North Carolina Sets ‘Kaestner’ Refund Deadline (1)

July 2, 2019, 6:39 PMUpdated: July 3, 2019, 7:12 PM

Certain North Carolina taxpayers have until Dec. 21 to apply for refunds of tax payments linked to a late-June U.S. Supreme Court ruling.

  • In the North Carolina v. Kaestner Family Trust case, the high court found that a trust beneficiary’s residence in North Carolina didn’t establish enough of a connection for the state to tax the trust. The Kaestner trust paid more than $1.3 million in taxes to North Carolina, but challenged the state’s law.
  • The state Department of Revenue issued a July 2 notice describing the law regarding the statute of limitations on requesting tax overpayment refunds and special provisions related to “contingent events” such as the court ruling at issue.
  • Taxpayers whose statute of limitations was expiring when the case was pending and who filed the proper notice must file an amended state return or a claim for refund by Dec. 21. Otherwise, the usual statutory deadline will apply: either three years after the date of the return or two years after payment of the tax.
  • The high court’s ruling could lead North Carolina lawmakers to rewrite the trust tax statute, according to William W. Nelson, a partner with Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan LLP in Raleigh. He said changes could be included in the budget legislation currently being considered, but it’s “more likely that any revision would have to wait until next year.”
(Updates with practitioner comment on state law rewrite. Earlier version corrected applicability of Dec. 21 deadline.)

To contact the reporter on this story: Andrew M. Ballard in Raleigh, N.C. at aballard@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Kathy Larsen at klarsen@bloombergtax.com

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