Sec. 2. (a) Except as otherwise provided in this section and section 2.5 of this chapter, the department may not issue a proposed assessment under section 1 of this chapter more than three (3) years after the latest of the date the return is filed, or the following:

(1) The due date of the return.

(2) In the case of a return filed for the state gross retail or use tax, the gasoline use tax, the gasoline tax (including the inventory tax), the special fuel tax (including the inventory tax), the motor carrier fuel tax (including the inventory tax), the oil inspection fee, the cigarette tax, the tobacco products tax, any county innkeeper’s taxes imposed under IC 6-9, any food and beverage taxes imposed under IC 6-9, any county or local admissions taxes imposed under IC 6-9, or the petroleum severance tax, the end of the calendar year which contains the taxable period for which the return is filed.

(3) In the case of the use tax, three (3) years from the end of the calendar year in which the first taxable use, other than an incidental nonexempt use, of the property occurred.

     (b) If a person files a return for the utility receipts tax (IC 6-2.3) (repealed), adjusted gross income tax (IC 6-3), pass through entity tax (IC 6-3-2.1), supplemental net income tax (IC 6-3-8) (repealed), county adjusted gross income tax (IC 6-3.5-1.1) (repealed), county option income tax (IC 6-3.5-6) (repealed), local income tax (IC 6-3.6), or financial institutions tax (IC 6-5.5) that understates the person’s income, as that term is defined in the particular income tax law, by at least twenty-five percent (25%), the proposed assessment limitation is six (6) years instead of the three (3) years provided in subsection (a).

     (c) In the case of the vehicle excise tax (IC 6-6-5), the tax shall be assessed as provided in IC 6-6-5 and shall include the penalties and interest due on all listed taxes not paid by the due date. A person that fails to properly register a vehicle as required by IC 9-18 (before its expiration) or IC 9-18.1 and pay the tax due under IC 6-6-5 is considered to have failed to file a return for purposes of this article.

     (d) In the case of the commercial vehicle excise tax imposed under IC 6-6-5.5, the tax shall be assessed as provided in IC 6-6-5.5 and shall include the penalties and interest due on all listed taxes not paid by the due date. A person that fails to properly register a commercial vehicle as required by IC 9-18 (before its expiration) or IC 9-18.1 and pay the tax due under IC 6-6-5.5 is considered to have failed to file a return for purposes of this article.

     (e) In the case of the excise tax imposed on recreational vehicles and truck campers under IC 6-6-5.1, the tax shall be assessed as provided in IC 6-6-5.1 and must include the penalties and interest due on all listed taxes not paid by the due date. A person that fails to properly register a recreational vehicle as required by IC 9-18 (before its expiration) or IC 9-18.1 and pay the tax due under IC 6-6-5.1 is considered to have failed to file a return for purposes of this article. A person that fails to pay the tax due under IC 6-6-5.1 on a truck camper is considered to have failed to file a return for purposes of this article.

     (f) In the case of a credit against a listed tax based on payments of taxes to a state or local jurisdiction outside Indiana or payments of amounts that are subsequently refunded or returned, a proposed assessment for the refunded or returned credit must be issued by the later of:

(1) the date by which a proposed assessment must be issued under this section; or

(2) one hundred eighty (180) days from the date the taxpayer notifies the department of the refund or return of payment.

For purposes of this subsection, if a taxpayer receives a refund of an amount paid by or on behalf of the taxpayer for a listed tax, that refund shall not be considered the payment of an amount that is subsequently refunded or returned.

     (g) If a person files a fraudulent, unsigned, or substantially blank return, or if a person does not file a return, there is no time limit within which the department must issue its proposed assessment, except as provided in subsection (l).

     (h) If any part of a listed tax has been erroneously refunded by the department, the erroneous refund may be recovered through the assessment procedures established in this chapter. An assessment issued for an erroneous refund must be issued within the later of:

(1) the period for which an assessment could otherwise be issued under this section; or

(2) whichever is applicable:

(A) within two (2) years after making the refund; or

(B) within five (5) years after making the refund if the refund was induced by fraud or misrepresentation.

     (i) If, before the end of the time within which the department may make an assessment, the department and the person agree to extend that assessment period, the period may be extended according to the terms of a written agreement signed by both the department and the person. The agreement must contain:

(1) the date to which the extension is made; and

(2) a statement that the person agrees to preserve the person’s records until the extension terminates.

The department and a person may agree to more than one (1) extension under this subsection.

     (j) Except as otherwise provided in subsection (k), if a taxpayer’s federal taxable income, federal adjusted gross income, or federal income tax liability for a taxable year is modified due to a modification as provided under IC 6-3-4-6(c) and IC 6-3-4-6(d) (for the adjusted gross income tax), or a modification or alteration as provided under IC 6-5.5-6-6(c) and IC 6-5.5-6-6(e) (for the financial institutions tax), then the date by which the department must issue a proposed assessment under section 1 of this chapter for tax imposed under IC 6-3 is extended to six (6) months after the date on which the notice of modification is filed with the department by the taxpayer.

