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Comptroller of the Treasury v. Mack Truck, Inc., No. 136, September Term, 1995. [Income Tax - Statutory Construction. Held: Limitations Period

For TaxpayerUs Claiming Refund Of Maryland Income Tax Ran From Date Of TaxpayerUs Agreement With IRS Extending Time For Assessment Of Additional Federal Tax.]

Circuit Court for Anne Arundel County Case #C-9413550 AA

IN THE COURT OF APPEALS OF MARYLAND No. 136 September Term, 1995 ____________________________________ COMPTROLLER OF THE TREASURY v.

MACK TRUCK, INC. ____________________________________ *Murphy, C.J. Eldridge Rodowsky Chasanow Karwacki Bell Raker, JJ. ____________________________________ Opinion by Rodowsky, J. ____________________________________ Filed: October 11, 1996

*Murphy, C.J., now retired, participated in the hearing and conference of this case while an active member of this Court; after being recalled pursuant to the Constitution, Article IV, Section 3A,

he also participated in the decision and the adoption of this opinion.

This

case

involves

the

construction

of

the

statute

of

limitations on claims for refund of Maryland income tax.

Part of

the Maryland statute incorporates by reference the section of the Internal Revenue Code (IRC) providing time limits on claims for refunds of federal taxes. The federal statute includes a special

period of limitations where the Internal Revenue Service (IRS) and a taxpayer, pursuant to another section of the IRC, have agreed to extend the period for assessment of additional tax. The issue

before us is whether a taxpayer, whose claim for refund of Maryland income tax is independent of any adjustments to the federal income tax return for the same year, obtains the benefit of the special time limit solely as a result of an extension agreement with the IRS, or whether the Comptroller of the Treasury (Comptroller) must also have sought and obtained an assessment extension agreement applicable to the same year. The taxpayer, Mack Truck, Inc. (Mack), overreported its income on its 1987 Maryland income tax return by one hundred million dollars ($100,000,000.00). The error involved one item, a dividend

in that amount paid to Mack by a wholly owned, domestic subsidiary, Mack Financial Corporation. As the common parent company of an

affiliated group, Mack filed a consolidated federal income tax return for 1987. Mack included the item in gross dividends

received on its federal return, where it also later deducted the same item as an inter-company dividend. (1986). See IRC

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