Protective Refund Claim

The protective refund claim policy is repealed effective January 1, 2014. N.C. Gen. Stat. § 105-241.6(b)(5), effective January 1, 2014, provides an exception to the general statute of limitations for obtaining a refund of an overpayment due to a contingent event or an event or condition other than a contingent event. The statute addresses specific situations when the general statute of limitations in N.C. Gen. Stat. § 105-241.6(a) may not apply. See Exception to the General Statute of Limitations for Certain Events.

A protective refund claim is a claim filed to protect a taxpayer’s right to a potential refund based on a contingent event for a taxable period for which the statute of limitations is about to expire. A protective claim is usually based on contingencies such as pending litigation or an ongoing income tax audit in another state.

The Department of Revenue will accept a protective claim for refund provided it (1) is filed before the expiration of the statutory refund claim period; (2) identifies and describes the contingencies affecting the claim; (3) is sufficiently clear and definite to alert the Department of Revenue as to the essential nature of the claim; and (4) identifies the tax schedule and the specific year for which the protective claim is filed. The six-month period within which the Department must take action on a claim for refund does not begin on a protective claim until the amended return perfecting the claim is filed.

It is not necessary for a taxpayer to file a protective refund claim for a year under examination by the Internal Revenue Service because, under North Carolina law, a taxpayer has six months to file an amended return to report federal changes.

There is no special form for filing a protective claim. The Department of Revenue will accept any written submission provided it contains all the required elements. Upon conclusion of the contingency, a taxpayer may perfect the claim for refund by filing an amended return for the tax year at issue.

Protective Refund Claims Filed With the Department Prior to January 1, 2014

If you filed a protective refund claim prior to January 1, 2014 under the Department’s former administrative policy based on an event or condition other than a contingent event as defined in N.C. Gen. Stat. § 105-241.6(b)(5), you must file a true and accurate (perfected) request for a refund of an overpayment with the Secretary by June 30, 2014 unless the general statute of limitations for the tax period impacted by the event or condition has not expired. See Exception to the General Statute of Limitations for Certain Events for finalizing a protective refund claim that was filed prior to January 1, 2014 under the Department’s former administrative policy.