June 24, 2015
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek a refund of the individual income tax withheld from wages paid to ***** (the "Taxpayer") for the taxable years ended December 31, 2007 and 2008. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer states that he was a military servicemember present in Virginia solely in compliance with military orders during the 2007 and 2008 taxable years. The Taxpayer had Virginia income tax withheld from his wages, but he did not file any Virginia individual income tax returns. In September 2013, the Taxpayer filed Virginia Special Nonresident Claim for Individual Income Tax Withheld (Form 763-S) returns indicating he was a domiciliary resident of ***** (State A) during the taxable years at issue. The Department denied the Taxpayer's request for refunds on the basis that the statute of limitations had expired. The Taxpayer appealed, contending that the Servicemembers' Civil Relief Act prevents the Department from applying the statute of limitations to deny a military servicemember a refund of Virginia income taxes erroneously withheld.
DETERMINATION
Virginia Code § 58.1-499 A provides that in the case of any overpayment of any tax, whether by reason of excessive withholding, overestimating and overpaying estimated tax, or error on the part of the taxpayer, the Department shall order a refund of the overpayment. Virginia Code § 58.1-499 D specifies, however, in pertinent part:
No refund under this section . . . shall be made . . . whether on discovery by the Department or on written application of the taxpayer, if such discovery is not made or such written application is not received within three years from the last day prescribed by law for the timely filing of the return . . . [Emphasis supplied.]
Virginia Code § 58.1-341 A requires that taxpayers file individual income tax returns by May 1 of the year following the tax year for which the return is filed. Based on Virginia statutes, the Taxpayer was required to submit his claims for refund for the 2007 and 2008 taxable years no later than May 2, 2011, and May 1, 2012, respectively (May 1, 2011, was on a Sunday). The Taxpayer did not file his Form 763-S for either year until September 2013, well after the statute of limitations had expired.
The Taxpayer contends that the statute of limitations does not apply to his claim for refund because it conflicts with the Servicemembers Civil Relief Act (the "Act"), codified at 50 U.S.C. app. § 571 et seq., and is thus preempted by the Act according to the Supremacy Clause in Article 6 of the United States Constitution.
The Taxpayer cites several provisions from the Act in support of his contention. The first defers the collection of income tax for up to 180 days after the servicemember's termination or release of military service if his ability to pay was materially affected by such service. See 50 U.S.C. app. § 570(a). The second suspends a statute of limitations on collection of tax deferred under subsection (a) for the period of the servicemember's military service and for an additional 270 days thereafter. See 50 U.S.C. app. § 570(c). Neither of these provisions, however, pertains to refund claims.
In addition, the Department has held that the Soldiers' and Sailors' Civil Relief Act did not toll the statute of limitations on refund claims. See Public Document (P.D.) 97-436 (10/31/1997). In that case, the Department concluded that the filing of a return was not an action or proceeding for which the statute of limitations would be tolled during the period of military service. The Act retains the same standard for tolling the statute of limitations on which the Department made its determination in P.D. 97-436. See 50 U.S.C. app. § 526. Accordingly, the Taxpayer's request for refunds of income tax withheld for the 2007 and 2008 taxable years is denied.
The Code of Virginia sections and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Ruling, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-5834119709.M