The state has not adopted many of the federal tax laws, instead has different laws for the same items.  any federal audit that results in a refund should not be automatically refunded because of these differences.  any clam for refund must be made by the taxpayer not the taxing agency unless the error was simple (ie math) then the agency would automatically make the refund.  however, any error made by the TP that misinterprets the law, should be corrected by the TP within the statute of limitations and believe the state follows this same policy.  only under audit circumstances if there was an error in the tps favor will it be corrected.  so I am not sure why the challenge, the policy seems reasonable.  the taxing agency does not have the personnel nor time to review every return for technical errors.