Tax Type
Corporation Income Tax
Description
Statute of limitations; Refund
Topic
Payment and Refund
Statute of Limitations
Date Issued
04-28-1993
April, 28, 1993
Re: §58.1-1821 Application; Corporate Income Tax
Dear**************
This will reply to your two letters of October 7, 1992 in which you protest the assessment of corporate income taxes, and protest the denial of refunds for corporate income taxes for**********(the "Taxpayer"). We have addressed your protest letters together as they are related to the same issue.
FACTS
The Taxpayer's federal income tax returns for taxable years 1972 through 1981 were audited by the IRS. Generally, federal income tax was decreased for the years 1972 through 1977, and increased for the years 1978 through 1981. Based on the federal changes, the Taxpayer filed amended Virginia corporate income tax returns with the department on September 27, 1991. The Taxpayer claimed refunds on the amended returns for the 1972 through 1977 taxable years, and requested that the refunds be offset against the taxes owed on the amended returns for the 1978, 1979 and 1981 taxable years. The refund offset was denied because the amended returns claiming a refund were not filed within the limitation period prescribed in Va. Code §58.1-1823. You protest the denial of the refund and the amount of tax which was not offset accordingly.
DETERMINATION
Under Va. Code §58.1-1823, an amended return claiming a refund must be filed within three years of the due date of the return or, if later, within 60 days from the final determination of a change in the taxpayer's federal taxable income (90 days for returns filed on or after July 1, 1992). In this case, the amended returns claiming a refund were filed more than three years after the due dates of the returns. Therefore, they are timely filed only if filed within 60 days from the date of final determination of federal tax liability.
The information provided indicates that form 870-AD was signed by the taxpayer on June 26, 1991 and accepted by the IRS on June 27, 1991. Virginia Regulation (VR) Sec. 630-1-1823 (B) (2) provides that the receipt of an assessment or other notice that the amount of deficiency or overassessment stated on federal form 870 or similar form has been agreed to by the I.R.S. shall be deemed a final determination of a change in liability for federal tax. The Taxpayer's amended returns were clearly filed outside the 60 day period (as in effect prior to Chapter 678 of the 1992 Acts of the Assembly).
The Taxpayer and the Internal Revenue Service executed Form 907, Agreement to Extend the Time to Bring suit, on June 26, 1991. This agreement extends the time period within which the Taxpayer may bring suit for a refund pursuant to IRC §6532 (a)(2). You aver that this agreement precludes the department from finding that a "final determination" has occurred within the meaning of Va. Code § 58.1-1823, and that your claims are therefore timely.
The execution of Form 907 does not preclude the I.R.S. from making an assessment, nor defer the time when an assessment shall be made. Since the IRS audit results are "final" for purposes of assessing federal tax, VR §630-1-1823 provides that the audit results are "final" for purposes of assessing Virginia tax. The Taxpayer may, at its option, bring suit for some or all of the issues stipulated on the agreement. If the Taxpayer prevails in a suit with the I.R.S., a final determination will result, allowing the Taxpayer to file a refund claim with the department within the statutory limitations of Va. Code § 58.1-1823.
You have suggested that the mitigation provisions of Internal Revenue Code (IRC) §§1311 through 1314 or the common law principal of equitable recoupment should grant relief in this situation. While Virginia has adopted conformity to the Internal Revenue Code, such conformity is only with respect to terms used within the Code of Virginia. Virginia statutes do not contain the equivalent of the federal mitigation provisions. In any event, the concept of the IRC mitigation provisions is not applicable to this situation. At the date of the federal assessments, Virginia statutes did not bar the Taxpayer from filing an amended return and claiming a refund. It was only after the expiration of an additional 60 days that the Taxpayer was barred from claiming a refund. The Taxpayer was entitled to relief, but failed to act within the statute of limitations.
As set forth by the Virginia Supreme Court in Commonwealth v. Holland, 211 Va. 530:
-
- It is well settled that the common law continues in force in Virginia except as altered by statute. (Emphasis added.)
- It is well settled that the common law continues in force in Virginia except as altered by statute. (Emphasis added.)
Your application for correction is denied and I find no basis to make any adjustment. Accordingly, the assessment is correct and is now due and payable.
Although the assessment is correct, it appears that two (2) vendor payments were set-off against this assessment in October of 1992. Because you had filed a protest in accordance with §58.1-1821, our administrative system should have suspended the vendor set-off process. Accordingly, these payments ( **********set off on 10/21/92 and ***********set off on 10/27/92) will be issued to the appropriate payee. The Taxpayer will in turn be billed for the full assessment. The interest charged to the Taxpayer will be adjusted appropriately to reflect the aforementioned payments.
You will shortly receive an updated bill with appropriate interest accrued to date which must be paid in full in 30 days to avoid additional interest and collection actions.
Sincerely,
W. H. Forst
Tax Commissioner
6455/6496M
Rulings of the Tax Commissioner