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