Tax Type
Corporation Income Tax
Description
Amnesty penalty and federal large corporate underpayment interest rate
Topic
Amnesty
Basis of Tax
Interest Rates
Date Issued
09-23-2005
September 23, 2005
Re: Ruling Request:
Dear *************:
**************** requested information concerning the Department's position regarding the 20 percent amnesty penalty and the application of the federal large corporate underpayment interest rate to late payments.
In 2003, the General Assembly passed legislation allowing for a tax amnesty in Virginia. In part, this legislation stated, "If any taxpayer eligible for amnesty under this section and under the rules and guidelines established by the Tax Commissioner retains any outstanding balance after the close of the Virginia Tax Amnesty Program because of the nonpayment, underpayment, nonreporting or underreporting of any tax liability eligible for relief under the Virginia Tax Amnesty Program, then such balance shall be subject to a 20 percent penalty on the unpaid tax." Va. Code § 58.1-1840.1 F 1.
In addition, the guidelines established by the Tax Commissioner stated, "After the close of Virginia Tax Amnesty, any tax liability that was eligible for Amnesty relief but remains unpaid will be subject to a 20 percent penalty." Virginia Tax Amnesty Guidelines C 4, September 2, 2003. This means that any eligible delinquencies and tax underpayments discovered after Virginia Tax Amnesty ends, such as future audit assessments in periods that were eligible to receive amnesty, would be subject to the penalty. Ignorance of the liability is no excuse.
Thus, only those taxpayers who were not eligible to participate in the Amnesty program would not be subject to the 20 percent penalty. Ineligible taxpayers include those with the following liabilities: bills with an assessment date between June 4, 2003, and the end of amnesty November 3, 2003; delinquent and individual corporate income tax returns for taxable years beginning January 1, 2002, or later; delinquent business tax return for periods beginning May 1, 2003, and later; obligations of taxpayers under criminal investigation or prosecution; and jeopardy and fraud assessments. Virginia Tax Amnesty Guidelines C 3, September 2, 2003.
If the taxpayer was eligible to participate in the Amnesty, however, and did not do so for any reason, the taxpayer would be subject to the 20 percent penalty. This is because both the Code of Virginia and the guidelines established by the Tax Commissioner impose the penalty on any taxpayer with a tax liability that was eligible for the Amnesty program. Thus, even if the taxpayer was unaware that he was delinquent in his tax payments and eligible for the program, the taxpayer would still be subject to the penalty.
With respect to the federal large corporate underpayment interest rate issue, the Department reviewed its policy following the General Motors decision and determined that it would acquiesce in the Fairfax County Circuit Court decision.1 Accordingly, we will make the necessary modifications to our back-office system so that the additional two percentage points that you referred to in your letter will no longer be applied. This change will be reflected in the Interest Rate Tax Bulletin for the fourth quarter, although manual adjustments to bills may be required until the system changes can be completed.
I trust that this reply answers ***** ruling request. The Code of Virginia sections cited and other reference documents are available on-line in the Tax Policy Library section of the Department of Taxation's web site located at www.tax.virginia.gov. If you should have any questions regarding this letter, you may contact ***** in the Office of Policy and Administration, Policy Development, at *****.
-
-
-
-
-
-
-
- Sincerely,
-
-
-
-
-
-
-
-
-
-
-
-
-
Kenneth W. Thorson
Tax Commissioner
-
-
-
-
-
-
PD/55851
1 Contrary to ***** suggestion, the Virginia Supreme Court did not affirm the Fairfax County Circuit Court's decision on the large corporate underpayment interest rate. Rather, it merely declined review on that point. The Virginia Supreme Court's decision let stand the lower court's ruling on the interest issue, but that ruling is limited to the jurisdiction of the lower court. Nonetheless, the Department will not refuse to apply the lower court's ruling elsewhere.
Rulings of the Tax Commissioner