§ 135. Limitations on credit or refund. (a) General.--Claim for credit
or refund of an overpayment of income tax shall be filed by the taxpayer
within three years from the time the return was filed or two years from
the time the tax was paid, whichever of such periods expires the later,
or if no return was filed, within two years from the time the tax was
paid. If the claim is filed within the three year period, the amount of
the credit or refund shall not exceed the portion of the tax paid within
the three years immediately preceding the filing of the claim plus the
period of any extension of time for filing the return. If the claim is
not filed within the three year period, but is filed within the two year
period, the amount of the credit or refund shall not exceed the portion
of the tax paid during the two years immediately preceding the filing of
the claim. Except as otherwise provided in this section, if no claim is
filed, the amount of a credit or refund shall not exceed the amount
which would be allowable if a claim had been filed on the date the
credit or refund is allowed.

(b) Extension of time by agreement.--If an agreement under the
provisions of paragraph two of subdivision (c) of section one hundred
thirty-one (extending the period for assessment of income tax) is made
within the period prescribed in subdivision (a) for the filing of a
claim for credit or refund, the period for filing a claim for credit or
refund, or for making credit or refund if no claim is filed, shall not
expire prior to six months after the expiration of the period within
which an assessment may be made pursuant to the agreement or any
extension thereof. The amount of such credit or refund shall not exceed
the portion of the tax paid after the execution of the agreement and
before the filing of the claim or the making of the credit or refund, as
the case may be, plus the portion of the tax paid within the period
which would be applicable under subdivision (a) if a claim had been
filed on the date the agreement was executed.

(c) Notice of change or correction of federal taxable income.--If a
taxpayer is required by section one hundred twenty-seven to report a
change or correction in federal taxable income reported on his federal
income tax return, or to report a change or correction which is treated
in the same manner as if it were an overpayment for federal income tax
purposes, or to file an amended return with the director of finance,
claim for credit or refund of any resulting overpayment of tax shall be
filed by the taxpayer within two years from the time the notice of such
change or correction or such amended return was required to be filed
with the director of finance. If the report or amended return required
by section one hundred twenty-seven is not filed within the ninety day
period therein specified, interest or any resulting refund or credit
shall cease to accrue after such ninetieth day. The amount of such
credit or refund shall not exceed the amount of the reduction in tax
attributable to such federal change, correction or items amended on the
taxpayer's amended federal income tax return. This subdivision shall
not affect the time within which or the amount for which a claim for
credit or refund my be filed apart from this subdivision.

(d) Overpayment attributable to net operating loss carryback.--A claim
for credit or refund of so much of an overpayment as is attributable to
the application to the taxpayer of a net operating loss carryback shall
be filed within three years from the time the return was due for the
taxable year of the loss, or within the period prescribed in subdivision
(b) in respect of such taxable year, or within the period prescribed in
subdivision (c), where applicable, in respect of the taxable year to
which the net operating loss is carried back, whichever expires the
latest.

(e) Failure to file claim within prescribed period.--No credit or
refund shall be allowed or made, except as provided in subdivision (f)
of this section or subdivision (d) of section one hundred thirty-eight
after the expiration of the applicable period of limitation specified in
this title unless a claim for credit or refund is filed by the taxpayer
within such period. Any later credit shall be void and any later refund
erroneous. No period of limitations specified in any other law shall
apply to the recovery by a taxpayer of moneys paid in respect of taxes
under this title.

(f) Effect of petition to director of finance.--If a notice of
deficiency for a taxable year has been mailed to the taxpayer under
section one hundred twenty-nine and if the taxpayer files a timely
petition with the director of finance under section one hundred
thirty-seven, he may determine that the taxpayer has made an overpayment
for such year (whether or not it also determines a deficiency for such
year). No separate claim for credit or refund for such year shall be
filed, and no credit or refund for such year shall be allowed or made,
except--

(1) as to overpayments determined by a decision of the director of
finance which has become final;

(2) as to any amount collected in excess of an amount computed in
accordance with the decision of the director of finance which has become
final;

(3) as to any amount collected after the period of limitation upon the
making of levy for collection has expired; and

(4) as to any amount claimed as a result of a change or correction
described in subdivision (c).

(g) Limit on amount of credit or refund.-- The amount of overpayment
determined under subdivision (f) shall, when the decision of the
director of finance has become final, be credited or refunded in
accordance with subdivision (a) of section one hundred thirty-four and
shall not exceed the amount of tax which the director of finance
determines as part of his decision was paid--

(1) after the mailing of the notice of deficiency, or

(2) within the period which would be applicable under subdivisions
(a), (b) or (c), if on the date of the mailing of the notice of
deficiency a claim had been filed (whether or not filed) stating the
grounds upon which the director of finance finds that there is an
overpayment.

(h) Early return.--For purposes of this section, any return filed
before the last day prescribed for the filing thereof shall be
considered as filed on such last day, determined without regard to any
extension of time granted the taxpayer.

(i) Prepaid income tax.--For purposes of this section, any tax paid by
the taxpayer before the last day prescribed for its payment and any
amount paid by the taxpayer as estimated income tax for a taxable year
shall be deemed to have been paid by him on the fifteenth day of the
fourth month following the close of his taxable year with respect to
which such amount constitutes a credit or payment.

(j) Cross reference.--For provision barring refund of overpayment
credited against tax of a succeeding year, see subdivision (d) of
section one hundred thirty-four.

(k) Notice of change or correction of sales and compensating use tax
liability.--If a taxpayer is required by section one hundred
twenty-seven-A to file a report or amended return in respect of a change
or correction of his sales and compensating use tax liability, claim for
credit or refund of any resulting overpayment of tax shall be filed by
the taxpayer within two years from the time such report or amended
return was required to be filed with the commissioner of finance. If the
report or amended return required by section one hundred twenty-seven-A
is not filed within the ninety day period therein specified, interest on
any resulting refund or credit shall cease to accrue after such
ninetieth day. The amount of such credit or refund shall be computed
without change of the allocation of income or capital upon which the
taxpayer's return (or any additional assessment) was based, and shall
not exceed the amount of the reduction in tax attributable to such
change or correction of sales and compensating use tax liability. This
subdivision shall not affect the time within which or the amount for
which a claim for credit or refund may be filed apart from this
subdivision.