source, whether or not the evidence was considered in the federal correction or determination.
The Secretary shall assess and collect any additional tax due from the taxpayer as provided in Article 9 of this Chapter.  The Secretary shall refund any overpayment of tax as provided in Article 9 of this Chapter.  	A taxpayer that fails to comply with this section is subject to the penalties in G.S. 105-236 and forfeits its rights to any refund due by reason of the determination.
		."
Sec. 3.  G.S. 105-160.8 reads as rewritten:
"§ 105-160.8.  Federal corrections.
For purposes of this Division, the provisions of G.S. 105-159 requiring an individual to report the correction or determination of taxable income by the federal government apply to fiduciaries required to file returns for estates and trusts."
Sec. 4.  Article 4A of Chapter 105 of the General Statutes is amended by adding a new section to read:
"§ 105-163.6A.  Federal corrections.
If the amount of taxes an employer is required to withhold and pay under the Code is corrected or otherwise determined by the federal government, the employer must, within two years after being notified of the correction or final determination by the federal government, file a return with the Secretary reflecting the corrected or determined amount.  The Secretary shall determine from all available evidence the correct amount the employer should have paid under this Article for the period covered by the federal determination.  As used in this section, the term 'all available evidence' means evidence of any kind that becomes available to the Secretary from any source, whether or not the evidence was considered in the federal correction or determination.
The Secretary shall assess and collect any additional tax due from the employer as provided in Article 9 of this Chapter.  If there has been an overpayment of the tax the Secretary shall either refund the overpayment to the employer in accordance with G.S. 105-163.9 or credit the amount of the overpayment to the individual in accordance with G.S. 105-163.10.  An employer who fails to comply with this section is subject to the penalties in G.S. 105-236 and forfeits the right to any refund due by reason of the determination.  Failure of an employer to comply with this section does not, however, affect an individual's right to a credit under G.S. 105-163.10."
Sec. 5.  G.S. 105-241.1 reads as rewritten:
"§ 105-241.1.  Additional taxes; assessment procedure.
(a)	Proposed Assessment. – If the Secretary discovers that any tax is due from a taxpayer, the Secretary shall notify the taxpayer in writing of the kind and amount of tax due and of the Secretary's intent to assess the tax.  This notice shall state that the proposed assessment will become final unless the taxpayer applies for a hearing within the time specified in subsection (c).  The Secretary's proposed assessment shall be based upon the best information available and shall be presumed correct.  
(b)	Delivery of Notice. – The Secretary shall deliver the notice of a proposed assessment to a taxpayer either in person or by United States mail sent to the taxpayer's last known address.  A notice mailed to a taxpayer is presumed to have been received by the taxpayer unless the taxpayer makes an affidavit to the contrary within 90 days after the notice was mailed.  If the taxpayer makes this affidavit, the time limitations in subsection (c) apply as if the notice had been delivered on the date the taxpayer makes the affidavit.  
(c)	Hearing. – A taxpayer who objects to a proposed assessment of tax is entitled to a hearing before the Secretary as provided in this subsection.  To obtain a hearing, the taxpayer must file a written request either for a hearing or for a written statement of the information and evidence upon which the proposed assessment is based.  If the notice of a proposed assessment was mailed, the taxpayer's request must be filed within 30 days after the date the notice was postmarked; if the notice of a proposed assessment was delivered in person, the taxpayer's request must be filed within 30 days after the date the notice was delivered.
Upon the taxpayer's timely request, the Secretary shall furnish a written statement of the information and evidence upon which the proposed assessment is based.  A taxpayer who requests a written statement in accordance with this subsection must, to obtain a hearing, file a written request for a hearing within 30 days after receiving the written statement.
Upon receipt of a timely application for a hearing, the Secretary shall conduct the hearing at a time and place chosen by the Secretary.  The taxpayer may present any objections to the proposed assessment at the hearing.  The rules of evidence do not apply to a hearing conducted under this subsection.
(d)	Assessment. – If a taxpayer does not apply for a hearing in accordance with subsection (c), a proposed assessment becomes final without further notice and is immediately due and collectible.  After the Secretary conducts a hearing under subsection (c), the Secretary shall make a decision on the proposed assessment, notify the taxpayer of the decision, and assess the taxpayer for the amount of tax determined to be due.  Upon assessment, the tax becomes immediately due and collectible.  G.S. 105-241.2, 105-241.3, and 105-241.4 apply to a tax assessed under this section.  Except in the case of a jeopardy assessment, the Secretary may not assess a taxpayer for a tax until the notice required by subsection (a) has been given and one of the following has occurred:
(1)	The time for applying for a hearing has expired.
(2)	The Secretary and the taxpayer have agreed upon a settlement.
(3)	The taxpayer has filed a timely application for a hearing and the Secretary, after conducting the hearing, has given the taxpayer written notice of the decision.
(e)	Statute of Limitations. – The Secretary may propose an assessment of tax due from a taxpayer at any time if (i) the taxpayer did not file a proper application for a license or did not file a return, (ii) the taxpayer filed a false or fraudulent application or return, or (iii) the taxpayer attempted in any manner to fraudulently evade or defeat the tax.  If a taxpayer files a return reflecting a federal determination as provided in G.S. 105-130.20, 105-159, 105-160.8, or 105-163.6A, the Secretary must propose an assessment of any tax due within three years after the return is filed.  If there is a federal determination and the taxpayer does not file the return required by G.S. 105-130.20, 105-159, 105-160.8, or 105-163.6A, the Secretary must propose an assessment of any tax due within five years after the date the Secretary received the final report of the federal determination.  In all other cases, the Secretary must propose an assessment of any tax due from a taxpayer within three years after the date the taxpayer filed an application for a license or a return or the date the application or return was required by law to be filed, whichever is later.  If the Secretary proposes an assessment of tax within the time provided in this section, the final assessment of the tax is timely.
A taxpayer may make a written waiver of any of the limitations of time set out in this subsection, for either a definite or an indefinite time.  If the Secretary accepts the taxpayer's waiver, the Secretary may propose an assessment at any time within the time extended by the waiver.
		(g)	Jeopardy Assessments. –  Notwithstanding any other provision of this section, the Secretary may at any time within the applicable period of limitations immediately assess any tax the Secretary finds is due from a taxpayer if, in the opinion of the Secretary, the collection of the tax is in jeopardy and immediate assessment is necessary in order to protect the interest of the State.  An assessment under this subsection is invalid if the Secretary does not give the notice required by subsection (a) either before or within 30 days after the assessment is made. 
	(i)	Interest. –  All assessments of tax, exclusive of penalties assessed on the tax, shall bear interest at the rate established pursuant to this subsection from the time the tax was due until paid.  On or before June 1 and December 1 of each year, the Secretary shall establish the interest rate to be in effect during the six-month period beginning on the next succeeding July 1 and January 1, respectively, after giving due consideration to current market conditions and to the rate that will be in effect on that date pursuant to the Code.  If no new rate is established, the rate in effect during the preceding six-month period shall continue in effect.  The rate established by the Secretary may not be less than five percent (5%) per year and may not exceed sixteen percent (16%) per year.  
		 " " (j)	Construction. – This section is in addition to and not in substitution of any other provision of the General Statutes relative to the assessment and collection of taxes. "
Sec. 6.  This act is effective upon ratification and applies to assessments of taxes for which the statute of limitations had not expired on or before the date of ratification.