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North Carolina Sets ‘Kaestner’ Refund Deadline in July 2nd Notice

July 8, 2019

By Richard Bloom and Melissa Gonzalez

On June 21, 2019, the US Supreme Court ruled in N.C. Department of Revenue v The Kimberley Rice Kaestner 1992 Trust, US, No. 18-457, 6/21/19 that the presence of in-state beneficiaries alone does not empower a state to tax trust income that has not been distributed to the beneficiaries, where the beneficiaries have no right to demand that income and are uncertain to receive it.

(See our Tax Alert dated June 25, 2019Mazars USA LLP Tax Alert: Supreme Court Determines Trust is Not Subject to North Carolina Income Tax). As a result, taxpayers may have an opportunity to file amended North Carolina fiduciary income tax returns.

The North Carolina Department of Revenue issued a notice on July 2 stating that under N.C. Gen. Stat. § 105-241.6(a), the general statute of limitations for obtaining a refund of an overpayment of tax is the later of the following: (1) three years after the due date of the return, or (2) two years after the payment of tax. However, N.C. Gen. Stat. § 105-241.6(b)(5) provides an exception to the general statute of limitations for obtaining a refund of an overpayment in the case of a contingent event, such as this court ruling.

Taxpayers whose statutes of limitations were expiring when the case was pending and filed the proper “Notice of Contingent Event” must file an amended state return or a claim for refund on, or before, December 21, 2019. Otherwise, the usual statutory deadline will apply: either three years after the due date of the return or two years after payment of the tax.

Please contact your Mazars USA LLP professional for additional information.



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