     (k) The following apply:

(1) This subsection applies to partnerships whose taxable year:

(A) begins after December 31, 2017;

(B) ends after August 12, 2018; or

(C) begins after November 2, 2015, and before January 1, 2018, and for which a valid election under United States Treasury Regulation 301.9100-22 is in effect;

and to the partners of such partnerships, including any partners, shareholders, or beneficiaries of a pass through entity that is a partner in such partnership.

(2) Notwithstanding any other provision of this article, if a partnership is subject to federal income tax liability or a federal tax adjustment at the partnership level as the result of a modification under Sections 6221 through 6241 of the Internal Revenue Code, the date on which the department must issue a proposed assessment to either the partners or the partnership shall be the later of:

(A) the date on which a proposed assessment must otherwise be issued to the partner or the partnership under this section or IC 6-3-4.5 with regard to the taxable year of the partnership to which the modification is taxed at the partnership level; or

(B) December 31, 2021.

(3) For purposes of this section and IC 6-8.1-9-1, a modification under this subsection shall be considered a modification to the federal taxable income, federal adjusted gross income, or federal income tax liability of both the partners and the partnership within the meaning of IC 6-3-4-6 and IC 6-5.5-6-6, and shall be considered to be included in the federal taxable income or federal adjusted gross income of both the partners and partnerships for purposes of this article and IC 6-5.5.

(4) If a modification made to a partnership for federal income tax purposes is reported to the partners to determine the partners’ respective federal taxable income, federal adjusted gross income, or federal income tax liability, including reporting to partners as the result of an election made under Section 6226 of the Internal Revenue Code, subdivision (2) shall not apply, and those modifications shall be treated as modifications to the partners’ federal taxable income, federal adjusted gross income, or federal income tax liability for purposes of the following:

(A) This section.

(B) IC 6-3-4-6.

(C) IC 6-5.5-6-6.

(D) IC 6-8.1-9-1.

     (l) Notwithstanding any other provision, a nonresident individual is considered to have filed a return for purposes of this section for a taxable year if the individual does not file a return otherwise required under IC 6-3-4-1 for a taxable year and all of the following apply:

(1) the:

(A) individual did not have income from sources within Indiana; or

(B) only income derived from sources within Indiana and includible in the individual’s adjusted gross income is distributive share income from one (1) or more pass through entities (as defined by IC 6-3-1-35);

(2) the individual is not a resident of Indiana for any portion of the taxable year;

(3) the individual does not request a reduction in tax withholding for a pass through entity under IC 6-3-4-12, IC 6-3-4-13, or IC 6-3-4-15 for the taxable year; and

(4) all pass through entities from which the individual derives income from Indiana sources:

(A) file a composite return required under IC 6-3-4-12, IC 6-3-4-13, or IC 6-3-4-15; and

(B) include the individual on the composite return.

     (m) The following provisions apply to subsection (l):

(1) If an individual is married and files a joint federal tax return with the individual’s spouse, the individual is considered to have filed a return for purposes of this section only if both the individual and the individual’s spouse meet the conditions under subsection (l)(1) through (l)(4).

(2) If an individual does not file a return, the last date for assessment with regard to the individual’s share of income from a pass through entity shall be determined at the pass through entity and shall be determined separately for each pass through entity.

(3) In the event the individual files a return, the period for assessment shall be determined based on the individual’s filing unless a different period for assessment is prescribed under this title.

(4) The individual is required to file a return to request a refund or carryforward of an overpayment for a taxable year.

(5) If the individual has a net operating loss deduction under IC 6-3-2-2.5 or IC 6-3-2-2.6, or a credit carryforward allowable under IC 6-3-3 or IC 6-3.1 for the taxable year, the amount of net operating loss or credit carryforward shall be reduced to reflect the amount of net operating loss or credit carryforward that otherwise would have been allowable for the taxable year.

As added by Acts 1980, P.L.61, SEC.1. Amended by P.L.73-1983, SEC.16; P.L.82-1983, SEC.11; P.L.76-1985, SEC.6; P.L.335-1989(ss), SEC.19; P.L.347-1989(ss), SEC.18; P.L.2-1991, SEC.55; P.L.28-1997, SEC.26; P.L.181-1999, SEC.6; P.L.192-2002(ss), SEC.143; P.L.131-2008, SEC.28; P.L.182-2009(ss), SEC.251; P.L.242-2015, SEC.36; P.L.149-2016, SEC.31; P.L.198-2016, SEC.58; P.L.197-2016, SEC.76; P.L.247-2017, SEC.26; P.L.257-2017, SEC.15; P.L.256-2017, SEC.86; P.L.146-2020, SEC.42; P.L.159-2021, SEC.33; P.L.138-2022, SEC.13; P.L.1-2023, SEC.20.