Corporate Close-Up: State Requirements for Reporting of Federal Adjustments Analyzed in 2016 Survey

Internal Revenue Agency adjustments or taxpayer amendments to federal income tax returns can trigger a myriad of state administrative burdens for multistate taxpayers. A gray area covered in the soon-to-be released Bloomberg BNA 2016 Survey of State Tax Departments is what each state deems to be adequate notice for a reportable adjustment made at the federal level. This is important because it starts the statute of limitations by which a state affected by the federal change can make an assessment.

Now in its 16th year, the survey clarifies each state’s position on the gray areas of corporate income tax and sales and use tax administration, with an emphasis on nexus policies.

Many states agreed that adequate notice of a reportable adjustment is only made when the taxpayer files an amended return with their tax agency, preliminary results of the survey show. Fewer jurisdictions said receiving written notice from a taxpayer of the federal change would suffice. 

Only 10 states said that adequate notice of a reportable adjustment is imputed to them from the date that the IRS or another jurisdiction provides information to their tax agency. Among these jurisdictions was Alabama, which noted that receiving such notice "does not relieve the taxpayer's responsibility to file an amended return."

The full and final results of the Bloomberg BNA Survey will be released on April 22.

Continue the discussion on LinkedIn Should adequate notice be limited to filing an amended return—or should it be something less than that?

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