42-1123

42-1123. Interest

A. If it is provided by law that interest applies as determined pursuant to this
section, the department shall apply interest, compounded annually, in the same manner and
at the same times as prescribed by section 6621 of the United States internal revenue
code, except that the rate of interest for both overpayments and underpayments for all
taxpayers is the federal short-term rate, determined pursuant to section 6621(b) of the
internal revenue code, plus three percentage points.

B. On January 1 of each year the department shall add any interest outstanding as
of that date to the principal amount of the tax. For purposes of this section the amount
added to the principal is thereafter considered a part of the principal amount of the tax
and accrues interest pursuant to this section.

C. If the tax, whether determined by the department or the taxpayer, or any portion
of the tax is not paid on or before the date prescribed for its payment the department
shall collect, as a part of the tax, interest on the unpaid amount at the rate determined
pursuant to this section from the date prescribed for its payment until it is paid.

D. Interest on the amount assessed as a deficiency shall be assessed and paid at
the same time as the deficiency at the rate determined pursuant to this section from the
date prescribed for the payment of the tax to the date the deficiency is assessed. If
any portion of the deficiency is paid before the date it is assessed, interest shall
accrue on that portion only to the date paid.

E. If the time for filing a return is extended, the department shall collect, as
part of such tax, interest on any unpaid balance at the rate determined pursuant to this
section from the date on which the payment should have been made if no extension had been
granted until the date the tax is paid.

F. Except in the case of a jeopardy assessment, collection of which has been stayed
by the posting of a bond, if a deficiency or any interest is not paid in full within ten
days from the date of notice and demand from the department, the department shall collect
as a part of the tax interest on the unpaid tax or interest at the rate determined
pursuant to this section from the date of the notice and demand until it is paid.

G. If an original return filed with the department shows that the taxpayer is
entitled to a refund, interest is not allowed on the amount to be refunded if the refund
is paid within sixty days of the last day for filing the return or sixty days from the
filing of the return, whichever is later. If the department does not pay the amount of
the refund due within sixty days after the date established in this subsection, the
department shall pay the interest on the amount at the rate prescribed in this section
from the sixty-first day to the issued date of the refund warrant. The department's
annual budget shall separately state the amount necessary to satisfy the requirements of
this subsection.

H. In the case of an amended return, claim for refund or refund determined through
audit, interest shall be allowed and paid, with respect to any tax, from the date
prescribed for the payment of that tax to the issue date of the refund warrant, but in
the case of an original return of tax which is filed after the last date prescribed for
filing the return and paying such tax, determined with regard to extensions, no interest
may be allowed or paid for any day before the date on which the return is filed or the
tax paid, whichever is later. A payment not made incident to a bona fide and orderly
discharge of an actual liability or one reasonably assumed to be imposed by law is not an
overpayment for the purposes of this subsection and interest is not payable on the
payment.

I. If a credit or refund of any part of an overpayment would be barred under
section 42-1106, subsection A, except for the provisions of section 42-1104, subsection
B, paragraph 4, interest shall not be allowed or paid with respect to such part of the
overpayment for any period beginning after the expiration of the period of limitation
provided in section 42-1106, subsection A for filing a claim for credit or refund of such
part of the overpayment and ending at the expiration of six months after the date on
which the claim was filed or, if no claim was filed and the overpayment was found by the
department, ending at the time the appeal was filed with the board.

J. In any judgment of any court rendered for any overpayment, interest shall be
allowed at the rate determined pursuant to this section on the amount of the overpayment
from the date of the payment or collection to the date of allowance of credit on account
of such judgment or to a date determined by the department preceding the date of the
refund warrant by not more than thirty days.