Navigating Tax Refund Process: Key Insights on Franchise Tax Issue

On May 1, 2024

TL/DR –

House Bill 1893/Senate Bill 2103 was passed by Legislative Chambers on April 25, 2024, allowing taxpayers the potential for a franchise tax refund if the tax was reported on or after January 1, 2021. The refund claim must be filed on a Special Refund Claim form and taxpayers are required to amend their Tax Returns for each year they seek a refund. The Bill also indicates that taxpayers have the option to continue using Schedule G in calculating their taxes, should the application of the Bill’s provisions result in a lower tax base.

Legislative Chambers Approve House Bill 1893/Senate Bill 2103

A unified version of House Bill 1893/Senate Bill 2103 was approved by both Legislative Chambers on 25th April 2024. This passage is pending the signature of Governor Lee and is expected to become a law. The following provides insights into the refund process and other related aspects as per the bill’s stipulations and past comments made by the Commissioner of Revenue:

Franchise Tax Refund Opportunity: The bill proposes potential franchise tax refunds for taxes reported to the Department on a Franchise and Excise Tax Return filed from 1st January 2021, covering a period ending after 31st March 2020. This covers tax years 2020, 2021, 2022, and 2023.
2023 Tax Year: For the 2023 tax year, taxpayers must file their F&E Tax Returns and pay the resulting tax to the Department.
Requirement of Amended Returns: Taxpayers seeking a franchise tax refund need to amend the F&E Tax Return for each of those four years.
Chronological Filing Order: Amended F&E Returns must be filed chronologically, starting with the earliest year.
Amending Returns for Impacted Years Only: If a taxpayer paid franchise tax based on Schedule G for only certain years, they need to amend F&E Tax Returns only for those specific years.
Waiting Period After Amending a Return: After filing an amended Return, taxpayers must wait at least overnight before filing the corresponding Special Refund Claim.

Other provisions within the bill relate to requirements for filing Special Refund Claim forms, attachments necessary, Department notices, limited period for filing, definition of a “Claim”, Tax credits, and Taxpayer disclosure. The bill also clarifies matters related to legal fees, interest, the option to continue using Schedule G, litigation, and tax years for 2024 and beyond.

Please note that these details are based on commentary by the Commissioner, and the actual interpretation of the Bill could vary once it’s enacted into law. Not all provisions in the Bill are covered here, so other parts of it may affect you as well. We will update you about significant developments as they occur.

Please contact Carl E. Hartley, Lang Wiseman, William H.D. Fones, Jr., Steven K. Wood, or Jacob D. Baggett for more personalized advice.

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