Tax Type
Corporation Income Tax
Description
DISC adjustment
Topic
Computation of Income
Date Issued
06-20-1988
June 20, 1988
Re: §58.1-1821 Application; Corporation Income Tax
§58.1-1822 Action of Tax Commissioner on Application
§58.1-446 Adjustment for DISC
Dear **************
This is in response to your letter of January 23, 1988, in which you stated that you believe that you are not required to pay an assessment of tax while the issue of adjustments for Domestic International Sales Corporations (DISC) is in litigation.
Facts
The taxpayer was assessed additional tax and has paid the portion of the assessment unrelated to the DISC adjustment. You cite Va. Code §58.1-1822 as authority for not paying the tax until there has been a final decision in the General Electric case.
Discussion
The validity of the department's policy on requiring an adjustment under §58.1-446 for a DISC has been raised in numerous applications in addition to the pending litigation. The department firmly believes that the adjustment is appropriate and within its authority. The department requires all taxpayers to make the DISC adjustment, and will continue to do so until the Virginia Supreme Court rules that the policy is incorrect.
As far as the department is concerned, this determination is final for purposes of §58.1-1822. Therefore, the assessment is now due and payable. If you wish to preserve your judicial remedies, the statute permits you to file a protective claim or you may, at your election, file an application with the circuit court. In either case the assessment must be paid in full and the filing made within three years of the assessment.
Virginia law contains no provision extending or tolling the statute of limitations on a court application while an application under §58.1-1821 is pending on an unpaid assessment. Thus, if you fail to pay the assessment any right you may have to file a protective claim or to have the assessment reviewed by a court will expire three years after the date of the assessment.
Determination
Accordingly, the assessment is correct as made and is now due and payable. You will shortly receive an updated bill with interest accrued to date. The bill should be paid within thirty days to avoid the accrual of additional interest. If you wish to preserve your judicial remedies, you may file a protective claim under §58.1-1824 pending a final determination in the case styled Commonwealth of Virginia v. General Electric Co. which is currently pending before the Virginia Supreme Court.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner