Greenberg Traurig Alert
Corporations May Be Entitled to Refund of Interest From Florida Department
By Marvin Kirsner, Greenberg
Traurig, Boca Raton Office
View or download the PDF version of this Alert
In a significant case released on August 10, 1999, the Florida’s First
District Court of Appeal ruled that interest on a Florida corporation income
tax deficiency resulting from changes made by a federal income tax audit
did not start accruing until the date that the corporation reported the
federal income tax adjustments to the Department of Revenue.
In Barnett Bank v. Department of Revenue, Case No. 98-4104, Barnett Bank
was audited by the Internal Revenue Service for its corporate income tax
returns for 1986 through 1991. Barnett Bank settled with the IRS and agreed
to changes which increased its federal taxable income. This, of course,
increased Barnett Bank’s income for Florida corporate income tax purposes.
Barnett Bank timely notified the Department of Revenue regarding the increase
in federal taxable income, which increased its Florida corporate income
tax liability for the years in question, by filing an amended state corporate
tax return pursuant to §220.23(2), F.S.
The Department of Revenue did not assess penalties, but did assess interest
relating back to the date that the original return was filed. Barnett Bank
paid the interest under protest and filed a claim for refund on the theory
that a literal reading of the statute for the payment of interest should
result in interest accruing from the date the Corporation notified the Department
of Revenue of the additional Florida tax resulting from the federal tax
audit. When the Department of Revenue refused to pay the refund, Barnett
Bank commenced a legal action.
The Court ruled in favor of Barnett Bank, holding that the language of
the relevant statute, §220.809, F.S., provides that the interest accrues
from the date the payment of the tax is due. The Court interpreted this
statutory language literally, and ruled that the interest did not start
accruing until the tax becomes due, which the Court ruled is when the amended
return is filed. Accordingly, the Court ordered the Department of Revenue
to refund the interest paid by Barnett Bank.
The practical impact of this case is that Corporations that paid additional
Florida corporate income taxes as the result of a federal tax audit will
likely be entitled to a refund of interest from the Florida Department of
Revenue. A claim for refund may be filed within five years that the interest
was paid (for interest that was paid prior to July 1, 1999). If the claim
for refund is not filed within this period, the statute of limitations will
bar the refund.
A claim for refund should be made by filing Form DR-26 "Application for
Refund" with the Florida Department of Revenue.
Please note that it is possible that the Department of Revenue may attempt
to have legislation adopted that would change the law set out in the Court’s
ruling. It is possible that such legislation could be retroactive, or prospective
- effecting only future audits. Or the legislations might possibly "grandfather"
refund claims filed prior to any such possible legislation. Consequently,
claims for refund should be filed as soon as possible.
© 1999 Greenberg Traurig
This GT ALERT is issued for informational purposes only and is not intended
to be construed or used as general legal advice. Greenberg Traurig attorneys provide
practical, result-oriented strategies and solutions tailored to meet our clients’
individual legal needs.