April 25, 2025
Re: § 58.1-1821 Appeal: Individual Income Tax
Dear *****:
This will respond to your letter in which you seek a refund of the overpayment of individual income tax paid by ***** (the “Taxpayer”), now deceased, for the taxable year ended December 31, 2016.
FACTS
The Taxpayer filed his 2016 Virginia individual income tax return on August 13, 2020, requesting that the overpayment be credited as an estimated payment for the following taxable year. The Department denied the overpayment credit because the return was filed beyond the refund period allowed by the statute of limitations.
The denial of the overpayment credit resulted in corresponding increases in the amount of tax due for the 2019 and 2020 taxable years, and assessments were issued. The Taxpayer’s estate applied for correction, requesting that the Department allow the overpayment credit because the return was timely filed and the refund was allowable under the Internal Revenue Code (IRC).
DETERMINATION
Conformity
Virginia Code § 58.1-301 provides, with certain exceptions, that terminology and references used in Title 58.1 of the Code of Virginia will have the same meaning as provided in the IRC unless a different meaning is clearly required. Conformity does not extend to terms, concepts, or principles not specifically provided in the Code of Virginia. For individual income tax purposes, Virginia conforms to federal law, in that it starts the computation of Virginia taxable income with federal adjusted gross income (FAGI).
Conformity, however, does not mean that every provision of the IRC is imported directly into Virginia law. Title 58.1 of the Code of Virginia has specific statutes setting forth the periods of time within which the taxpayers may request a refund of Virginia income tax. Thus, even if the Taxpayer timely requested a refund of federal income tax under the IRC, and the Internal Revenue Service (IRS) would issue a refund in the same situation, the Department would not issue a refund of Virginia income tax unless it was made within the time allowed under Virginia law.
Statute of Limitations for Refunds
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 added.]
Although the Taxpayer’s estate has not requested an actual refund but has requested that the Department allow the overpayment credit instead, the laws regarding refunds apply. As stated above, Virginia 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 P.D. 09-88 (5/28/2009). See also Joseph Richard Azar vs. Virginia Dep’t of Taxation, Circuit Court of Arlington County, Case No. 16-1910, the final order for which is reported as P.D. 17-140 (6/30/2017).
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. Taxpayers are allowed to elect a six-month extension to file their returns. In order to elect an extension, a taxpayer must (i) file the return within the extended period, and (ii) on or before the original due date for the filing of the return, pay the full amount properly estimated as the balance of the tax due for the taxable year. See Virginia Code § 58.1-344. If the taxpayer intends to take the extension but then does not file a return or pay the full amount of the tax due by the extended due date, the taxpayer is treated as if no extension had been granted. See P.D. 10-238 (9/30/2010). In such cases, the extension is negated and the last day allowed for the timely filing of the return reverts to the original due date of such return. This policy has been consistently applied in numerous determinations. See, e.g., P.D. 15-3 (1/8/2015), P.D. 21-18 (1/16/2021), P.D. 22-9 (1/18/2022), and P.D. 24-48 (5/16/2024).
Because the Department had not received the Taxpayer’s 2016 return before the extended due date described in Virginia Code § 58.1-344, the Taxpayer had three years from the original due date, May 1, 2017, in which to file a timely request for refund. The statute of limitations for filing a return claiming a refund for the 2016 taxable year expired the day after May 1, 2020. The Taxpayer’s 2016 income tax return was filed on August 13, 2020, after the statute of limitations had expired.
CONCLUSION
The provisions of Virginia Code § 58.1-499 D are clear and do not provide the Department with any discretion in enforcing the three-year limitations period to apply for a refund. In addition, because the Code of Virginia has specific provisions governing the time periods within which a taxpayer may request a refund of Virginia income tax, the fact that the Taxpayer’s representative requested the federal income tax refund within the time allowed under the IRC has no bearing on whether he timely requested his Virginia income tax refund. Accordingly, the Department was correct in denying the overpayment credit claimed on the 2016 return and making the corresponding adjustments to the 2019 and 2020 returns.
Based on this determination, the assessments for the 2019 and 2020 taxable years are upheld. The Taxpayer will receive updated bills that will include accrued interest to date. The Taxpayer should remit the balance due within 30 days of the bill dates to avoid the accrual of additional interest and possible collection actions.
The Code of Virginia sections cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at ***** or *****@tax.virginia.gov.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR/4826.Y