Statute of limitations on issuance of proposed assessment

Sec. 7. (a) Except as otherwise provided in IC 6-8.1-5-2, the statute of limitations for the assessment of a listed tax liability is

three (3) years from the due date of the annual return (including extensions of time granted by the department) or the date on which the annual return

is filed for the tax year, whichever is later. If an extension of time is granted by the department, the statute of limitations shall begin to run on the

day after the last day of the extension period.

(b) In the case where returns are filed monthly, quarterly, or semi-annually such as returns filed for the state gross retail or use tax, the

gasoline tax, the special fuel tax, the motor carrier fuel tax, the oil inspection fee, or the petroleum severance tax, the statute of limitations for an

assessment is three years from the date the return was filed, or the end of the calendar year which contains the taxable period for which the return

was filed, whichever is later.

(c) "Date of filing" is defined in IC 6-8.1-6-3. The due date of any listed tax is defined in IC 6-8.1-1-4.

(d) If a taxpayer files an amended return which corrects, updates or in any way changes the amount and/or method of reporting, the statute

of limitations for assessment will be three (3) years from the date on which the amended return is filed. However, once the statute of limitations for

the original return (the return being amended) has run, the amount the department may assess due to the amended return is limited to any amount

claimed as a refund on the amended return.

EXAMPLE

(e) If a taxpayer files an adjusted gross income tax, supplemental net income tax, or county adjusted gross income tax return that understates

its income by at least twenty-five percent (25%), the statute of limitations for proposed assessments is increased from three (3) years to six (6) years.

"Income," as used in 45 IAC 15-5-7(e), shall be defined to mean adjusted gross income for the adjusted gross income tax, supplemental

net income for the supplemental net income tax and county adjusted gross income for the county adjusted gross income tax.

(f) The running of the statute of limitations for purposes of assessing unpaid taxes will not start if the taxpayer fails to file a return which

is required by any listed tax provision. Also, a substantially blank, unsigned or fraudulent return will not start the running of the statute of limitations.

(1) A substantially blank return is one which does not furnish all the information necessary to determine a taxpayer's liability for the

tax in question. In order for a return to be complete enough to determine the taxpayer's liability, the information does not have to be correct. Any

denotion by the taxpayer which clearly indicates a positive denial of liability for any tax listed on the tax form shall constitute a completed return.

Thus, a return which has "zero," or "-0-" or "none" written on a given line is not substantially blank. Also, if a taxpayer makes a positive indication

of liability on a line which constitutes a total of one or more taxes, a return is deemed to be completed for all such taxes even if the particular line

for the tax(es) is left blank.

(2) An unsigned return is one which does not have the original hand written signature of the individual taxpayer or corporate officer

or their authorized designee. The return also must be dated.

(3) A person who files a return which makes a false representation(s) with knowledge or reckless ignorance of the falsity will be

deemed to have filed a fraudulent return. There are five elements to fraud.

(A) Misrepresentation of a material fact: A person must truthfully and correctly report all information required by the Indiana Code and

the department's regulations. Any failure to correctly report such information is a misrepresentation of a material fact. Failure to file a return may

be a misrepresentation.

(B) Scienter: This is a legal term meaning guilty knowledge or previous knowledge of a state of facts, such as evasion of tax, which it was

a person's duty to guard against. A person must have actual knowledge of the responsibility of reporting the information under contention. However,

the reckless making of statements without regard to their truth or falsity may serve as an imputation of scienter for purpose of proving fraud.

(C) Deception: Deception operates on the mind of the victim of the fraud. If a person's actions or failure to act causes the department to

believe a given set of facts which are not true, the person has deceived the department.

(D) Reliance: Reliance also concerns the state of mind of the victim and is generally considered along with deception. If the person's actions,

failure to act, or misrepresentations cause the department to rely on these acts to the detriment or injury of the department, the reliance requirement

of fraud will be met.

(E) Injury: The fraud instituted upon the department must cause an injury. This can be satisfied simply by the fact that the

misrepresentation(s) caused the department not to have collected the money which properly belongs to the state of

Indiana.

In order to demonstrate fraud, the department is required to prove all of the above elements are present. This must be shown by clear and

convincing evidence.