Revenue

Tax Refund Interest

Statewide Outcome(s):

Tax Refund Interest supports the following statewide outcome(s).

Efficient and accountable government services.

Context:

Interest is due and paid to the taxpayer on certain tax refunds if they are not paid within a set statutory time frame. The interest rate paid on refunds is the same rate that the taxpayer would owe on underpayments. The interest rate for 2012 and 2013 is three percent. The interest rate is announced prior to the start of each calendar year and is calculated based on the prime rate charged by banks.

While the Department of Revenue works to minimize interest accruals; interest accruals can occur for various reasons, such as tax disputes that are resolved via court cases, and audits and administrative appeals. Interest payments can fluctuate greatly from year to year depending on resolution of court cases.

For individual income tax and corporate franchise tax, interest on refunds is computed starting 90 days after the due date or the date the return is filed (whichever is later). For both sales and use tax and withholding taxes, interest generally accrues from the date of payment. However, for sales tax refunds of tax paid on capital equipment, certain building materials, and purchaser refunds, interest is computed starting 90 days after the refund claim is filed.

Strategies:

Pay refunds in a timely fashion to minimize any interest payments, without risking accuracy.

Results:

Performance Measures Notes:

The measure above compares tax refund interest paid in FY 2011 compared to FY 2012.