42-1123. Interest

A. If it is provided by law that interest applies as determined pursuant to this section, the department shall apply interest, compounded annually, in the same manner and at the same times as prescribed by section 6621 of the United States internal revenue code, except that the rate of interest for both overpayments and underpayments for all taxpayers is the federal short-term rate, determined pursuant to section 6621(b) of the internal revenue code, plus three percentage points.

B. On January 1 of each year the department shall add any interest outstanding as of that date to the principal amount of the tax. For purposes of this section the amount added to the principal is thereafter considered a part of the principal amount of the tax and accrues interest pursuant to this section.

C. If the tax, whether determined by the department or the taxpayer, or any portion of the tax is not paid on or before the date prescribed for its payment the department shall collect, as a part of the tax, interest on the unpaid amount at the rate determined pursuant to this section from the date prescribed for its payment until it is paid.

D. Interest on the amount assessed as a deficiency shall be assessed and paid at the same time as the deficiency at the rate determined pursuant to this section from the date prescribed for the payment of the tax to the date the deficiency is assessed. If any portion of the deficiency is paid before the date it is assessed, interest shall accrue on that portion only to the date paid.

E. If the time for filing a return is extended, the department shall collect, as part of such tax, interest on any unpaid balance at the rate determined pursuant to this section from the date on which the payment should have been made if no extension had been granted until the date the tax is paid.

F. Except in the case of a jeopardy assessment, collection of which has been stayed by the posting of a bond, if a deficiency or any interest is not paid in full within ten days from the date of notice and demand from the department, the department shall collect as a part of the tax interest on the unpaid tax or interest at the rate determined pursuant to this section from the date of the notice and demand until it is paid.

G. If an original return filed with the department shows that the taxpayer is entitled to a refund, interest is not allowed on the amount to be refunded if the refund is paid within sixty days of the last day for filing the return or sixty days from the filing of the return, whichever is later. If the department does not pay the amount of the refund due within sixty days after the date established in this subsection, the department shall pay the interest on the amount at the rate prescribed in this section from the sixty-first day to the issued date of the refund warrant. The department's annual budget shall separately state the amount necessary to satisfy the requirements of this subsection.

H. In the case of an amended return, claim for refund or refund determined through audit, interest shall be allowed and paid, with respect to any tax, from the date prescribed for the payment of that tax to the issue date of the refund warrant, but in the case of an original return of tax which is filed after the last date prescribed for filing the return and paying such tax, determined with regard to extensions, no interest may be allowed or paid for any day before the date on which the return is filed or the tax paid, whichever is later. A payment not made incident to a bona fide and orderly discharge of an actual liability or one reasonably assumed to be imposed by law is not an overpayment for the purposes of this subsection and interest is not payable on the payment.

I. If a credit or refund of any part of an overpayment would be barred under section 42-1106, subsection A, except for the provisions of section 42-1104, subsection B, paragraph 4, interest shall not be allowed or paid with respect to such part of the overpayment for any period beginning after the expiration of the period of limitation provided in section 42-1106, subsection A for filing a claim for credit or refund of such part of the overpayment and ending at the expiration of six months after the date on which the claim was filed or, if no claim was filed and the overpayment was found by the department, ending at the time the appeal was filed with the board.

J. In any judgment of any court rendered for any overpayment, interest shall be allowed at the rate determined pursuant to this section on the amount of the overpayment from the date of the payment or collection to the date of allowance of credit on account of such judgment or to a date determined by the department preceding the date of the refund warrant by not more than thirty days.