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General Laws

Section 26. (a) Taxes shall be deemed to be assessed at the amount shown as the tax due upon any return filed under the provisions of this chapter and on any amendment, correction or supplement thereof, or at the amount properly due, whichever is less, and at the time when the return is filed or required to be filed, whichever occurs later.

(b) If the commissioner determines, from the verification of a return or otherwise, that the full amount of any tax has not been assessed or is not deemed to be assessed, he may, at any time within three years after the date the return was filed or the date it was required to be filed, whichever occurs later, assess the same with interest as provided in section thirty-two to the date when the deficiency assessment is required to be paid, first giving notice of his intention to the person to be assessed; provided, however, that said three year period for making an assessment shall be suspended during the period of time that the taxpayer has a bankruptcy case pending under the appropriate chapters of Title 11 of the United States Code. Such person or his representative may confer with the commissioner or his duly authorized representative as to the proposed assessment within thirty days after the date of such notification. After the expiration of thirty days from the date of such notification, the commissioner shall assess the amount of tax remaining due the commonwealth, or any portion thereof, which he believes has not therefore been assessed.

Failure to receive the notice provided for by this paragraph shall not affect the validity of the tax.

If the commissioner audits or verifies the returns of the same tax for two or more tax periods and determines, as a result thereof, that the amounts assessed result in overpayments for some tax periods and underpayments for others, he shall offset any overpayments against any underpayments and refund any net overpayment as required by section thirty-six. An application for abatement under section thirty-seven shall not be required for overpayments resulting from assessments made pursuant to this section.

(c) In the case of an arithmetic or clerical error or other obvious error, including any exclusion of taxable unemployment compensation or Massachusetts state lottery winnings, apparent either upon the face of the return or from a comparison of the return with any records pertaining to the taxpayer’s liability or payment thereof, which are maintained by the commissioner or furnished to the commissioner from any third party source, the commissioner may assess a deficiency attributable to such error without giving notice to the person being assessed. The commissioner may make such corrections to errors found upon a taxpayer’s return and to the amount shown as the tax assessed thereon, including an increase in tax due or a reduction in a refund claimed, as will cause the return to conform with any records pertaining to the taxpayer’s liability or payment thereof, which are maintained by the commissioner or furnished to the commissioner by any third-party. Concurrently with the making of such corrections, the commissioner shall notify the taxpayer in writing of the changes made to the return. If within 30 days after the date of such notice, or within any extended period permitted by the commissioner, the taxpayer fails to challenge the corrections, the return as corrected shall constitute the taxpayer’s amended self-assessed return and the commissioner shall not be required to assess the corrected tax, nor to provide the taxpayer with a notice of intention to assess, nor otherwise to send any notice of the corrected tax liability to the taxpayer. Any taxpayer that disagrees with corrections made by the commissioner’s corrections under this subsection shall challenge them in writing within 30 days after the date of the commissioner’s notice, or within any extended period permitted by the commissioner. Once so challenged, the commissioner shall be required to assess any additional tax not shown on the original return in accordance with subsection (b) and shall comply with subsection (e) of section 32 if the commissioner’s initial corrections to the return resulted in the reduction or elimination of a refund claimed on the return by the taxpayer.

(d) In the case of a false or fraudulent return filed with intent to evade a tax or of a failure to file a return, the commissioner may make an assessment at any time, without giving notice of his intention to assess, determining the tax due according to his best information and belief.

(e) If a nonresident fails to file a return of income derived by him from sources within the commonwealth, as required by section six, the tax imposed by section five A of chapter sixty-two shall be assessed on the basis of his gross income from such sources. The commissioner shall determine such income according to his best information and belief and may assess the tax, with penalties and interest, and without allowance for deductions or exemptions.

(f) If an executor, as defined in chapter sixty-five C, omits from the gross estate items includable in such gross estate as exceed in amount twenty-five per cent of the gross estate stated in the return filed pursuant to section seventeen, the estate tax may be assessed at any time within six years after the return was filed. In determining the items omitted from the gross estate, there shall not be taken into account any item which is omitted from the gross estate in the return if such item is disclosed in the return, or in a statement attached to the return, in a manner adequate to apprise the commissioner of the nature and amount of such item.

(g) The provisions of this section shall not apply to assessments of taxes imposed by chapters sixty-five or sixty-five A.

(h) Except as otherwise provided in subsection (d), in the case of a return filed pursuant to section six or eleven, if the taxpayer omits from gross income an amount properly includible therein which is in excess of twenty-five per cent of the amount of gross income stated in the return, the tax may be assessed at any time within six years after the return was filed. For purposes of this subsection, in the case of a trade or business, the term “gross income” shall mean the total of the amounts received or accrued from the sale of goods or services, if such amounts are required to be shown on the return, prior to diminution by the cost of such sales or services. In determining the amount omitted from gross income, there shall not be taken into account any amount which is omitted from gross income stated in the return if such amount is disclosed on the return, or in a statement attached to the return, in a manner adequate to apprise the commissioner of the nature and amount of such item.

(i) Except as otherwise provided in subsection (d), in the case of a return filed pursuant to the provisions of sections twelve, fourteen or sixteen, if the return omits an amount of such tax properly includible thereon which exceeds twenty-five per cent of the amount of such tax reported thereon, the tax may be assessed at any time within six years after the return is filed. In determining the amount of tax omitted on a return, there shall not be taken into account any amount of tax which is omitted from the return if the transaction giving rise to such tax is disclosed in the return, or in a statement attached to the return, in a manner adequate to apprise the commissioner of the existence and nature of such item.

(j)(1) The commissioner shall not make any assessment under this chapter if that assessment is based on a change in policy unless such change in policy first is announced to taxpayers pursuant to the promulgation of a validly adopted regulation or the issuance of a technical information release, directive, administrative procedure or other similar public statement of equivalent formality that explains the change in policy. Further, no assessment based on a change in policy shall be made with respect to taxable years or periods that began prior to the issuance of a public written statement as provided in this paragraph.

(2) For purposes of this section, an assessment is based on a change in policy if it is contrary to a rule of law or the interpretation of a rule of law set forth in a regulation, technical information release, directive, administrative procedure, letter ruling, tax form, including instructions, or any other written guidance issued by the commissioner; provided, however, that the facts and circumstances on which the letter ruling was based are not materially different. A change in policy shall not occur when the commissioner merely applies a previously announced or established rule of law to the facts and circumstances of a particular taxpayer or transaction.

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