Requirement to report federal changes

1. The following provisions are applicable for purposes of interpreting subsection 1 of North Dakota Century Code section 57-38-34.4: a. If a change or correction to federal taxable income or federal income tax liability is initiated by the United States internal revenue service, the change or correction must be reported to the commissioner even if it does not result in an underpayment or an overpayment of federal income tax. b. "Final determination" means a decision, action, or date from which no further action is taken by the taxpayer or the United States internal revenue service to resolve any dispute relating to the change or correction which was made to the taxpayer's federal taxable income or federal income tax liability. A final determination has occurred if any of the following circumstances apply: (1) A taxpayer receives a notice or other correspondence from the United States internal revenue service which makes an adjustment to the taxpayer's federal taxable income based on: (a) A mathematical or clerical error. (b) Any other change or correction if the taxpayer has paid or arranged to pay the underpayment of federal income tax, or if the United States internal revenue service has credited or refunded to the taxpayer an overpayment of federal income tax. A final determination does not occur, however, if a taxpayer pays the tax and then files a claim for credit or refund with the United States internal revenue service. (2) A taxpayer waives the restrictions on assessment and collection of all or any part of an underpayment of federal income tax by signing a federal form 870 or any other form prescribed for this purpose by the United States internal revenue service. A final determination does not occur with respect to any part of the underpayment which is not covered by the waiver. If the signature of an authorized representative of the United States internal revenue service is required to execute this waiver, the date of final determination is when the taxpayer receives notice of the signing. A final determination does not occur, however, if a taxpayer pays the tax and then files a claim for credit or refund with the United States internal revenue service. (3) A taxpayer receives a federal statutory notice of deficiency and does not timely file a petition with the United States tax court for redetermination of the assessed underpayment of federal income tax. The date of final determination is when the time period within which to file the petition expires. A final determination does not occur, however, if a taxpayer pays the tax and then files a claim for credit or refund with the United States internal revenue service. (4) A closing agreement is executed pursuant to United States Internal Revenue Code section 7121 [26 U.S.C. 7121]. The date of final determination is when the taxpayer receives notice of the signing of the closing agreement by an authorized representative of the United States commissioner of internal revenue. (5) A federal court of law issues a decision which is not appealed or is not subject to appeal. (6) A federal court of law approves a voluntary agreement stipulating final disposition of a case. (7) If a taxpayer files a claim for credit or refund of all or any part of an underpayment of federal income tax, as described in paragraph 1, 2, or 3, a final determination has occurred if any of the following circumstances apply: (a) The taxpayer receives notice of the disallowance of the claim for credit or refund from the United States internal revenue service and the taxpayer does not appeal the disallowance or file a suit for refund. (b) The taxpayer receives notice of the allowance of the claim for credit or refund from the United States internal revenue service. (c) Receipt of the refund from the United States internal revenue service, if no prior notice is received. (d) The provisions of paragraph 4, 5, or 6 apply. 2. The following provisions are applicable for purposes of interpreting subsection 2 of North Dakota Century Code section 57-38-34.4: a. If a taxpayer initiates the filing of the amended federal income tax return, the taxpayer must also file an amended state income tax return even if it does not result in payment of additional tax. b. To request a credit or refund of tax, a taxpayer must file an amended state income tax return either within the time period prescribed in subsection 1 of North Dakota Century Code section 57-38-40 or within the ninety-day time period prescribed in subsection 2 of North Dakota Century Code section 57-38-34.4. 3. a. A change or correction to federal taxable income or federal income tax liability must be reported on an amended state income tax return except as provided in subdivision b. b. An alternative report may be elected to report an increase in North Dakota tax liability as a result of a change or correction to federal taxable income or federal income tax liability. The alternative report must contain the following: (1) A statement that the information is submitted in lieu of an amended return pursuant to subdivision b of subsection 3 of section 81-03-01.1-09. (2) A description of the change or correction to federal taxable income or federal tax liability and the effect which the change or correction has on the statutory adjustments provided for in North Dakota Century Code sections 57-38-01.2 and 57-38-01.3. (3) An allocation or apportionment of the change to North Dakota tax liability and a computation of the adjusted North Dakota tax liability. This alternative report is subject to audit and assessment as if it were an amended return. c. When reporting a change or correction to federal taxable income or federal income tax liability pursuant to subsection 1 of North Dakota Century Code section 57-38-34.4, a taxpayer must also submit the following items: (1) A copy of the applicable federal waivers. (2) A copy of the documentation evidencing that a final determination has been made with respect to the federal change or correction. 4. A change or correction to federal taxable income or federal income tax liability that affects a year other than the year in which the change or correction occurs must also be reported in accordance with subsection 3.