Could the Virginia Department of Taxation review a county tax on a personal vehicle or decide whether an income-tax-refund setoff paid that debt correctly?

Subject

Department's jurisdiction is limited to appeals from final local determinations concerning local business and mobile property tax assessments.

Plain-English summary

A county taxed an individual's personal vehicle and later certified a debt that caused Virginia to withhold part of her state income tax refund. She asked the Department of Taxation to cancel the county debt and determine how the withheld money had been applied.

Virginia dismissed the matter for lack of jurisdiction. A refund setoff is based on a debt certified by the claimant agency, and the taxpayer's opportunity to contest that debt is with the agency that claimed it. The Department had no separate procedure to review the county's setoff claim.

The Department's local-tax appeal authority also did not cover ordinary personal-vehicle property tax. It covered specified local business taxes, specified mobile property such as airplanes, boats, campers, recreational vehicles, and trailers, and BPOL matters. The taxpayer therefore had to contact the appropriate county official about both the assessment and application of payments.

What this means for you

• Contest a proposed refund setoff with the agency or locality that certified the debt.
• The claimant agency is responsible for the debt's validity and the required notice.
• Virginia's Department of Taxation has limited jurisdiction over local-tax appeals.
• A tax on an ordinary personal vehicle is not treated as the listed local mobile-property category for this appeal route.

Citations and references

• Va. Code §§ 58.1-523, 58.1-524 A, and 58.1-525.
• Va. Code § 58.1-3983.1 A and D.
• Va. Code §§ 58.1-3703.1 A 6 and 58.1-1821.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 17-142

Original ruling text

August 7, 2017

Re: Taxpayer: *

Locality Assessing Tax: *

Local Tangible Personal Property - Tax

Dear *:

This notice of jurisdiction is issued upon the application for correction filed by you (the “Taxpayer”) with the Department of Taxation. The Taxpayer seeks correction of assessments of tangible personal property tax issued to her by * (the “County”) for the 2015 and 2016 tax years.

The following determination is based on the facts presented to the Department summarized below. The Code of Virginia sections cited are available on-line in the Laws, Rules and Decisions section of the Department's web site, located at www.tax.virginia.gov .

FACTS

The County issued assessments of tangible personal property tax on the Taxpayer's personal vehicle for the 2015 and 2016 tax years. In May 2016, the Department withheld a portion of the Taxpayer's 2015 Virginia individual income tax refund for a debt owed to the County, although the documentation provided did not specify the debt. The County subsequently issued another bill to the Taxpayer for a vehicle license fee and unpaid taxes. The Taxpayer appealed, requesting that the Department cancel all debt owed to the County on the basis that the County, the Department and the Virginia Department of Motor Vehicles have failed to prove how withheld funds were applied to the personal property taxes.

ANALYSIS

Setoff Debt Collection

Virginia Code § 58.1-523 requires the Department to assist in the collection of any delinquent account or debt owing to a claimant agency, which may include a Virginia locality. The assistance is provided by setting off any Virginia income tax refunds belonging to the debtor against debts certified by the claimant as due and owing. It is the claimant agency's responsibility to ensure that the delinquent debt is valid. See Va. Code § 58.1-524 A. It is also the claimant agency's responsibility to notify the taxpayer of the impending collection action, and the taxpayer is afforded the opportunity to contest the action at a hearing with the claimant agency by providing written notice of the intent to do so within 30 days. See Va. Code § 58.1-525. A failure to apply for a hearing within that time period is deemed a waiver of the right to contest the claim. See id .

Jurisdiction

Under Va. Code § 58.1-3983.1 D, the Department's jurisdiction is limited to appeals from final local determinations concerning local business and mobile property tax assessments. Local business taxes include the machinery and tools tax, business tangible personal property tax, merchant's capital tax and consumer utility tax. See Va. Code § 58.1-3983.1 A. Local mobile property taxes include the tangible personal property tax on airplanes, boats, campers, recreational vehicles, and trailers. In addition, taxpayers may file appeals of local Business, Professional and Occupational License (BPOL) tax assessments with the Department pursuant to Va. Code § 58.1-3703.1 A 6. In addition, although Va. Code § 58.1-1821 permits a taxpayer to assert a claim that an amount collected by the Department was exempt from process, Va. Code § 58.1-1821 only applies to taxes administered by the Department of Taxation.

DETERMINATION

The Code of Virginia provides taxpayers the opportunity to contest a proposed Virginia income tax refund setoff with the claimant agency asserting the debt is owed to it. There is no procedure for appealing the setoff to the Department. As such, the Department has no jurisdiction to determine whether the Taxpayer's debt with the County that gave rise to the setoff was valid, whether it was an unpaid tangible personal property tax debt or some other debt. In addition, an assessment of tangible personal property tax on a personal vehicle is not an assessment of local business tax, local mobile property tax or local BPOL tax over which the Department has jurisdiction to hear an appeal. Accordingly, the Department lacks jurisdiction to correct such assessments. Further, Va. Code § 58.1-1821 does not permit a taxpayer to claim that an amount collected by the Department was exempt from process unless the assessment was for a tax administered by the Department. Because the Department does not administer local tangible personal property taxes, Va. Code § 58.1-1821 does not apply.

The Taxpayer should contact the appropriate local official for an explanation about how the setoff and any other payments were applied to her account. Any questions the Taxpayer has about the assessments themselves should also be directed toward the appropriate local official.

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/1338.M