What Virginia tax assessment and refund interest rates applied during the third quarter of 2008?

Subject

Third-quarter 2008 Virginia tax interest rates

Plain-English summary

Virginia set both its assessment and refund interest rates at 7% for the third quarter of 2008. The corresponding federal rates were 5%, and Virginia law added two percentage points.

The 7% underpayment rate also applied to the estimated-income-tax addition for taxpayers whose taxable year ended June 30, 2008, through the stated October 15, 2008 return due date.

Local delinquent-tax interest followed separate rules. A locality could impose up to 10% for the first delinquency year and, for later years, the greater of 10% or the applicable federal underpayment rate. A locality charging delinquency interest also had to pay interest on overpayments and erroneous assessments at the same rate.

What this means for you

• Use 7% for historical Virginia state interest accruing from July 1 through September 30, 2008.
• Match the rate to the accrual period, not merely the tax or assessment year.
• Local interest followed the locality's ordinance within the statutory limits.
• This is historical guidance; current rates must be confirmed separately.

Common questions

Q: What was Virginia's third-quarter 2008 assessment rate?
A: 7%.

Q: What was the refund rate?
A: 7%.

Q: What federal rate did the bulletin report?
A: 5% for underpayments and for overpayments by taxpayers other than corporations.

Citations and references

• IRC § 6621.
• Va. Code §§ 58.1-15 and 58.1-3916.
• Virginia Tax Bulletin 08-9.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 08-87

Original ruling text

TAX BULLETIN 08-9
Virginia Department of Taxation

June 10, 2008

VIRGINIA’S THIRD QUARTER 2008 INTEREST
RATES WILL CHANGE

Federal Rates To Change: State and certain local interest rates are subject to change every quarter due to changes in federal rates established pursuant to IRC § 6621. Federal rates for the third quarter of 2008 will be 5% for tax underpayments (assessments) and 5% for tax overpayments (refunds) by taxpayers other than corporations. Va. Code § 58.1-15 provides that underpayment rates for Virginia taxes will be 2% higher than the corresponding federal rates and overpayment rates for Virginia taxes will be 2% higher than the federal rate.

Accordingly, the Virginia rates for the third quarter of 2008 will be 7% for tax underpayments (assessments) and 7% for tax overpayments (refunds).
Rate for Addition to Tax for Underpayments of Estimated Tax

Taxpayers whose taxable year ends on June 30, 2008 : For the purpose of computing the addition to the tax for underpayment of Virginia estimated income taxes on Form 500C (for corporations), Form 760C (for individuals, estates and trusts), or Form 760F (for farmers and fishermen), the third quarter 7% underpayment rate will apply through the due date of the return, October 15, 2008.
Local Tax

Assessments: Localities that assess interest on delinquent taxes under Va. Code § 58.1-3916 may impose interest at a rate not to exceed 10% for the first year of delinquency, and at a rate not to exceed 10% or the federal underpayment rate in effect for the applicable quarter, whichever is greater, for the second and subsequent years of delinquency. For the third quarter of 2008, the federal underpayment rate is 5%.

Refunds: Localities that charge interest on delinquent taxes are required to pay interest to taxpayers on all overpayments or erroneously assessed taxes at the same rate as they charge interest on delinquent taxes under Va. Code § 58.1-3916.
Recent Interest Rates
Accrual
Period
Overpayment
Underpayment

Beginning
Through
(Refund)
(Assessment)

1-Apr-00
31-Mar-01
11%
11%

1-Apr-01
30-Jun-01
10%
10%

1-Jul-01
31-Dec-01
9%
9%

1-Jan-02
31-Dec-02
8%
8%

1-Jan-03
30-Sep-03
7%
7%

1-Oct-03
31-Mar-04
6%
6%

1-Apr-04
30-Jun-04
7%
7%

1-Jul-04
30-Sep-04
6%
6%

1-Oct-04
31-Mar-05
7%
7%

1-Apr-05
30-Sep-05
8%
8%

1-Oct-05
30-Jun-06
9%
9%

1-Jul-06
31-Dec-07
10%
10%

1-Jan-08
31-Mar-08
9%
9%

1-Apr-08
30-Jun-08
8%
8%

1-Jul-08
30-Sep-08
7%
7%

Additional Information: Contact Customer Services, Virginia Department of Taxation, P. O. Box 1115, Richmond, Virginia 23218-1115, or call the following numbers for more information about interest rates and penalties.

Individual & Fiduciary Income Tax (804) 367-8031
Corporation Income Tax (804) 367-8037
Withholding Tax (804) 367-8037
Soft Drink Excise Tax (804) 786-2450
Aircraft Sales & Use Tax (804) 786-2450
Other Sales & Use Taxes (804) 367-8037

This Tax Bulletin along with other reference documents are available online in the Tax Policy Library section of the Department of Taxation’s website, located at www.tax.virginia.gov.
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