Filing an amended tax return does not negate the need to file a timely petition for refund with the Pennsylvania Department of Revenue’s Board of Appeals. In a case decided in June, Quest Diagnostics Venture, LLC v. Commonwealth, Docket No. 782 F.R. 2012, the Commonwealth Court of Pennsylvania rejected the taxpayer’s argument that its amended Corporate Tax Report constituted a timely petition for refund. In addition, the Court found that under the facts of the case, equitable considerations did not provide a basis to extend the time period for filing a refund petition set out in the statute. We note, however, that under other factual scenarios the Board of Finance and Revenue or a court may exercise equitable tolling powers. Also, pending Pennsylvania legislation concerning amending tax reports, if adopted, could affect the time limitations for filing a refund petition.
Pennsylvania tax refund claims currently are required to be filed within three years of the actual payment of the tax,1 with the exception that when there has been an audit, a petition for refund may be filed within the later of six months from the date of an assessment or three years from the date the tax was paid.2
On April 15, 2008, Quest Diagnostics Venture, LLC (“Quest”) obtained a six month extension to file its 2007 Corporate Tax Report and paid Franchise Tax for the 2007 year.3 On October 15, 2010, Quest timely filed an amended Corporate Tax Report showing a tax refund due.4 On February 21, 2012, the Department notified Quest via letter that the Department did not accept Quest’s amended 2007 return. On the same day, Quest filed a petition for refund with the Department’s Board of Appeals.5 Both the Board of Appeals and the Board of Finance and Revenue denied Quest a refund on the basis that the petition was untimely filed. In Commonwealth Court, Quest argued that its October 15, 2010 amended report essentially should be treated as a timely filed refund petition on the basis that “the amended report contained substantial information required for a petition for refund.”6
Under current statutory law, a petition for refund must identify: “(i) the tax type and tax periods included within the petition; the amount of the tax that the taxpayer claims to have been overpaid; and (iii) the basis of the taxpayer’s claim for refund.”7 Pursuant to the Department of Revenue’s regulations, all petitions for refund must be filed with the Department’s Board of Appeals.8
In its opinion, the Commonwealth Court confirmed that the filing of an amended report does not extend the three year time limit for filing a Petition for Refund and determined that the amended report was not a Petition for Refund “in form and substance.”9 Thus, Quest has been unsuccessful in its appeal to date but does have a right of appeal to the Pennsylvania Supreme Court.
In support of its position, Quest also relied on other legal arguments, including the doctrine of equitable estoppel. They argued that the Department should be estopped from denying the timeliness of Quest’s refund request because “the Department’s representatives advised Petitioner that the Department was reviewing and considering the refund claim that had been submitted as an Amended Return” and “waited almost a year and a half to advise Petitioner that the Department’s position was that a refund claim need not be considered or granted and the statute of limitations would not be tolled.”10 The Commonwealth Court rejected this argument because the rules for filing refund claims are clear and the company should have been aware of them.
Although the equitable argument was unsuccessful in this case, such arguments may be successful in other limited circumstances, as where a taxpayer has been affirmatively misled by someone at the Revenue Department and, as a result, misses a filing deadline.
A house bill has been introduced in the Pennsylvania House of Representatives proposing a new section be added to the Tax Reform Code of 1971 that, if enacted in its current form, would provide that the Department must “review an amended report and advise the taxpayer in writing within one year of the filing date of the amended report whether the department accepts the amended report.”11 “A taxpayer who disagrees with the action of the department [could then] file an appeal with the board of appeals within ninety days of the mailing date of the written notice.”12 If this bill were to become law in its current form, a company in Quest’s position in the future would be provided an opportunity to appeal the denial of its amended return.
1 See 72 P.S. § 10003.1(a).
2 See 72 P.S. § 10003.1(b).
3 Quest Diagnostics Venture, LLC v. Commonwealth, Docket No. 782 F.R. 2012, 2015 Pa. Commw. LEXIS 240, at *2.
4 Petition for Review, Quest Diagnostics Venture, LLC v. Commonwealth of Pennsylvania, No. 782 F.R. 2012, 2012 Pa. Tax LEXIS 740, at *7.
5 Quest Diagnostics Venture, LLC v. Commonwealth, Docket No. 782 F.R. 2012, 2015 Pa. Commw. LEXIS 240, at *5.
6 Id. at *10
7 72 P.S. § 9703(2).
8 61 Pa. Code § 7.14(a).
9 Quest Diagnostics Venture, LLC v. Commonwealth, Docket No. 782 F.R. 2012, 2015 Pa. Commw. LEXIS 240, at *10.
10 Petition for Review, Quest Diagnostics Venture, LLC v. Commonwealth of Pennsylvania, No. 782 F.R. 2012, 2012 Pa. Tax LEXIS 740, at *13.
11 H. 1198, Reg. Sess., at 3 (Pa. 2015).
12 H. 1198, Reg. Sess., at 4 (Pa. 2015).
