Were Virginia income-tax assessments barred when the taxpayer appealed 1997-1999 late and had never filed a 2000 return?

Subject

Administrative appeal was not timely filed

Plain-English summary

Virginia barred the 1997-1999 appeal as late and upheld the 2000 assessment on the merits. Under the policy then applied to older assessments, the earlier appeal was due no later than October 27, 2003.

The 2000 appeal was timely, but no return had been filed. Virginia could estimate and assess at any time, and the taxpayer supplied no objective evidence showing the IRS-based liability was wrong. Federal consumer-credit statutes did not apply to government tax collection.

What this means for you

• Appeal deadlines can prevent review of disputed assessments.
• When no return is filed, Virginia's assessment period may remain open.
• Ability to pay does not show that an assessment is incorrect.

Common questions

Was the 2000 appeal timely? Yes, but the assessment was still upheld.

Why was the 2000 assessment not too late? No return had been filed.

Citations and references

• Va. Code §§ 58.1-1821, 58.1-111, 58.1-312, 58.1-301, 58.1-322, 58.1-341, and 58.1-205.
• IRC § 6103(d); 15 U.S.C. § 1601 et seq.; P.D. 06-132.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 08-55

Original ruling text

April 30, 2008

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek correction of the individual income tax assessments issued to * (the "Taxpayer") for the 1997 through 2000 taxable years.

FACTS

The Taxpayer was a Virginia resident during the taxable years at issue. The Taxpayer filed his individual Virginia income tax returns for the 1997 through 1999 taxable years late, and underpaid the tax. The Department assessed the tax due, late filing penalties and interest. The Taxpayer did not file a Virginia income tax return for the 2000 taxable year. Based on information obtained from the Internal Revenue Service (IRS), the Department determined that the Taxpayer had Virginia taxable income in 2000 and assessed tax, penalty and interest.

The Taxpayer contends that the Department's assessments are out of statute for the taxable years at issue. He also argues that the Department has failed to follow federal debt collections laws. Finally, the Taxpayer states that he lacks the ability to pay the assessments.

DETERMINATION

Timeliness of Appeal

Virginia Code § 58.1-1821 provides, in pertinent part, "Any person assessed with any tax administered by the Department of Taxation may, within ninety days from the date of such assessment, apply for relief to the Tax Commissioner."

For assessments issued prior to August 15, 2003, the Department had a policy of accepting administrative appeals at anytime within the three-year statute of limitations for pursuing a judicial remedy. See Public Document (P.D.) 06-132 (10/30/2006). In this instance, the latest tax assessment for the 1997 through 1999 taxable years were issued to the Taxpayer on October 27, 2000. In accordance with the Department's policy as it existed at the time the assessment was issued, the Taxpayer was required to file an administrative appeal within three years of the dare of assessment, or by October 27, 2003, at the latest.

The administrative appeal for the 1997 through 1999 taxable years was filed with the Department well after the expiration of the statute of limitations. Therefore, the Taxpayer's application for correction pursuant to Va. Code § 58.1-1821 under the Department's policy prior to August 15, 2003, was not timely filed. Accordingly, I have no choice but to rule that the Taxpayer's appeal for the taxable years ended 1997 through 1999 is time barred by the statute of limitations.

The Department's records indicate an assessment was issued for the 2000 taxable year on October 19, 2007. An administrative appeal was filed with the Department on November 7, 2007, within ninety days from the date of assessment. Therefore, the Taxpayer's application for correction pursuant to Va. Code § 58.1-1821 for the 2000 taxable year is considered timely filed. Accordingly, this determination will address the Taxpayer's appeal of the assessment for the taxable year 2000.

Timeliness of Assessment

With regard to the assessment for 2000, the Department has the authority under Va. Code § 58.1-111 to estimate the amount of taxes due when a taxpayer fails to file a valid state tax return. Virginia Code § 58.1-312 further provides that an assessment can be issued at any time if a return is not filed. Because the Taxpayer failed to file a return for the 2000 taxable year, the assessment issued in October 2007 was made within the authority provided to the Department by Va. Code § 58.1-312.

Basis for Assessments

Virginia Code § 58.1-301 provides that terminology and references used in Title 58.1 of the Code of Virginia will have they same meaning as provided in the Internal Revenue Code (IRC) unless a different meaning is clearly required. For individual income tax purposes, Virginia "conforms" to federal law, in that it starts the computation of Virginia taxable income with federal adjusted gross income (FAGI). Income included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it is specifically exempt as a Virginia modification pursuant to Va. Code § 58.1-322.

Virginia Code § 58.1-341 provides that a Virginia resident who is required to file a federal income tax return is also required to file a Virginia income tax return, unless the resident is exempt from filing under Va. Code § 58.1-321. Additionally, even if a resident is not required to file a federal return but has Virginia adjusted gross income that exceeds the filing threshold, the resident is required to file a Virginia individual income tax return. When a resident does not file a proper Virginia return, IRC § 6103(d) authorizes the Department to obtain information from the IRS that will enable the Department to determine the resident's tax liability. In this case, the Department received information from the IRS to determine the Taxpayer's liability for the taxable year 2000.

Collection Actions

The Taxpayer contends that the Department is bound by the Federal Credit Protection Act and the Accurate Credit Transactions Act of 2003 with regard to collection of his Virginia tax liability. The various federal consumer credit protection laws, which are addressed in 15 U.S.C. § 1601 et seq ., apply to institutions that provide consumer credit, not to government agencies collecting tax. As such, these laws are inapplicable to the Taxpayer's situation.

CONCLUSION

The Taxpayer's administrative appeal for taxable years 1997 through 1999 was not timely filed. Therefore, the assessment is correct as issued. In regard to the assessment for the taxable year 2000, Virginia Code § 58.1-205 provides that any assessment of a tax by the Department shall be deemed prima facie correct. The Taxpayer has not shown that the assessment issued by the Department is incorrect. Moreover, he has failed to provide objective evidence as to the correct liability for the taxable year 2000.

Based on the foregoing, I find no basis to abate the Virginia individual income tax assessments for the 1997 through the 2000 taxable years. A schedule is enclosed showing the balance of the assessments.

The Taxpayer is requested to file an accurate Virginia individual income tax return for the 2000 taxable year, along with payment of the balance due, within 30 days from the date of this letter. The Taxpayer should also (1) file any other delinquent income tax returns, and (2) amend income tax returns based on the claims set forth in the application for correction. Refusal to file the requested returns or any future returns in accordance with Virginia law by continuing to make the claims you have stated in your letter would justify the 100% fraud penalty and other legal actions to collect the proper tax.

Returns and payments should be sent to: Virginia Department of Taxation, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attn: *.

The Code of Virginia sections and public documents cited, along with other reference documents, are available on-line at www.ta.x.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this determination, you may contact * at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-1900265247.B