2017 ORS 314.410¹
Time limit for notice of deficiency
  • circumstances when claim for refund may be reduced after time limit
  • time limit for refund or notice of deficiency for pass-through entity items

(1) At any time within three years after the return was filed, the Department of Revenue may give notice of deficiency as prescribed in ORS 305.265 (Deficiency notice).

(2) If the department finds that gross income equal to 25 percent or more of the gross income reported has been omitted from the taxpayer’s return, notice of the deficiency may be given at any time within five years after the return was filed.

(3) If the department finds that a return reports or reflects the use of a listed transaction, as defined in ORS 314.307 (Definitions), and that use of that listed transaction results in a deficiency in tax paid, notice of that deficiency may be given at any time within nine years after the return was filed.

(4)(a) The limitations to the giving of notice of a deficiency provided in this section do not apply to a deficiency resulting from false or fraudulent returns, or in cases where no return has been filed.

(b)(A) If the Commissioner of Internal Revenue or other authorized officer of the federal government or an authorized officer of another state’s taxing authority makes a change or correction as described in ORS 314.380 (Furnishing copy of federal or other state return or report) (2)(a)(A) and, as a result of the change or correction, an assessment of tax or issuance of a refund is permitted under any provision of the Internal Revenue Code or applicable law of the other state, or pursuant to an agreement between the taxpayer and the federal or other state taxing authority that extends the period in which an assessment of federal or other state tax may be made, then notice of a deficiency under any Oregon law imposing tax upon or measured by income for the corresponding tax year may be mailed within two years after the department is notified by the taxpayer or the commissioner or other tax official of the correction, or within the applicable period prescribed in subsections (1) to (3) of this section, whichever period expires later.

(B) A notice of deficiency mailed pursuant to this paragraph may assert any adjustment necessary to arrive at the correct amount of Oregon taxable income and Oregon tax liability for the tax year for which the federal or other state change or correction is made.

(c) If the taxpayer files an original or amended federal or other state return as described in ORS 314.380 (Furnishing copy of federal or other state return or report) (2)(a)(B), the department may reduce any claim for refund as a result of a change in Oregon tax liability related to the original or amended federal or other state return, but may not give notice of a deficiency for an adjustment to Oregon tax liability following the expiration of the applicable period prescribed in subsections (1) to (3) of this section and paragraph (a) of this subsection.

(5) The tax deficiency must be assessed and notice of tax assessment mailed to the taxpayer or authorized representative, who is authorized in writing, within one year from the date of the notice of deficiency unless an extension of time is agreed upon as prescribed in subsection (7) of this section.

(6) Notwithstanding other provisions of this section, the period for the assessment of any deficiency attributable to any part of the gain realized upon the sale or exchange of the taxpayer’s principal residence, as provided in section 1034 of the Internal Revenue Code (as in effect prior to the repeal of section 1034 of the Internal Revenue Code by the Taxpayer Relief Act of 1997 (P.L. 105-34)), does not expire prior to the expiration of three years from the date the department is notified by the taxpayer of:

(a) The cost of purchasing the new residence which the taxpayer claims results in nonrecognition of any part of such gain;

(b) The taxpayer’s intention not to purchase a new residence; or

(c) A failure to purchase a new residence within the period prescribed in section 1034 of the Internal Revenue Code (as in effect prior to the repeal of section 1034 of the Internal Revenue Code by the Taxpayer Relief Act of 1997 (P.L. 105-34)).

(7) If, prior to the expiration of any period of time prescribed in this section for giving of notice of deficiency or of assessment, the department and the taxpayer consent in writing to the notice of deficiency being mailed or deficiency being assessed after the expiration of such prescribed period, notice of such deficiency may be mailed or the deficiency assessed at any time prior to the expiration of the period agreed upon. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period agreed upon.

(8) In the case of a deficiency attributable to the application to the taxpayer of a net operating loss carryback, notice of such deficiency may be mailed at any time before the expiration of the period within which notice of a deficiency for the taxable year of the net operating loss which results in such carryback may be mailed.

(9) Notwithstanding the other provisions of this section, if any taxpayer agreed with the United States Commissioner of Internal Revenue or the taxing authority of another state for an extension, or renewals thereof, of the period for giving notices of deficiencies and assessing deficiencies in income tax for any year, the period for mailing notices of deficiencies of tax for such years and the period for filing a claim for refund under ORS 314.380 (Furnishing copy of federal or other state return or report) (2)(b) shall expire on the later of:

(a) The expiration of an applicable period described in subsections (1) to (8) or (10) of this section; or

(b) Six months after the date of the expiration of the agreed period for assessing a deficiency.

