What Virginia tax interest rates applied during the second quarter of 2014?

Subject

2014 Second Quarter Interest Rates

Plain-English summary

Virginia announced these second-quarter 2014 annual rates:

• 5% for Virginia tax underpayments and assessments;
• 5% for Virginia tax overpayments and refunds; and
• 0% reduced interest for qualifying assessments in administrative appeal after nine months without a Department determination.

The corresponding federal underpayment and noncorporate overpayment rates were 3%. Virginia added two percentage points under § 58.1-15. The federal short-term rate used for the reduced disputed-assessment calculation was 0%.

For taxpayers whose taxable year ended March 31, 2014, the 5% rate applied to specified estimated-income-tax underpayment additions through the July 15, 2014 return due date.

Localities using § 58.1-3916 could impose no more than 10% for the first delinquency year and, for later years, no more than the greater of 10% or the applicable federal underpayment rate. Localities charging delinquency interest also had to pay the same rate on overpayments or erroneous assessments.

What this means for you

• These rates apply only to April 1 through June 30, 2014.
• The 0% rate did not apply to every appeal; the assessment had to meet the bulletin's filing-date and nine-month conditions.
• Local tax interest followed separate statutory limits from state tax interest.

Citations and references

• IRC § 6621.
• Va. Code §§ 58.1-15, 58.1-1822, and 58.1-3916.
• Virginia Tax Bulletin 14-2.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 14-40

Original ruling text

TAX BULLETIN 14-2
Virginia Department of Taxation

March 19, 2014

VIRGINIA’S SECOND QUARTER 2014 INTEREST
RATES WILL REMAIN THE SAME

Federal Rates Remain Unchanged: State and certain local interest rates are subject to change every quarter due to changes in federal rates established pursuant to
IRC § 6621. IRC § 6621 dictates that the federal underpayment and overpayment rates are three percentage points higher than the federal short-term rate. Federal rates for the second quarter of 2014 will be 3% for tax underpayments (assessments) and 3% for tax overpayments (refunds) by taxpayers other than corporations.

Virginia Code § 58.1-15 provides that the underpayment rate for Virginia taxes will be 2% higher than the corresponding federal rate and the overpayment rate for Virginia taxes will be 2% higher than the corresponding federal rate. Accordingly, the Virginia rates for the second quarter of 2014 will be 5% for tax underpayments (assessments) and 5% for tax overpayments (refunds).
Rate for Addition to Tax for Underpayments of Estimated Tax

Taxpayers whose taxable year ends on March 31, 2014 : 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 second quarter 5% underpayment rate will apply through the due date of the return, July 15, 2014.
Reduced Rate for Certain Assessments in Dispute

Assessments in Dispute : During the 2011 session, the General Assembly passed Senate Bill 1152 (Chapter 295, 2011 Acts of Assembly), which created a reduced rate for certain assessments in dispute. If a taxpayer files an administrative appeal with the Department of Taxation on or after July 1, 2011, interest begins accruing at the standard underpayment rate until nine months from the date of assessment. From nine months after the date of assessment until a determination is issued, interest accrues at the federal short-term rate established pursuant to IRC § 6621(b). Because the reduced rate is effective for administrative appeals filed on or after July 1, 2011, this legislation could potentially impact interest rates during the second quarter of 2014.

The federal short-term rate established pursuant to IRC § 6621(b) for the second quarter of 2014, rounded to the nearest whole percent, is 0%. Accordingly, the reduced rate for the second quarter of 2014 for qualifying assessments in dispute is 0%. This rate applies only to contested assessments for which an administrative appeal was filed on or after July 1, 2011 and the Department has not made a determination within nine months from the date of assessment. See Va. Code § 58.1-1822 for more information.
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 second quarter of 2014, the federal underpayment rate is 3%.

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
Reduce

Beginning
Through
(Refund)
(Assessment)
Rate

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%
-

1-Oct-08
31-Dec-08
8%
8%
-

1-Jan-09
31-Mar-09
7%
7%
-

1-Apr-09
30-Dec-10
6%
6%
-

1-Jan-11
31- Mar-11
5%
5%
-

1-Apr-11
30-Sept-11
6%
6%
-

1-Oct-11
30-Jun-14
5%
5%
0%

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, is available online in the Laws, Rules and Decisions section of the Department of Taxation’s website, located at www.tax.virginia.gov
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