42-1104

42-1104. Statutes of limitation;
exceptions

A. For the taxes to which this article applies every notice of every additional tax
due shall be prepared on forms prescribed by the department and mailed within four years
after the report or return is required to be filed or within four years after the report
or return is filed, whichever period expires later.

B. The following are exceptions to the general rules prescribed by this section,
and a deficiency assessment may be issued in any of the following cases:

1. The department may assess the tax or begin a proceeding in court for the
collection of the tax at any time:

(a) In the case of a false or fraudulent return with the intent to evade tax.

(b) In the case of failure to file a return.

2. If a taxpayer omits from gross income, gross receipts, gross proceeds of sales
or Arizona adjusted gross income, as defined for purposes of chapter 5 of this title or
title 43, an amount which is properly includible and which is in excess of twenty-five
per cent of the amount of gross income stated in the return, the tax may be assessed at
any time within six years after the return was filed.

3. If a taxpayer during a taxable year sells at a gain property used as the
taxpayer's principal residence, the statutory period for the assessment of any deficiency
attributable to any part of the gain does not expire before the expiration of four years
from the date the taxpayer notifies the United States internal revenue service pursuant
to the United States internal revenue code.

4. If a claim for credit or refund relates to an overpayment on account of the
deductibility of a debt as one which became worthless, a loss from worthlessness of a
security, an erroneous inclusion of an amount attributable to the recovery of a bad debt,
prior tax or delinquency amount due to an adjustment of a bad debt deduction or a loss
deduction from worthlessness of a security, the period of limitation is seven years from
the date prescribed by law for filing the return for the year with respect to which the
claim is made.

5. If a taxpayer fails to report a change or correction by the commissioner of
internal revenue or other officer of the United States or other competent authority or
fails to file an amended return as required by section 43-327, the department may assess
any deficiency resulting from such adjustments within four years after the change,
correction or amended return is reported to or filed with the United States internal
revenue service regardless of any previous examinations by the department.

6. If a taxpayer is required to report a change or correction by the commissioner
of internal revenue or other officer of the United States or other competent authority or
to file an amended return as required by section 43-327 and does report the change or
files the return, any deficiency resulting from the adjustments may be assessed within
six months from the date the notice of amended return is filed with the department by the
taxpayer, or within the period provided in subsection A of this section or paragraph 1 or
2 of this subsection, whichever period expires last.

7. Except as provided in paragraph 8 of this subsection if a taxpayer agrees with
the United States commissioner of internal revenue for an extension or renewals of the
period for proposing and assessing deficiencies in federal income taxes for any year, the
period for mailing a notice of a proposed income tax deficiency is four years after the
return was filed or six months after the date of the expiration of the agreed period for
assessing deficiencies in the federal income tax, whichever period expires later.

8. If a taxpayer agrees with the United States commissioner of internal revenue for
a limited extension or renewals of the period for proposing and assessing deficiencies in
federal income taxes for any year, then, solely with respect to those items specifically
enumerated in this agreement, the period for mailing a notice of a proposed income tax
deficiency, or claiming a refund, is four years after the return was filed or six months
after the date of the expiration of the agreed period for assessing deficiencies in the
federal income tax, whichever period expires later.

9. If, before the expiration of the time prescribed for the mailing of a notice of
a proposed deficiency assessment, the taxpayer consents in writing to an assessment after
that time, the assessment may be made at any time before the expiration of the period
agreed on. The period agreed on may be extended by subsequent written agreements made
before the expiration of the period previously agreed on.

C. Notwithstanding subsection A of this section and subsection B, paragraphs 1 and
2 of this section, a taxpayer who has a duty to collect use tax shall not be assessed tax
pursuant to chapter 5, article 4 of this title for any retail sales to purchasers who
were licensed pursuant to section 42-5005 or registered pursuant to section 42-5154 and
who filed use tax returns for the reporting period in which the sale was made, if the
reporting period in which the sale was made is more than four years from the notice of
proposed deficiency. If, before the expiration of this time limitation, the taxpayer
consents in writing to an assessment after that time for the transactions, a subsequent
assessment may include any transaction within the agreed extended period. The period
agreed to may be extended by subsequent written agreements made before the expiration of
the period previously agreed to.