December 28, 2015
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you appeal the Department's denial of the application of an overpayment for individual income tax paid by ***** (the "Taxpayer") to tax due for the taxable year ended December 31, 2012.
FACTS
The Taxpayer filed a 2011 Virginia individual income tax return in June 2015, reporting an overpayment of income tax and requesting that the overpayment be credited against his income tax liability for the 2012 taxable year. The Department denied the request because the return was filed beyond the refund period allowed by the statute of limitations. The Taxpayer appeals the Department's denial, contending the statute of limitations on refunds is not applicable to overpayment credits.
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 that:
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 added.]
Although the Taxpayer has not requested an actual refund, but has requested that an overpayment of tax for the 2011 taxable year be applied against the income tax liability for the 2012 taxable year, the laws regarding refunds apply. As stated above, Va. Code § 58.1-499 requires that an application for refund must be received within three years from the last day prescribed by law for the timely filing of the return. See Public Document (P.D.) 09-88 (5/28/2009).
Virginia Code § 58.1-341 A requires that a taxpayer file an individual income tax return by May 1 of the year following the tax year for which the return is filed. Based on Virginia statutes, the due date for the Taxpayer's 2011 individual income tax return was May 1, 2012. As such, the return was required to be filed by May 1, 2015, in order to receive a refund for the 2011 taxable year. The original 2011 Virginia income tax return was not filed until June 2015, after the statute of limitations had expired on May 1, 2015.
The Taxpayer contends that the reference to "refund" in Va. Code § 58.1-499 D means that the three year statute of limitations does not apply as long as a taxpayer requests that the overpayment be credited on the following year's return.
The Virginia Supreme Court has ruled that statutes should not be interpreted in a manner that would make a portion of it useless, repetitious or absurd. See Jones v. Conwell, 227 Va. 176, 181, 314 S.E.2d 61, 64 (1984). In addition, it is well established that every act of the legislature should be read so as to give reasonable effect to every word and to promote the ability of the enactment to remedy the mischief at which it is directed. Id. Statute of limitations serve to protect individuals, businesses, and governments from situations "in which the search for truth may be seriously impaired by the loss of evidence, whether by death or disappearance of witnesses, fading memories, disappearance of documents, or otherwise." See U.S. v. Kubrick, 444 U.S. 111, 117, 100 S. Ct. 352, 317 (1979).
The Taxpayer's interpretation could effectively eliminate the statute of limitations on tax overpayments in certain circumstances. A non-filer, for example, who otherwise had satisfied his Virginia income tax liabilities by having income withheld from wages or making estimated payments could potentially file original income tax returns for any taxable year since Virginia first imposed an income tax. Instead of claiming refunds, however, he could claim overpayment credits and carry over such credits into each successive taxable year until they were finally carried over into a year that was within the statute of limitations to request a refund. In such circumstances, the refund would consist of aggregate overpayment credits carried forward for many years, rendering the statute of limitations meaningless.
Thus, while I empathize with the Taxpayer's situation, the Department's policy regarding the statute of limitations for claiming overpayment credits is clear. Accordingly, the Taxpayer's request to apply his overpayment for the 2011 taxable year against his income tax liability for the 2012 taxable year is denied.
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/1-6174317253.M