Tax Type
Individual Income Tax
Description
Franchise taxes paid to another state; Retroactive application
Topic
Credits
Payment and Refund
Date Issued
09-25-1995
September 25, 1995
Re: Protective Claim: Individual Income Tax
Dear***************:
This will reply to your request for a protective claim for the refund of individual income tax for taxable years 1989 and 1990 made on behalf of your clients,*************(the "Taxpayers"). The Taxpayers were shareholders in a California S corporation and were denied a credit for franchise tax payments made by the S corporation to California during these years. On June 6, 1994, the department agreed to hold the protective claim pending a final decision in Giesecke v. Department of Taxation.
As you are already aware, the 1991 General Assembly enacted an amendment to Code of Virginia § 58.1-332 specifically to prohibit individuals from claiming a tax credit for franchise taxes paid to other jurisdictions. The amendment was retroactively enacted to taxable years beginning on or after January 1, 1987.
The department recently litigated this issue in Giesecke v. Department of Taxation, Fairfax County Circuit Court No. L-124781 (1994). In Giesecke, the taxpayer challenged the retroactive application of the 1991 amendment. The Circuit Court of Fairfax County ruled in favor of the department and on April 13, 1995, the Virginia Supreme Court declined to hear the appeal in Giesecke.
Accordingly, the Taxpayers' protective claim for refund must now be denied. Please be aware this denial does not prevent the Taxpayers from filing their own suit in circuit court pursuant to Code of Virginia § 58.1-1825; however, suit must be filed within one year of the date of this letter. Should you have any questions regarding this matter, please contact********* at ***********.
Sincerely,
Danny Payne
Tax Commissioner
OTP/7291L
Re: Protective Claim: Individual Income Tax
Dear***************:
This will reply to your request for a protective claim for the refund of individual income tax for taxable years 1989 and 1990 made on behalf of your clients,*************(the "Taxpayers"). The Taxpayers were shareholders in a California S corporation and were denied a credit for franchise tax payments made by the S corporation to California during these years. On June 6, 1994, the department agreed to hold the protective claim pending a final decision in Giesecke v. Department of Taxation.
As you are already aware, the 1991 General Assembly enacted an amendment to Code of Virginia § 58.1-332 specifically to prohibit individuals from claiming a tax credit for franchise taxes paid to other jurisdictions. The amendment was retroactively enacted to taxable years beginning on or after January 1, 1987.
The department recently litigated this issue in Giesecke v. Department of Taxation, Fairfax County Circuit Court No. L-124781 (1994). In Giesecke, the taxpayer challenged the retroactive application of the 1991 amendment. The Circuit Court of Fairfax County ruled in favor of the department and on April 13, 1995, the Virginia Supreme Court declined to hear the appeal in Giesecke.
Accordingly, the Taxpayers' protective claim for refund must now be denied. Please be aware this denial does not prevent the Taxpayers from filing their own suit in circuit court pursuant to Code of Virginia § 58.1-1825; however, suit must be filed within one year of the date of this letter. Should you have any questions regarding this matter, please contact********* at ***********.
Sincerely,
Danny Payne
Tax Commissioner
OTP/7291L
Rulings of the Tax Commissioner