On November 22, 2017, the Pennsylvania Supreme Court, in a 5-1 decision, found that a taxpayer’s petition for refund regarding its 2007 tax year was untimely because the three-year statute of limitations began on the original due date of the return, April 15, 2008, and not the date on which the report was filed, September 19, 2008.
By statute, refunds must be filed within three years of “actual payment of the tax.” The court reasoned that “actual payment of the tax” occurred on April 15, 2008, the date tax was due and payable and when the Department accepted taxpayer’s estimated tax payments and credits as payment for its 2007 tax year liability.
Filing of the annual report is not the triggering event for determining whether a refund petition was timely filed. Accordingly, the court found that taxpayer’s refund petition was not timely filed because the three-year tax refund period began to run on April 15, 2008, and expired prior to the September 16, 2011, refund petition filing date.
This decision raises several issues. For example, when would the statute of limitations for a refund start to run if a taxpayer is not fully paid-in by the original due date? The single-judge concurrence expresses the opinion that if Mission Funding did not make any estimated payments and tendered payment with its delinquent report, the limitations period would have begun on the date it made payment, not on the original due date. Further, if Mission Funding made insufficient estimated payments and made a final payment when it filed its late report, the estimated payments would have been paid on April 15, 2008, and the amount paid with the tax report would have been paid on September 19, 2008 - thus creating two different limitation periods.
This decision should generally clarify the statute of limitations question in Pennsylvania for taxpayers that are fully paid-in by the original due date of their return. However, as noted by the concurring opinion, Pennsylvania’s practice of looking to the original due date of the return rather than the actual filing date or the extended due date could lead to unusual results in the context of taxpayers that make late corporate tax payments to the state.