Tax Type
Corporation Income Tax
Description
Statute of limitations for refunds
Topic
Payment and Refund
Statute of Limitations
Date Issued
07-23-1993
July 23, 1993
Re: §58.1-1821 Application; Corporate Income Taxes
Dear*************
This will reply to your letter of January 4, 1993 in which you seek correction of an assessment of corporation income tax on behalf of***********(the "Taxpayer") for the 1987 taxable year.
FACTS
The Taxpayer was audited by the IRS for 1987, resulting in an increase to federal taxable income. On February 25, 1992 the Taxpayer filed Form 500X with the department to report the changes made by the audit. Form 500X as filed resulted in a claim for refund, and was denied by the department because it was not filed within 60 days of a final determination of a change to the Taxpayer's federal taxable income. You protest this determination, citing your reliance on Virginia Regulation (VR) 630-3-311.
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. In this case, the amended return claiming a refund was filed more than three years after the due date of the return. Therefore, it is timely filed only if filed within 60 days from the date of final determination.
The information provided indicates that Form 870 was signed by the Taxpayer and accepted by the IRS on November 27, 1991. VR 630-1-1823 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 IRS shall be deemed a final determination of a change in liability for federal tax. The Taxpayer's amended return was clearly filed outside the 60 day period.
Generally, the 1987 IRS audit increased the Taxpayer's federal taxable income. The primary increases were to foreign dividend income and IRC Sec. 78 foreign dividend gross-up income.
The Taxpayer, citing reliance on VR 630-3-311, reported the increase in federal taxable income to Virginia within the statutory 90 day period. While in the process of reporting the increase in federal taxable income, the Taxpayer discovered that foreign source income and IRC S 78 dividend gross-up income is not taxable in Virginia. The Taxpayer also discovered that no deduction for such income was claimed on the original 1987 return as filed, and claimed a deduction for such income on its amended return.
However, I cannot accept the Taxpayer's reliance on VR 630-3-311 as subsection (B) of the regulation clearly provides that any amended return claiming a refund for overpayment of tax must be filed within 60 days of the final determination of any changes in its federal tax liability. The amended return was not filed within the 60 day period.
Because of the clear language of VR 630-3-311 (B) and Va. Code § 58.11823, I find no basis to grant relief in this situation. Accordingly, your request for refund is denied.
For future reference, I point out that effective July 1, 1992, the periods for filing federal audit changes and claiming refunds resulting from such changes have been equalized at 90 days by law. However, at the same time, Va. Code §58.1-1823 was amended to clarify that refund claims filed within the 90 day period cannot exceed the amount of the decrease in Virginia tax attributable to the federal change, i.e. once the normal three-year statute has expired, issues that were not addressed in the federal audit cannot be raised in the Virginia amended return.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6635M
Rulings of the Tax Commissioner