91-0924 - Corporation Franchise

 

BEFORE THE UTAH STATE TAX COMMISSION

___________________________

XXXXX :

Petitioner : FINDINGS OF FACT,

: CONCLUSIONS OF LAW,

v. : AND FINAL DECISION

:

AUDITING DIVISION OF THE : Appeal No. 91-0924

UTAH STATE TAX COMMISSION, :

: Account No. XXXXX

Respondent :

_________________________________

STATEMENT OF CASE

A prehearing conference was held in this matter at XXXXX on XXXXX, Alan Hennebold, Administrative Law Judge presiding. XXXXX and XXXXX, Certified Public Accountants, and XXXXX, owner of XXXXX, appeared for Petitioner. XXXXX, Assistant Utah Attorney General, XXXXX and XXXXX of the Audit Division's staff appeared for Respondent.

At the prehearing conference, the parties acknowledged that the facts pertaining to this matter are not in dispute and that no evidenciary hearing was required. The parties agreed to submit briefs setting forth their respective positions. The parties also agreed that unless a request for oral argument was made prior to XXXXX, the matter would be submitted to the Commission on the basis of the pleadings and briefs.

The Commission has received no request for oral argument from either party. Therefore, based upon the pleadings and the parties' briefs, the Tax Commission makes its:

FINDINGS OF FACT

1. The tax in question is corporate franchise tax.

2. The period in question is XXXXX.

3. Petitioner reported net operating income of $$$$$ on its XXXXX franchise tax return.

4. Petitioner reported net operating loss of $$$$$ on its XXXXX franchise tax return.

5. Petitioner carried its XXXXX net operating loss forward as a deduction against XXXXX income, resulting in a net operating income of $$$$$ on its XXXXX franchise tax return.

6. Respondent audited Petitioner's XXXXX franchise tax return during XXXXX. In connection with its audit, Respondent concluded that under applicable law, Petitioner should have applied its XXXXX operating loss against its XXXXX income. Respondent therefore recomputed Petitioner's XXXXX franchise tax liability by excluding the deduction for Petitioner's XXXXX operating loss. Petitioner's XXXXX franchise tax liability was thereby increased in the amount of $$$$$. Petitioner was advised of the foregoing by Statutory Notice dated XXXXX.

7. Petitioner's tax preparer failed to apply the XXXXX operating loss against XXXXX income due to the mistaken belief that Utah law followed federal tax provisions allowing taxpayers the option of carrying operating losses forward or backward to other years.

CONCLUSIONS OF LAW

In determining income for purposes of Utah's corporate franchise tax, a deduction from income is allowed for the aggregate of net loss carryovers and net loss carrybacks. (Utah Code Ann. 59-7-108(14).)

A net loss must first be carried back to the earliest of the prior three years before it may be applied to any succeeding years. (Utah Code Ann. 59-7-108(14)(c).)

Claims for credit or refund arising from an overpayment attributable to a net loss carryback adjustment must be made before the expiration of the 15th day of the 40th month following the end of the taxable year of the net loss which resulted in the carryback. (Utah Code Ann. 59-7-141(2)(b).)

DECISION AND ORDER

Petitioner concedes that it failed to apply its XXXXX operating loss against its XXXXX operating income, as required by Utah law. As a result, Petitioner did not properly claim a credit for its XXXXX operating loss within the time permitted by Utah Code Ann. 59-7-141(2)(b).

Having conceded the foregoing, Petitioner requests relief based on two other points. First, Petitioner suggests that Respondent delayed its audit of Petitioner's XXXXX franchise tax return until the time limit for correcting its XXXXX return had expired. However, that allegation is unsupported by any evidence.

Petitioner also argues that the Commission should follow provisions of the federal Internal Revenue Code that allow relief under circumstances such as these. However, Petitioner's liability is controlled by Utah statute and Commission rules and policies, which do not permit the relief requested. In this case, the statute of limitations for Petitioner's XXXXX tax year had expired almost a year prior to Petitioner's receipt of Respondent's Statutory Notice.

Based on the foregoing, the Commission concludes that Respondent properly denied Petitioner's deduction of its XXXXX operating loss from its 1987

operating income. The Respondent's determination in this matter is therefore affirmed. It is so ordered.

DATED this 5th day of May, 1992.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco S. Blaine Willes

Commissioner Commissioner