Tax Type
Corporation Income Tax
Description
Refund protective claim; DISC adjustments
Topic
Returns/Payments/Records
Date Issued
01-03-1989
January 3, 1989
Re: Protective Claim for Refund of Corporate Income Tax
Dear*****************
Our records indicate that you filed one or more protective claims for refund under §58.1-1824 of the Code of Virginia (or §58-1119.1 before recodification) which involved adjustments to taxable income related to a Domestic International Sales Corporation (DISC). Because this issue was in litigation all protective claims were held without action pending resolution of the court case.
On September 23, 1988, the Supreme Court of Virginia announced its decision in the case styled Commonwealth of Virginia v. General Electric Company. The decision upheld the authority of the department to require adjustments under §58.1-446 of the Code of Virginia §58-151.083 before recodification) for DISC income. A copy of the decision is enclosed.
The court remanded the case because of unresolved issues in stipulation 19, one of which was interest income received by the DISC which had been included in apportionable income but which should have been included in the taxpayer's allocable income pursuant to Commonwealth v. Champion Int. Corp., 220 Va. 981 (1980). This issue does not affect taxable years beginning on or after January 1, 1981.
Your protective claim(s) challenged the department's authority to make any adjustment for DISC income and did not address the issue of whether any of the DISC's interest income should be included in the taxpayer's allocable or apportionable income for taxable years 1972 through 1980. Accordingly, your protective claim(s) for refund is (are) denied as filed.
However, the department will reconsider a protective claim under the following circumstances: the protective claim is for a taxable year beginning before January 1, 1981; an amended protective claim is filed within 60 days from the date of this letter; the amended protective claim is limited to the refund attributable to including in the taxpayer's allocable income only the amount of interest income received by the DISC from sources other than the parent; and the amended protective claim includes, at a minimum, a copy of the DISC return showing the receipt of allocable interest income, and a reconciliation of this income to the taxpayer's DISC adjustment. This information should be sent to *********** Supervisor, Technical Services Section, Department of Taxation, P. O. Box 6-L, Richmond, VA 23282.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner