Assessment: Penalty - Late Filing
July 6, 2023
Re: § 58.1-1821 Application: Corporate Income Tax
Dear *****:
This will respond to your letter in which you seek correction of an assessment of late filing penalties issued to ***** (the “Taxpayer”) for the taxable year ended April 3, 2020.
FACTS
The Taxpayer filed calendar year income tax returns on a combined basis for Virginia income tax purposes and on a consolidated basis for federal income tax purposes. On April 3, 2020, the Taxpayer completed an all stock merger of equals with Company A. Subsequent to the merger, Taxpayer became a wholly owned subsidiary of Company A. As a result, the Taxpayer was required to file a return for the short taxable year ending April 3, 2020.
The Taxpayer made a Virginia extension payment on April 14, 2021, and filed the short period return on November 15, 2021. The Department assessed a late filing penalty based on its determination that the return was due on August 18, 2021. The Taxpayer appeals, contending that the return was timely filed on November 15, 2021. The Taxpayer also requests that any late payment penalty be abated because its estimated payments were based on the best available information.
DETERMINATION
Assessment of Late Filing Penalty
Virginia Code § 58.1-440 requires that corporations use the same taxable year for Virginia income tax purposes as for federal income tax purposes. Accordingly, when a short period return is required for federal tax purposes, a similar return must be filed for Virginia tax purposes.
Virginia Code § 58.1-441 requires Virginia income tax returns to be filed on or before the fifteenth day of the fourth month following the close of the taxable year, and such returns may be extended subject to the provisions of Virginia Code § 58.1-453.
In the instant case, the short period return for the taxable year ended April 3, 2020, would normally have been due on August 17, 2020 (August 15 was a Saturday). Virginia Code § 58.1-453, however, grants an extension of 30 days after the federal due date, as extended, or six months, whichever is later, provided a Virginia extension is filed.
Pursuant to Treasury Regulation §1.1502-76(b)(4) and § 1.1502-76(c)(1), the federal due date for filing a short period return subsequent to certain changes in ownership is the same as the due date for the group’s consolidated return, with extensions. In this case, Company A’s federal consolidated return was due April 15, 2021, and both the Taxpayer and Company A submitted timely extension requests.
Accordingly, the federal due dates for the Company A consolidated return and the Taxpayer’s short period return were extended to October 15, 2021. The extended due date for the Taxpayer’s Virginia return for the taxable year ended April 4, 2020, was thus November 15, 2021, 30 days after the federal due date. See also, Public Document (PD.) 91-265 (10/22/1991) and P.D. 97-171 (4/14/1997).
Assessment of Late Payment Penalty
Virginia Code § 58.1-1 05 authorizes the Tax Commissioner to accept an offer in compromise and to settle claims of disputed or doubtful liability, or doubtful collectibility and to waive penalty for reasonable cause. To date, a late payment penalty has not been assessed with respect to the taxable year ended April 3, 2020.
CONCLUSION
For the reasons discussed above, the Taxpayer’s Virginia corporate income tax return for the short taxable year ended April 3, 2020, was due November 15, 2021. Because the Taxpayer filed the return on that date, the late filing penalty was erroneously assessed and will be abated. A review of the Department’s records indicates the Taxpayer has paid a portion of the penalty and a refund will be issued as warranted. If the Taxpayer is subsequently assessed a late payment penalty, a penalty waiver may be requested at that time.
The Code of Virginia sections and public documents cited are available online at www.tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. 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/4217.X