What Virginia tax interest rates applied during the second quarter of 2019 to assessments, refunds, disputed assessments, estimated tax, and local taxes?

Plain-English summary

Virginia Tax Bulletin 19-3 announced the interest rates for April 1 through June 30, 2019.

• State assessment underpayments: 8%
• State refund overpayments: 8%
• Reduced rate on qualifying disputed assessments: 3%

These are historical quarterly rates, not current standing rates.

How Virginia calculated 8%

IRC § 6621 set second-quarter federal underpayment and noncorporate overpayment rates at 6%. Va. Code § 58.1-15 added two percentage points, producing Virginia's 8% rates.

Estimated tax and appeals

For taxable years ending March 31, 2019, the 8% underpayment rate applied through the July 15, 2019 return due date on Forms 500C, 760C, and 760F.

For qualifying Department appeals filed on or after July 1, 2011, the federal short-term rate applied beginning nine months after assessment until determination. That rounded rate was 3% for Q2 2019.

Local taxes

Localities could charge up to 10% for the first delinquency year and later up to the greater of 10% or the applicable federal underpayment rate. A locality charging delinquency interest also had to pay the same rate on qualifying refunds.

What this means for you

• Match interest to the precise quarter of accrual.
• Appeal-rate relief begins only after nine months.
• Estimated-tax computations can extend to a later return due date.
• Local rates depend on lawful locality policy.

Common questions

Q: What was Virginia's ordinary Q2 2019 rate?

A: 8% for both assessments and refunds.

Q: What was the qualifying disputed-assessment rate?

A: 3% during the second quarter of 2019.

Citations and references

• IRC § 6621 — federal rates
• Va. Code § 58.1-15 — Virginia state rates
• Va. Code § 58.1-3916 — local interest

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 19-12

Original ruling text

TAX BULLETIN 19-3

Virginia Department of Taxation

March 6, 2019

VIRGINIA’S INTEREST RATES WILL REMAIN THE SAME FOR THE SECOND QUARTER OF 2019

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 Internal Revenue Code (“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 2019 will be 6% for tax underpayments (assessments) and 6% for tax overpayments (refunds) by noncorporate taxpayers.

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 federal overpayment rate for noncorporate taxpayers. Accordingly, the Virginia rates for the second quarter of 2019 will be 8% for tax underpayments (assessments) and 8% for tax overpayments (refunds).

Rate for Addition to Tax for Underpayments of Estimated Tax

Taxpayers whose taxable year ends on March 31, 2019: 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 8% underpayment rate will apply through the due date of the return, July 15, 2019.

Reduced Rate for Certain Assessments in Dispute

For administrative appeals filed with the Department of Taxation on or after July 1, 2011, a reduced interest rate equal to the federal short term rate established pursuant to IRC § 6621(b) applies, beginning nine months after the date of assessment until a determination is issued. The federal short-term rate established pursuant to IRC § 6621(b) for the second quarter of 2019, rounded to the nearest whole percent, is 3%. Accordingly, the reduced rate for the second quarter of 2019 for qualifying assessments in dispute is 3%.

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 2019, the federal underpayment rate is 6%.

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 (Refund)

Underpayment (Assessment)

Reduced

Rate

Beginning

Through

1-Jul-04

30-Sept-04

6%

6%

-

1-Oct-04

31-Mar-05

7%

7%

-

1-Apr-05

30-Sept-05

8%

8%

-

1-Oct-05

30-Jun-06

9%

9%

-

1-July-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-Sept-08

7%

7%

-

1-Oct-08

31-Dec-08

8%

8%

-

1-Jan-09

31-Mar-09

7%

7%

-

1-Apr-09

31-Dec-10

6%

6%

-

1-Jan-11

31-Mar-11

5%

5%

-

1-Apr-11

30-Sept-11

6%

6%

-

1-Oct-11

31-Mar-16

5%

5%

0%

1-Apr-16

31-Mar-18

6%

6%

1%

1-Apr-18

1-Jan-19

31-Dec-18

30-Jun-19

7%

8%

7%

8%

2%

3%

Additional Information: This Tax Bulletin, along with other reference documents, is available online in the Laws, Rules and Decisions section of the Department’s website, located at www.tax.virginia.gov . If you have questions about interest rates, please visit Virginia Tax’s website or contact the Department at 804.367.8031 (for individuals), 804.786.2450 (for Soft Drink Excise Tax and Aircraft Sales and Use Tax), or 804.367.8037 (for all other business taxes).