Was an October 2015 refund claim timely for Virginia income-tax assessments issued in 2005?

Subject

Taxpayer filed the protective claim, well after the three year period had expired for any of the assessments at issue.

Plain-English summary

Virginia issued assessments for tax years 2001 through 2003 in 2005. The taxpayer paid them between January 2010 and April 2013, then filed an October 2015 refund claim with returns for all three years.

The 2001 and 2003 returns appeared identical to the originals and lacked the required explanation of changes, so they were not valid amended returns. Even if they had been amendments, they arrived more than two years after payment of the relevant assessments.

A protective claim under Va. Code § 58.1-1824 required both payment and filing within three years of assessment. None of the assessments was paid within that period, and the October 2015 claim was also years late.

Virginia denied the requested refunds for all three tax years.

Citations and references

• Va. Code §§ 58.1-1823 and 58.1-1824.
• 23 VAC 10-20-180 A 2 and 10-20-190 A 1.
• P.D. 86-224.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 16-63

Original ruling text

April 20, 2016

Re: § 58.1-1824 Application: Individual Income Tax

Dear *:

This will reply to your letter in which * (the "Taxpayer") requests a refund of individual income taxes paid for the taxable years ended December 31, 2001, through 2003.

FACTS

The Department adjusted the Taxpayer's 2001 and 2003 Virginia individual income tax returns in April 2005 and October 2005, respectively, and issued assessments. The Department also issued an assessment for the 2002 taxable year in January 2005, because the Taxpayer failed to file a tax return. The 2001 assessment was paid as of January 2010. The 2002 and 2003 assessments were paid as of January 2013 and April 2013, respectively. In October 2015, the Taxpayer filed a claim for refund of all amounts paid and included returns for each taxable year at issue.

DETERMINATION

Amended Returns

Generally, Va. Code § 58.1-1823 allows a taxpayer to file an amended return within three years from the last day prescribed by law for the timely filing of the return. Virginia Code § 58.1-1823, however, also includes a number of exceptions to the general rule when specific circumstances are present. Under Va. Code § 58.1-1823 A (iv), a taxpayer may timely file an amended return within two years from the payment of an assessment, provided that the amended return raises issues relating solely to such assessment and that the refund does not exceed the amount of such payment.

The 2001 and 2003 returns the Taxpayer submitted with his refund claim appear to be identical to the returns he originally filed. Under Title 23 of the Virginia Administrative Code (VAC) 10-20-180 A 2, taxpayers must attach a statement to the return explaining the changes made and the reasons for the changes. In this case, it does not appear that the Taxpayer made any changes to the 2001 and 2003 returns, so they would not be considered to be amended returns. Even if they were valid amended returns, the Taxpayer did not submit them until October 2015, more than two years after the payment of the assessments in January 2010 and April 2013, respectively.

Protective Claim

Virginia Code § 58.1-1824 provides that "any person who has paid an assessment of taxes administered by the Department of Taxation may preserve his judicial remedies by filing for refund with the Tax Commissioner . . . within three years of the date such tax was assessed." Virginia Code § 58.1-1824, therefore, expressly limits the right to file a protective claim to cases in which both the filing of the claim and the payment of the assessment occurred within three years of the assessment. See Public Document (P.D.) 86-224 (11/3/1986). In addition, all assessed taxes, penalties and accrued interest must be paid before a taxpayer may file a protective claim. See Title 23 of the Virginia Administrative Code (VAC) 10-20-190 A 1.

In this case, the assessments were issued in 2005. The 2001 assessment was fully paid in January 2010. The 2002 and 2003 assessments were paid in January 2013 and April 2013, respectively. None of the assessments were paid within three years of the dates they were issued. In addition, the Taxpayer filed the protective claim in October 2015, well after the three year period had expired for any of the assessments. Accordingly, the Taxpayer's request for refunds for the 2001 through 2003 taxable years is denied.

The Code of Virginia sections, regulation and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns
Tax Commissioner

AR/1-6245121134.M