Does the time a Texas tax refund claim spends under informal review pause (toll) the statute of limitations?

Plain-English summary

This Comptroller policy letter explains when the clock stops (is "tolled") on the statute of limitations while a tax refund claim is being informally reviewed — and the answer splits on a single date, June 20, 2003.

• The old policy. The Comptroller's long-standing position was that an informal review of a refund claim is not an administrative proceeding, so it did not toll the limitations period. Under that view, a second refund claim for the same tax type and period got its own independent limitations analysis.
• The court reversed it. The Third Court of Appeals in Strayhorn v. Willow Creek Resources, Inc., 161 S.W.3d 716 (Tex. App.-Austin 2005, no pet.) held that the informal-review period is an administrative proceeding. As a result, a refund claim tolls the Chapter 111 limitations period to the same extent as a formal redetermination or refund hearing, and the taxpayer does not have to request a hearing after the informal review for tolling to apply.
• Who this affects. The holding governs refund claims filed before June 20, 2003 that are still pending and where limitations is at issue — those must be re-evaluated. For such a claim under informal review, the claim tolls limitations for all refund issues the claimant may raise for the same tax type and same period.
• How the tolling window is measured. For a prior informally reviewed claim, tolling begins the date that claim was filed and ends when it is fully paid or when the denial becomes administratively final (the last day a refund hearing could have been requested, with none requested). For a claim that went to a hearing, tolling begins when the claim was filed or redetermination was requested and ends when the hearing becomes final — 23 days after the Comptroller's decision, or the date a motion for rehearing is overruled.
• The 2003 change. For claims filed on or after June 20, 2003, the result is the opposite. HB 2425 (Acts 2003, 78th Leg., ch. 1310) changed the law so that even if informal review is an administrative proceeding, it no longer tolls limitations for other claims of the same tax type and period. Only formal refund or redetermination hearings toll limitations, and only for the contested issues raised. Tax Code Sec. 111.1042(d) expressly says informal review does not toll limitations for subsequent claims.

What this means for you

Taxpayers with older refund claims

If you had a refund claim filed before June 20, 2003 that was under informal review, the Willow Creek decision means that period paused the limitations clock for your other refund issues on the same tax type and period — potentially preserving claims the Comptroller previously treated as time-barred. If your claim was filed on or after that date, don't count on informal review to protect your deadlines; only a formal hearing tolls, and only for the issues actually contested.

Accountants and tax professionals

This is a Chapter 111 limitations/refund procedure, not a franchise-tax-specific rule (it is filed under the franchise-tax type on STAR but the reasoning applies to Comptroller refund claims generally). Pin every claim to the June 20, 2003 dividing line, and for pre-2003 claims measure tolling precisely: filing date to administrative finality for informally reviewed claims, and the 23-day rule for hearing decisions.

Common questions

Q: Does informal review of a refund claim pause the statute of limitations?
A: For claims filed before June 20, 2003, yes — the Willow Creek decision treats informal review as an administrative proceeding that tolls Chapter 111 limitations. For claims filed on or after that date, no — under Sec. 111.1042(d) informal review does not toll limitations.

Q: Do I have to request a hearing for tolling to apply to a pre-2003 claim?
A: No. Under the court's holding, tolling applies to the informal-review period itself; a later hearing request is not required.

Q: When does the tolling period end?
A: For an informally reviewed claim, when it is fully paid or the denial becomes administratively final. For a claim decided at a hearing, 23 days after the Comptroller's decision or when a motion for rehearing is overruled.

Citations and references

Statutes and authority:

• Tex. Tax Code Ch. 111 (tax administration; limitations and refunds)
• Tex. Tax Code Sec. 111.1042(d) (informal review does not toll limitations, effective 6/20/2003)
• HB 2425, Acts 2003, 78th Leg., R.S., ch. 1310, Secs. 86-91, 121(24), 122(i)
• Strayhorn v. Willow Creek Resources, Inc., 161 S.W.3d 716 (Tex. App.-Austin 2005, no pet.)

Related Comptroller guidance (described, not linked): STAR Accession No. 200508202L (Aug. 2, 2005), which cites Question 11 of STAR Accession No. 200306964L (June 23, 2003).

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=FIT
• Opinion: https://star.comptroller.texas.gov/view/200508240L

Original ruling text

August 9, 2005

Informal Review of Refund Claims: Tolling Limitations

This concerns the tolling of the applicable statute of limitations for the time
a refund claim is being informally reviewed and applies only to refund claims
filed prior to June 20, 2003, the effective date of HB 2425, enacted by the
78th Legislature, Acts 2003, 78th Leg., R.S., ch. 1310, Sections 86 - 91,
121(24), and 122(i).

The Comptroller’s long-standing policy has been that the informal review of a
refund claim is not an administrative proceeding that tolls the applicable
statute of limitations. For example, if a refund claim is being informally
reviewed, and the claimant files another refund claim for the same tax type and
same period, then that second refund claim was subject to an independent
limitations determination. This policy, however, was recently invalidated by
the Third Court of Appeals in Strayhorn v. Willow Creek Resources, Inc., 161
S.W.3d 716 (Tex. App. -- Austin 2005, no pet.).

The court of appeals held that the period during which a refund claim is being
informally reviewed by the Comptroller is an administrative proceeding, and the
consequence of that ruling is that a refund claim tolls the statute of
limitations under Chapter 111, Texas Tax Code, to the same extent as does a
formal administrative redetermination or refund hearing. Under the court's
holding, a hearing is not required to be requested after the informal review
for tolling to apply. This court decision requires all refund claims that were
filed prior to June 20, 2003 and that are currently pending for which
limitations is an issue to be reevaluated for compliance with this policy
statement.

If a refund claim filed prior to June 20, 2003 is currently being informally
reviewed, then that claim tolls the statute of limitations for all refund
issues that the claimant may file for the same tax type and same period. See
STAR Accession No. 200508202L (August 2, 2005) (citing to Question 11 of STAR
Accession No. 200306964L (June 23, 2003)).

Further, in calculating the applicable tolling for a refund claim, the time
period in which the claimant was in hearings for the same tax type and same
period is considered, but a similar analysis must be done for any refund claims
that the claimant had under informal review for the same tax type and same
period. In other words, for claims filed prior to June 20, 2003, a
determination must be made whether the claimant previously had a refund claim
for the same tax type and same period that was informally reviewed by the
Comptroller or had a formal administrative hearing for the same tax type and
same period. If the claimant had a prior refund claim that was informally
reviewed, then, the tolling begins the date that the prior refund claim was
filed with the Comptroller, and ends on the date the refund claim was fully
paid or the date that the full or partial denial became administratively final.
The denial of a claim is administratively final on the last day in which the
claimant had the right to request a refund hearing and no hearing was requested

If the claimant had an administrative hearing for the same tax type and same
period, then the tolling begins on the date that the refund claim was filed or
the date the redetermination was requested. The tolling ends on the date that
the administrative hearing became final, which is 23 days from the date the
Comptroller’s decision was issued or the date that the motion for rehearing was
overruled.

The Willow Creek court decision, however, has no impact on refund claims filed
on or after June 20, 2003 because of the statutory changes that were made in
2003. The period in which a refund claim is informally reviewed may be an
administrative proceeding, but effective June 20, 2003, it no longer tolls the
statute of limitations for other claims for the same tax type and same period.
The only administrative proceedings that will toll the statute of limitations
are formal administrative refund or redetermination hearings, but the tolling
is limited to the contested issues raised. Moreover, Section 111.1042(d)
expressly provides that the time period in which a refund claim is informally
reviewed does not toll the statute of limitations for any subsequent claims.