Protective Refund Claim
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.