(10)(a) Notwithstanding the other provisions of this section and ORS 314.415 (Refunds), the period for claiming a refund or giving a notice of deficiency with respect to an item that is shown or required to be shown on a taxpayer’s return and that is attributable to a pass-through entity does not expire prior to three years from the date of the filing of the pass-through entity return to which the item on the taxpayer’s return relates.

(b) As used in this subsection, “pass-through entity” means any entity that is recognized as a separate entity for federal income tax purposes, for which the owners are required to report income, gains, losses, deductions or credits from the entity for federal income tax purposes. [1957 c.632 §14 (enacted in lieu of 316.610 and 317.410); 1959 c.212 §2; 1959 c.591 §20; subsection (8) derived from 1959 c.212 §3 and 1959 c.591 §21; 1963 c.509 §2; 1963 c.627 §1 (referred and rejected); 1969 c.405 §1; 1969 c.493 §§88,88a; 1971 c.507 §1; 1977 c.870 §43; 1983 c.162 §53; 1985 c.602 §5; 1993 c.726 §14; 1997 c.100 §3; 1999 c.74 §3; 1999 c.90 §4a; 2001 c.9 §5; 2005 c.54 §1; 2007 c.568 §18]

Notes of Decisions

When notice was not mailed to the taxpayer pursuant to ORS 314.410 (Time limit for notice of deficiency) (4), the depart­ment was without power to issue an order on the merits. Dickson v. Dept. of Rev., 5 OTR 315 (1973)

Claim for refund of corporate excise taxes for 1964, filed within one year after corporate taxpayer filed report with Depart­ment of Revenue in March 1972 re­gard­ing change or correc­tion of its federal taxable income resulting from reorganiza­tion, was not barred by statute of limita­tions. Interna­tional Health & Life Ins. Co. v. Dept. of Rev., 269 Or 23, 523 P2d 223 (1974)

Where defendant Depart­ment of Revenue, after giving plaintiff notice of proposed deficiency, failed to assess deficiency within one year re­quired by this sec­tion, but rather, at­tempted to “start over again” by mailing plaintiff an­oth­er notice of deficiency and proposed assess­ment for same deficiencies and tax years, Depart­ment of Revenue’s failure to follow pro­ce­dure requiring deficiency be assessed within one year after notice rendered sub­se­quent assess­ment invalid. Olympia Brewing Co. v. Dept. of Revenue, 284 Or 669, 588 P2d 30 (1978)

Correc­tion by Internal Revenue Service results in change in tax for state income tax purposes only if made with respect to tax year open for state tax assess­ment at time correc­tion is made. Swarens v. Dept. of Rev., 320 Or 326, 883 P2d 853 (1994)

State could not recalculate tax for tax year closed to review in order to prevent elective carry forward of tax credit to tax year subject to review. Smurfit Newsprint Corp. v. Dept. of Revenue, 329 Or 591, 997 P2d 185 (2000)

Where, in 2005, taxpayer timely filed amended Oregon tax return for 1999 claiming refund carryback for that year based on change in 2002 tax year to federal tax liability, Oregon statute of limita­tions authorizes Depart­ment of Revenue to issue deficiencies to taxpayer only for year in which federal change occurred. Tektronix, Inc. v. Dept. of Revenue, 20 OTR 468 (2012)

Where taxpayers at­tempted to carry over net operating loss from past tax year to year that Depart­ment of Revenue audited, depart­ment may challenge calcula­tions from that past tax year only for purpose of determining taxpayers’ liability in year to which taxpayers carried over net operating loss, even though depart­ment is barred from issuing notice of deficiency for that past tax year. Hillenga v. Dept. of Revenue, 358 Or 178, 361 P3d 598 (2015)

Chapter 314

Law Review Cita­tions

9 WLJ 249 (1973); 5 EL 516 (1975)

1 Legislative Counsel Committee, CHAPTER 314—Taxes Imposed Upon or Measured by Net Income, https://­www.­oregonlegislature.­gov/­bills_laws/­ors/­ors314.­html (2017) (last ac­cessed Mar. 30, 2018).
 
2 Legislative Counsel Committee, Annotations to the Oregon Revised Stat­utes, Cumulative Supplement - 2017, Chapter 314, https://­www.­oregonlegislature.­gov/­bills_laws/­ors/­ano314.­html (2017) (last ac­cessed Mar. 30, 2018).
 
3 OregonLaws.org assembles these lists by analyzing references between Sections. Each listed item refers back to the current Section in its own text. The result reveals relationships in the code that may not have otherwise been apparent.