RALEIGH — Nearly, 8,000 individual North Carolina taxpayers are waiting to find out whether the state will return millions of dollars to them.
“We’re going to try and get it resolved quickly,” said incoming Senate Finance Co-Chairman Bob Rucho, R-Mecklenburg. He met with Revenue Secretary David Hoyle Wednesday.
Rucho referred to a backlog of 242,000 items dating to 1994 the Department of Revenue has flagged on tax returns. The items were flagged when discrepancies were discovered. The department has cleared most of that backlog except for 7,900 individual filers due $2.5 million. DOR says it cannot issue refunds to those filers because the statute of limitations for doing so has passed.
The department already has refunded $96 million in refunds and has found an additional $44 million in unpaid taxes it could collect legally.
Wednesday, Canaan Huie, general counsel for the Department of Revenue, explained to the General Assembly’s Revenue Laws Study Committee why the 7,900 refunds cannot be paid. State law says the statute of limitations to collect a refund is either three years after the due date or two years after the tax is paid, whichever is later. Before any of these refunds could be issued, Hoyle concluded that new legislation would be needed, and notified the committee of that in November.
“We both agree that Secretary Hoyle and the Department of Revenue needs to have a little flexibility in being able to legally provide a refund where it’s necessary,” Rucho said after Wednesday’s meeting with Hoyle.
Rucho also said he hopes to prepare a bill to provide authority for the refunds when the General Assembly reconvenes at the end of the month. “We want this done, resolved, and moving on to some other issues, more pertinent issues dealing with the economy and jobs,” Rucho said.
Those who filed their taxes on time deserve refunds, Rucho added. At the same time, those who didn’t pay their taxes fully at first may have to cough up some cash. Along with the 7,900 people who deserve refunds, another 480 individuals owe the state about $170,000, according to Huie.
Hoyle blames the backlog on an antiquated computer system and a lack of manpower. In his November comments, Hoyle said the computer system is 16 years old, so the backlog started the same year DOR started using its computer system.
The backlog is also the result of understaffing at DOR. “A large number of these items require an employee at the level of auditor or above to verify and correct returns,” Hoyle said in November. He added DOR lost 200 full-time temporary employees from 2009-10. At the time it had 150 vacancies that had been left open because of a hiring freeze.
A DOR spokeswoman said this backlog is not related to the reviews of tax returns from large families done under the previous revenue secretary, Ken Lay. As reported in 2009 by Carolina Journal, those reviews required randomly selected families claiming more than seven exemptions to provide extensive documentation before receiving tax refunds from the state.
Anthony Greco is an associate editor of Carolina Journal.