December 8, 2015
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which ***** (the "Taxpayer") requests a refund of individual income tax for the taxable year ended December 31, 2010.
FACTS
The Taxpayer, a California resident, filed a Virginia nonresident individual income tax return for the 2010 taxable year. In February 2015, California disallowed the credit she claimed on her 2010 California return for the income tax paid to Virginia. The Taxpayer paid the additional tax due and filed an amended Virginia return to claim credit for income tax paid to California. The Department processed the return but denied the refund because the return was not filed within the statute of limitations. The Taxpayer filed an appeal, contending the return was timely filed because it was filed within one year of the change to her California tax liability.
DETERMINATION
Out-of-State Tax Credit
Under Va. Code § 58.1-332 B, a nonresident is permitted to claim a credit against tax on income from Virginia sources when their state of residency provides a substantially similar credit to Virginia residents or imposes a tax upon their income derived from Virginia sources but does not tax income earned in the state by Virginia residents. Because it is dependent on another state granting a similar or reciprocal credit, it may be limited by the credit permitted by the other state. Currently, only residents of Arizona, California, Oregon, and the District of Columbia may qualify for this credit. The Taxpayer was eligible to claim the credit on her nonresident Virginia return because she filed a resident return with, and paid tax to, California.
Statute of Limitations
Generally, Va. Code § 58.1-1823 allows a taxpayer to file an amended return within three years from the last day prescribed by law for the timely filing of the return. The Taxpayer's 2010 return was due May 2, 2011 (May 1 was a Sunday). In order to have timely filed an amended return, the Taxpayer would have to have filed on or before May 2, 2014. In this case, the Taxpayer's 2010 amended return was filed in February 2015, well after the general statute of limitations had expired. Virginia Code § 58.1-1823, however, also includes a number of exceptions to the general rule when specific circumstances are present.
Under Va. Code § 58.1-1823 A (v), a taxpayer has one year from the final determination of a change made by any other state to file an amended return to request a refund, provided that the refund does not exceed the amount of the decrease in Virginia tax attributable to such change. In February 2015, California notified the Taxpayer of the correction to her California return, and she paid the assessment. The same month, she filed her amended Virginia return. Therefore, the amended return was timely filed under Va. Code § 58.1-1823 A (v).
Accordingly, the amended return will be processed as timely filed and the liability adjusted accordingly. If an overpayment results, a refund will be issued.
The Code of Virginia sections 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 Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-6121367925.M