The Mississippi Supreme Court rejected a taxpayer’s corporate income tax refund claim as untimely, holding that the timely issuance of a notice of examination and commencement of an examination tolled the statute of limitations for the Department of Revenue to make an assessment or effect a refund, but not for the taxpayer to claim a refund. Caesars Entm’t, Inc. v. Miss. Dep’t of Revenue, No. 2019-CA-00155-SCT (Miss. May 7, 2020).
The case concerned a casino operator’s refund claim for the 2005 tax year that was prompted by the Mississippi Supreme Court’s decision in Mississippi Department of Revenue v. Isle of Capri Casinos, Inc., 131 So. 3d 1192 (Miss. 2014). In October 2007, the taxpayer received a notice of examination for prior tax years, including the 2005 tax year. The Department completed its examination in January 2013 and found that the taxpayer had not overpaid or underpaid its corporate income taxes. The taxpayer filed its 2005 refund claim in June 2014, four months after the Mississippi Supreme Court decided Isle of Capri Casinos. The Department rejected the refund claim as untimely.
Under Section 27-7-313 of the Mississippi Code, taxpayers generally have three years after filing a return to file a refund claim. The pre-2013 version of Section 27-7-313 also provided that the three-year limitation period did “not apply to those refund requests or claims made in compliance with subsection 2 . . . of Section 27-7-49 [of the Mississippi Code].” Section 27-7-49 generally provides that the Department has three years to examine returns and determine whether taxpayers have overpaid or underpaid taxes, unless it issues a notice of examination and starts the examination within the three-year examination period. According to the pre-2013 version of Section 27-7-313(2), if the Department issued a notice of examination and started the examination within the three-year period, the Department was authorized to determine the taxpayer’s “correct tax liability” after the expiration of the three-year period as long as it did so “with reasonable promptness and diligence.”
The taxpayer contended that regardless of when it filed its refund claim, Sections 27-7-313 and 27-7-49(2) together gave the taxpayer additional time to file a refund claim after the Department’s examination, and gave the Department additional time to determine the taxpayer’s correct liability and issue a refund. The court disagreed, concluding that the tolling provision in Section 27-7-49(2) applied only to the Department. The court interpreted Section 27-7-49(2) as allowing the Department to request a refund (from the state auditor) after the three-year limitations period had expired if the Department determined during an examination that the taxpayer overpaid tax. But the court also said that the Department, having already examined the taxpayer and determined that the taxpayer did not overpay or underpay its taxes, was under no duty to redetermine the taxpayer’s correct tax liability, notwithstanding that Isle of Capri Casinos, which was the basis for the taxpayer’s refund claim, was decided after the Department completed its examination.
Under current Mississippi law, if the Department issues a notice of examination and starts the examination within the three-year examination period, the Department has an additional year after the expiration of the three-year period to examine a taxpayer’s returns and determine whether the taxpayer overpaid or underpaid its taxes. The taxpayer, however, does not receive an additional year to file a refund claim.