Tax Type
Individual Income Tax
Description
Federal changes to taxable income
Topic
Taxable Income
Date Issued
06-28-1991
June 28, 1991
Re: §58.1-1821 Application: Individual Income Tax
Dear***********************
This will reply to your letter of April 4, 1991 in which you seek reconsideration of the department's March 29, 1991 determination (P.D. 91-55) regarding the above referenced Taxpayers' protest of an assessment arising out of federal changes to their taxable income for taxable years 1978 and 1979.
You continue to maintain that the assessment for taxable year 1979 was barred by Va. Code §58.1-312(B) which provides, in pertinent part, that "[t]he amount of such assessment of tax shall not exceed the amount of the increase in Virginia tax attributable to such federal change or correction," which in this case, you argue, is none.
To support your position you contend that the Internal Revenue Service (IRS) adjustments to federal taxable income for taxable years 1978 and 1979 were part of one change to the Taxpayers' income initiated by the IRS "solely for its administrative convenience to close the tax years involved and resolve the issue in dispute." You maintain that the adjustment in the Taxpayers' taxable income resulted in a decrease in Virginia tax for 1978 more than the resulting increase in Virginia tax for 1979, and thus, taken together, the change in the Taxpayers' federal taxable income did not result in an "increase in Virginia tax attributable to such federal change."
Although the reallocation of income by the IRS between taxable years 1978 and 1979 may have been only to resolve the issue in dispute, the Taxpayers were still required to report the changes in federal taxable income for each year to the Department. Va. Code §58.1-311 provides that:
-
- [i]f the amount of any individual...taxpayer's federal taxable income reported on his federal income tax return for any taxable year is changed or corrected by the United States Internal Revenue Service...the taxpayer shall report such change or correction in federal taxable income within ninety days after the final determination of such change, correction, or renegotiation, or as otherwise required by the Department. (Emphasis added)
While the adjustments were considered collectively by the IRS, for Virginia tax purposes each year is handled separately. Thus, they resulted in a decrease in the Taxpayers' Virginia taxable income in 1978 and an increase in 1979. The assessment for taxable year 1979, accordingly, was not barred by Va. Code §58.1-312(B) as you contend.
As explained in my earlier determination, the Taxpayers did not file an amended return claiming a refund for overpayment of the tax for taxable year 1978 within the 60 day period required by Va. Code §58.1-1823, thus their right to claim a refund for the tax overpaid for that year lapsed.
Finally, you suggest that since Virginia is a conformity state, the IRS mitigation provisions are applicable in this case. However, while Virginia's individual and corporate income tax laws are in basic conformity with the federal rules for determining taxable income (e.g., the computation of Virginia taxable income begins with federal adjusted gross income with certain modifications), the state does not practice total conformity with the federal tax law. For example, Virginia does not provide the same income tax credits, exemption or exclusion amounts, or penalty provisions as federal law. Thus, since mitigation provisions are not specifically included in the Virginia tax law, they are not applicable to Virginia taxes.
Based on the foregoing, I find no basis for revision of my original determination. Accordingly, the assessment for taxable year 1979 will not be canceled as you requested and no refund is available for taxable year 1978.
If you have any questions regarding this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner