Taxpayers who disagree with proposed assessments of taxes from the Department of Revenue or refunds denied by the Department have the right to challenge the Department’s action.
Step 1 – If you disagree with a notice of proposed assessment, you may request that the Department review that action by submitting Form NC-242, Objection and Request for Departmental Review to the Department. The request for review must be filed with the Department within 45 days from the date the notice was mailed by the Department (if mailed) or delivered to you (if delivered by a Department employee in person). An assessment for taxes shown due on a return but not paid or the application of refunds to debts owed to State and local government agencies or the IRS is not subject to the review process.
If you disagree with a notice of proposed denial of refund and the refund claim was filed within the statute of limitations as determined by the Department, you may request a Departmental review using the procedure described above for reviewing a notice of proposed assessment. If you disagree with a notice of denied refund and the refund claim was not filed within the statute of limitations as determined by the Department, you may not request a Departmental review. Instead, you may file a petition for a contested tax case at the Office of Administrative Hearings ("OAH"). See Step 4.
Step 2 – If a request for Departmental review is received timely, the Department must take one of the following actions: 1) grant the refund or remove the assessment, 2) request additional information from you to help make the decision, or 3) schedule a conference with you to discuss the case. If a conference is scheduled, then the Department will notify you about the time and date of the conference at least 30 days in advance. It may be shorter than 30 days if both you and the Department can agree on a mutually agreed time and date. The conference can be in person or by telephone. The date set for the conference may be changed by mutual agreement.
This conference is not a formal proceeding in that there is no sworn testimony or rules of evidence that apply in court cases. You can, however, designate someone to represent you. Most disagreements are resolved at this step.
Step 3 – If you and the Department cannot agree at Step 2, then the Department will send you a Notice of Final Determination ("NOFD"). The NOFD is a written document that explains why the Department determined that the proposed assessment or denied refund should be sustained. The NOFD will show the amount of tax, penalties, and interest you owe and the collections options available to the Department if the amount shown due is not paid and you do not contest the final determination. The NOFD will also provide the appeal procedures you must follow to contest the NOFD. See Step 4.
Step 4 – If you disagree with the NOFD or the denied refund based on the Department’s determination that the refund claim was not filed within the statute of limitations, you may file a petition for a contested tax case hearing with the Office of Administrative Hearings (OAH). The OAH has impartial administrative law judges that hear cases that individual citizens and businesses file against government agencies. A petition for a contested tax case may be filed only after the Department has issued a Notice of Final Determination or a notice of denied refund based on the Department’s determination that the refund claim was not filed within the statute of limitations.
You have 60 days to file the petition after the Department sends or delivers to you the NOFD or the notice of denied refund based on the Department’s determination that the refund claim was not filed within the statute of limitations. You must also send a copy of the petition to the Department at this address:
Department of Revenue
P.O. Box 871
Raleigh, NC 27602-0871
You do not have to pay the tax, penalty, and interest due before proceeding to a hearing before the Office of Administrative Hearings. For information about the hearings process at the OAH, please consult its web page at http://www.ncoah.com.
Step 5 –If you disagree with the final decision from Step 4, you may file a petition in the Superior Court of Wake County for further judicial review of the case. Generally, you must file the petition within 30 days of when you receive the final decision from Step 4. But if the OAH dismissed the contested tax case due to lack of jurisdiction because the only issue in the case is the constitutionality of a statute, then you have two years to file this petition. You must pay the tax, penalty, and interest due before the petition will be considered.