Tax Type
Individual Income Tax
Description
Subtractions from federal adjusted gross income; Accelerated cost recovery system subtraction
Topic
Taxable Income
Date Issued
04-29-1993
April 29, 1993
Re: Refund Request:
Dear**************
This will reply to your letter of February 11, 1993, regarding a request for a refund of unrecovered ACRS subtractions for the above-referenced taxpayers.
FACTS
In 1988, the taxpayers filed individual income tax returns claiming an ACRS subtraction. In 1991, the taxpayers incurred a net operating loss and carried back the loss to their 1988 and 1989 taxable years. As a result of the application of the NOL to the 1988 returns, the taxpayers' taxable incomes were reduced to zero. Since the taxpayers had no income against which to offset the ACRS adjustments originally taken in 1988, they filed a refund claim for the unused ACRS adjustments. The taxpayers received verbal notification from a Department auditor that the refund would be denied.
RULING
§5 of Virginia Regulation ("V.R.") 630-2-323.1 permits individuals, with insufficient income to offset the full amount of a post-1987 ACRS subtraction, to carry the amount not offset over to the following taxable year.
Effective for taxable years beginning on and after January 1, 1988, the Virginia ACRS subtraction was repealed and §58.1-323.1 of the Code of Virginia was enacted to provide for the recovery of unused ACRS subtractions. According to Virginia Code §58.1-323.1, if an individual has not recouped the outstanding balance of its post-1987 ACRS subtraction by 1989, that individual may qualify to file an application for a refund of the outstanding amount.
Had the taxpayers' 1988 taxable income been insufficient to absorb the ACRS subtraction, the taxpayers would have carried the excess ACRS adjustment forward into the succeeding taxable years. If the taxpayers had not recouped the ACRS subtraction by 1989, it is clear they would have been permitted to file for a refund. The fact that the taxpayers' 1988 taxable income was rendered insufficient by the carryback of the NOL does not alter the above result.
There being no reason to deny the taxpayers- refund request for the unrecovered ACRS adjustment, the requested relief is hereby granted. Accordingly, a refund, plus the appropriate interest, will be issued to the Taxpayer in due course.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6785L
Rulings of the Tax Commissioner