Tax Type
Corporation Income Tax
Description
Idle portion of new plant; Apportionment factor
Topic
Allocation and Apportionment
Date Issued
06-29-1988
June 29, 1988
Re: §58.1-1821 Application; Corporation Income Tax
§58.1-409 Property Factor
§58.1-412 Payroll Factor
Dear***************
This is in response to your letter of September 9, 1987, in which you applied for correction of an assessment of corporation income tax. I apologize for the delay in responding.
Facts
The taxpayer constructed a plant in Virginia which was used to produce goods beginning in September, 1982. At that time only a portion of the plant was in use; the rest of the plant was idle until sometime after 1983. In the course of a field audit the property factor was adjusted to include the entire plant, not just the portion in use. In addition, the payroll factor was adjusted to include wages of employees at the plant prior to the time production started. Both of these adjustments are protested in this application. A number of other adjustments were made which are not disputed.
Discussion
Virginia's apportionment factors were revised in 1981 to provide, among other things, that property and payroll would be included in the factors only to the extent that they were used. The amendments were clearly intended to exclude construction in progress until construction was completed and the facilities were used.
Therefore, the property factor should have included only the portion of the plant which was completed and used during 1982 and 1983. The portion of the plant which was idle should not have been included in the factor. Similarly, the payroll factor should not have included the wages paid to the taxpayer's employees before construction was completed.
Determination
Accordingly, the audit report and assessment will be revised to exclude the idle plant from the factors for 1982 and 1933, and to exclude the wages paid before completion and use of the plant from the payroll factor. You will shortly receive a revised audit report which will reflect the application of a refund to the 1982 bill, and revised bills with interest accrued to date. The bills should be paid within thirty days to avoid the accrual of additional interest.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner