Tax Type
Corporation Income Tax
Description
Consolidated refund, merged corporation
Topic
Allocation and Apportionment
Corporate Distributions and Adjustments
Date Issued
08-19-2003
August 19, 2003
Re: § 58.1-1821 Application: Corporate Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the corporate income tax assessment issued to ***** (the "Taxpayer") for the taxable year ended December 31, 1998. I apologize for the delay in the Department's response.
FACTS
The Department audited a taxpayer ("Corporation A") for the 1983 through 1985 taxable years and issued assessments in October 1990. Corporation A contested the assessments and filed an administrative appeal pursuant to Va. Code § 58.1-1821. In a letter dated October 8, 1991, the Department upheld the assessments. See Public Document ("P.D.") 91-240 (10/8/91). According to the Department's records, Corporation A never paid the assessments.
In 1997, after a series of transactions, Corporation A merged with the Taxpayer, which was treated as the surviving corporation under the Federal reverse acquisition rules. The Taxpayer and its subsidiaries filed a combined Virginia corporate income tax return for the 1998 taxable year and claimed a refund. The Taxpayer's 1998 refund was applied by the Department to offset Corporation A's 1983 through 1985 audit assessments.
The Department conducted an audit on the Taxpayer for the 1998 taxable year and numerous adjustments were made. The Taxpayer concurred with the adjustments and requested that the resulting 1998 assessment be satisfied from the 1998 overpayment it never received. The 1998 assessment could not, however, be satisfied because of the prior offset to satisfy the 1983 through 1985 audit assessments.
The Taxpayer contests the application of its 1998 refund toward Corporation A's prior tax liability because Corporation A was not affiliated with the Taxpayer prior to 1998.
DETERMINATION
Both Virginia and Delaware laws provide that when a corporation consolidates or merges with other corporations, all liabilities of parties to the merger become the liabilities of the surviving corporation. See Va. Code § 13.1-721 and 8 Del. C. § 259. As such, Corporation A's Virginia corporate income tax liability for the 1983 through 1985 taxable years became a liability of the Taxpayer upon the ultimate acquisition of Corporation A. Accordingly, the application of the Taxpayer's 1998 refund to Corporation A's 1983 through 1985 liability was valid.
A review of the Department's records, however, indicates that an estimated payment was made under the account of one of the Taxpayer's subsidiaries. The Department has transferred this payment to the Taxpayer's account, reducing the Taxpayer's 1998 audit assessment accordingly. The enclosed schedule shows the Taxpayer's revised liability for the 1998 taxable year.
A revised bill, with interest accrued to date, will be sent shortly to the Taxpayer. No additional interest will accrue provided the outstanding balance is paid within 30 days from the date shown on the bill. Please remit your payment to: Virginia Department of Taxation, 3600 West Broad Street, Suite 160, Richmond, Virginia 23230, Attention: *****. If you-have any questions concerning payment of the assessment, you may contact ***** at *****.
Copies of the statutory references and the original letter dated October 8, 1991, to Corporation A are enclosed for reference purposes. Other reference documents are available on-line in the Tax Policy Library section of the Department's web site located at www.tax.state.va.us. If you have any questions regarding this response, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
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AR/43358B
Rulings of the Tax Commissioner