Pennsylvania (Philadelphia): Overpayment of Tax cannot be Refunded, But Taxpayers Allowed a Credit

Share this
TEXT SIZE Text Bigger Text Smaller

By KPMG's Washington National Tax practice | Nov. 25, 2013


From TaxWatch

audio Listen to this podcast

On November 18, 2013, the Pennsylvania Commonwealth court affirmed Tax Board and trial court rulings, addressing overpayments of Philadelphia’s Business Privilege Tax (now renamed the Business Income and Receipts Tax) as a result of IRS adjustments to federal taxable income.  The City of Philadelphia imposes a business tax based on gross receipts and net income. The starting point of the net income component is often federal taxable income. In 2003 and 2004, the taxpayers paid their estimated tax prior to the April 15 deadlines, but received extensions to file both their federal income tax and BPT returns. In February of 2009, the taxpayers underwent an IRS audit which resulted in a reduction of their federal taxable income, upon which their BPT was based. In March of the same year, the taxpayers filed amended 2003 and 2004 BPT reflecting their reduced taxable income for those years.

 

The City acknowledged the taxpayers’ overpayments, but denied refunds based on the fact that the refund claims were not timely filed within the three-year statute of limitations.  The court, agreeing with the Board and trial court, ruled that the plain language of the Philadelphia Code requires that refund petitions be filed within three years of the date when the payments were due or made, whichever is later. The taxpayers did not meet either of these deadlines. The IRS decreasing the taxpayers’ federal taxable income did not create an extension to file refund claims for overpayment of the BPT. Although the taxpayers did not receive a refund, the court agreed that the taxpayers were entitled to credits to the extent the overpayments identified on the amended returns resulted from estimated payments.  A three-year statute of limitations applies to refunds, however, in the court’s view there is no deadline for when credits can be awarded for overpayments of estimated tax. For more information on City of Philadelphia v. City of Philadelphia Tax Review Board to the use of Keystone Health Plan East, Inc., et al, please contact Howard Sklaroff at (267) 256-2891.

——————————————————————————————————————————————

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International.

 (0 user recommendations)

Comments

No comments found for this article.

Add a comment (Must be signed in.)

Want to participate in the discussion?

Or sign in to comment