BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
XXXXX, )
:
Petitioner, ) FINDINGS OF FACT,
: CONCLUSIONS
OF LAW,
v. ) AND FINAL DECISION
:
AUDITING
DIVISION OF THE ) Appeal No. 92-0129
UTAH STATE TAX
COMMISSION, :
) Account
No. XXXXX
Respondent. :
_______________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission for a formal hearing on XXXXX,
at 2:00 p.m. Alan Hennebold, Presiding
Officer, heard the matter for and on behalf of the Commission. XXXXX, C.P.A., participated by telephone for
Petitioner. XXXXX, Assistant Utah
Attorney General, appeared for Respondent.
Based
upon the evidence and argument presented at the hearing, the Commission hereby
makes its:
FINDINGS OF FACT
1. The tax in question is corporate franchise
tax.
2. The period in question is XXXXX through
XXXXX.
3. For Utah corporate franchise tax purposes,
Petitioner reported the following amounts of income or loss before the
application of net loss carrybacks or carryovers:
TAXABLE YEAR
INCOME
OR
PERIOD DESIGNATED
AS (LOSS)
XXXXX FY XXXXX $$$$$
XXXXX FY XXXXX $$$$$
XXXXX FY XXXXX $$$$$
XXXXX FY XXXXX $$$$$
XXXXX Short Year XXXXX $$$$$
XXXXX CY XXXXX $$$$$
XXXXX CY XXXXX $$$$$
XXXXX CY XXXXX $$$$$
4. Petitioner attempted to carryforward its
short year XXXXX and CY XXXXX losses to offset income from CY XXXXX and CY
XXXXX pursuant to I.R.C. §172(b)(1)(E).
5. Respondent disallowed the carryforward of
the losses by Petitioner, and required Petitioner to carryback the losses
first, and then carryforward any amount of loss still available, pursuant to
Utah Code Ann. §59-7-108(14)(c).
6. Respondent required the short year XXXXX
loss to be carried back to reduce the income from FY XXXXX to $$$$$. Petitioner is unable to obtain a refund of
taxes paid for FY XXXXX since the statute of limitations for obtaining a refund
expired on XXXXX. See Utah Code Ann.
§59-7-141(2)(b).
7. Respondent required the loss from CY XXXXX
to be carried back to offset the remaining $$$$$ of income from FY XXXXX. Petitioner is not entitled to a refund of
taxes in connection with this carryback due to the $$$$$ minimum tax. Respondent permitted the remainder of the
loss from CY XXXXX to be carried forward to offset all of the income from CY
XXXXX and a portion of the income from CY XXXXX.
8. As a result of the foregoing adjustment,
Respondent issued a statutory notice of deficiency dated XXXXX asserting a tax
deficiency for XXXXX in the amount of $$$$$ plus interest.
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 or 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 operating losses against prior years'
operating income, as required by Utah law.
As a result, Petitioner did not properly claim a credit for its short year
XXXXX and calendar year XXXXX operating losses within the time permitted by
Utah Code §59-7-141(2)(b).
Having
conceded the foregoing, Petitioner raises several other points.
First, Petitioner argues it is inequitable
for Respondent to disallow the loss carryforward for a particular year when it
is too late to carry such loss back, and obtain a refund for such other
years. The Commission recognizes that
the difference between federal and state law regarding loss carryback has
caused confusion. However, the fact
that Respondent did not discover Petitioner's error in carrying its losses
forward rather than backward is not a basis for excusing Petitioner from the
law's effect.
Petitioner
also argues that the Commission has exercised its authority to provide relief
to other taxpayers through its Tax Bulletin 6-92, but does not assist other
taxpayers equally as deserving, such as Petitioner. The Commission recognizes that in exercising its authority to
grant some relief, it must necessarily set limits. No matter where the limit is set, some taxpayers will fall
outside the area of relief.
Unfortunately, such a result cannot be avoided unless the statutes in
question were to be repealed.
Finally,
Petitioner questions whether Respondent's adjustments to Petitioner's liability
for fiscal year XXXXX are within the period permitted by law for such
adjustments. Utah Code Ann.
§59-7-141(2)(b) provides a specific statute of limitations for loss carryback
situations such as this. Respondent's
adjustments fall within the period allowed by 59-7-141(2)(b)
Based
on the foregoing, the Commission affirms Respondent's audit determination in
this matter. It is so ordered.
DATED
this 7th day of October, 1992.
BY ORDER OF THE STATE TAX COMMISSION
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco. S.
Blaine Willes
Commissioner Commissioner