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

Subject

2014 Third Quarter Interest Rates

Plain-English summary

Virginia's tax underpayment and overpayment rates were both 5% for the third quarter of 2014. Federal rates for that quarter were 3%, and Virginia Code § 58.1-15 added two percentage points to the corresponding federal rates.

For taxpayers with a June 30, 2014 year-end, the 5% second-quarter underpayment rate applied when computing the estimated-tax addition through the October 15, 2014 return due date.

The reduced rate for certain disputed assessments was 0%. That rate applied only when an administrative appeal had been filed on or after July 1, 2011 and the Department had not issued a determination within nine months after assessment.

For local delinquent taxes, a locality could charge up to 10% in the first year and, in later years, up to the greater of 10% or the applicable federal underpayment rate. The federal underpayment rate for the third quarter was 3%. A locality charging delinquent-tax interest also had to pay the same rate on overpayments or erroneous assessments.

What this means for you

• Use these rates only for the historical periods identified in the bulletin.
• The 0% disputed-assessment rate was conditional, not the general Virginia rate.
• Local tax interest depended on the locality's chosen rate within Virginia's statutory ceiling.
• The document's headline says “second quarter,” but its operative rate discussion and official subject concern the third quarter of 2014.

Citations and references

• IRC § 6621.
• Va. Code §§ 58.1-15, 58.1-1822, and 58.1-3916.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 14-87

Original ruling text

TAX BULLETIN 14-4
Virginia Department of Taxation

June 11, 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 third 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 third 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 June 30, 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, October 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 third quarter of 2014.

The federal short-term rate established pursuant to IRC § 6621(b) for the third 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 third 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-Sept-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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