N.C. Tax Dispute Guide

You have the right to challenge certain actions taken by the North Carolina Department of Revenue (“NCDOR”).  Under state law, you can challenge the following actions:

– Proposed Assessment
– Proposed Denial of Refund
– Denied Refund Claim Based on the Statute of Limitations
– Proposed Revocation – Sales & Use Certificate of Registration (“Proposed Revocation”)

How you go about disputing an NCDOR action depends on which stage of the process you are in. We discuss below the different stages of a N.C. tax dispute and the appropriate steps to follow at each stage.

1.  Initial Challenge

This step outlines what to do when you first receive a notice from the NCDOR and want to dispute it.

If you receive a written notice from the NCDOR, the way to challenge that action depends on the type of notice you receive.

a.  Proposed Assessment, Proposed Denial of Refund, and Proposed Revocation

If you receive a written notice related to either a Proposed Assessment, Proposed Denial of Refund, or Proposed Revocation, and you disagree with the notice, you may request a review of the NCDOR’s action by filing Form NC-242, Objection and Request for Departmental Review (“Request for Review”). The Request for Review must be filed with NCDOR within 45 days from the date the notice was mailed to you (if mailed) or delivered to you (if delivered to you in person by an NCDOR employee). It is very important to file the Request for Review within the 45-day period mentioned.

b.  Denied Refund Claim Based on the Statute of Limitations

If the written notice you receive relates to a request for a refund that was denied because the NCDOR determined that your request was not filed within the statute of limitations for obtaining a refund, the Department will issue you a Notice of Denied Refund. If this happens, your only option for contesting this action is to file a petition for a contested tax case at the Office of Administrative Hearings (“OAH”). Paragraph 4 below provides details of how to file a petition at OAH.

2.  Departmental Review Process

If you timely file a Request for Review, NCDOR must take one of the following actions:

– Grant the refund requested or remove the assessment
– Request additional information from you
– Schedule a conference with you to discuss your case

If NCDOR requests additional information (“Request for Information”) from you, NCDOR must give you at least 30 days to respond. If you do not respond to NCDOR’s Request for Information by the requested response date, NCDOR will reissue the Request for Information. If you do not respond to the reissuance of the Request for Information, NCDOR will send you a Notice of Inaction. If you do not respond to the Notice of Inaction within 10 days from the date of the Notice of Inaction, the Department’s action will become final and is not subject to further administrative or judicial review.

If a conference is needed to discuss your Request for Review, NCDOR will notify you about the time and date of the conference at least 30 days in advance. However, you and NCDOR may agree to a shorter notice period for a conference. The conference can be held in person, by telephone, or other electronic methods. You and NCDOR can mutually agree to change the date of the conference.

The conference is not a formal proceeding. There is no sworn testimony and rules of evidence do not apply to the conference. However, you can designate someone to represent you. Most disagreements are resolved at this step.

3.  Notice of Final Determination

If you and NCDOR cannot agree at Step 2, NCDOR will send you a Notice of Final Determination (“NOFD”). The NOFD is a written document that explains why NCDOR determined that the NCDOR’s action should be upheld. The NOFD will show the amount of tax, penalties, and interest you owe. The NOFD will also explain the collections options available to NCDOR if you do not contest the NOFD and you do not pay the amount shown due on the NOFD. Lastly, the NOFD will provide the procedures you must follow to contest the NOFD. See Step 4.

4.  Contested Case Hearing

If you disagree with a NOFD or a Notice of Denied Refund, you may file a petition for a contested tax case hearing (“Contested Case Petition”) at OAH. You can only file a Contested Case Petition after NCDOR has issued a NOFD or a Notice of Denied Refund.

You have 60 days after NCDOR mails, or hand delivers, the NOFD or the Notice of Denied Refund to file a Contested Case Petition. You must also serve a copy of the Contested Case Petition on the process agent for NCDOR by mailing a copy to this address:

Department of Revenue
PO Box 871
Raleigh, NC 27602-0871

Generally, you do not have to pay the tax, penalty, and interest due before proceeding to a hearing before the OAH. For information about the hearings process at the OAH, please consult its web page (https://www.oah.nc.gov/).

5.  Petition for Judicial Review

If you disagree with the final decision from Step 4, you may file a petition in the Superior Court of Wake County for further judicial review of the case in accordance with Article 4 of Chapter 150B of the General Statutes. Notwithstanding G.S. 150B‑45, a petition for judicial review must be filed in the Superior Court of Wake County and in accordance with the procedures for a mandatory business case set forth in G.S. 7A‑45.4(b) through (f). Generally, you must file the petition within 30 days of when you receive the final decision from Step 4. However, if the OAH dismissed the contested tax case due to lack of jurisdiction because the only issue in the case is the constitutionality of a statute, then you have two years to file this petition.

Before you file a petition for judicial review, you must pay the tax, penalty, and interest found due in the final decision.

Erik Lincoln is a founding member of Lincoln. In addition to being an attorney he is also a CPA. Erik has consistently been recognized as one of the top attorneys in North Carolina, by Business North Carolina.