Tax Type
Corporation Income Tax
Description
Effective date of legislation; Retroactive
Topic
Collection of Tax
Date Issued
02-21-1995
February 21, 1995
Re: §58.1-1821 Application: Corporate Income Tax
Dear***************
This letter concerns our meeting of September 27, 1994 in which we discussed the department's June 20,1994 ruling on an appeal of****************for the taxable year 1990. 1 apologize for our delay in responding.
During this meeting, you requested the we reconsider the sole remaining issue of contention concerning the department's 1990 assessment. This issue involves the date that 1990 House Bill 916, which amended Code of Virginia § 58.1-302, became operative and applicable. You assert that the department has misinterpreted the intent of the Virginia General Assembly by making the amendment applicable for the entire taxable year. You aver that the correct interpretation results in an effective date for the amendment that bifurcates the taxable year.
As we discussed in our meeting, the General Assembly traditionally enacts income tax legislation effective for an entire taxable year, and has the power to make legislation effective retroactive to the beginning of the year of enactment. Colonial Pipeline v. Commonwealth of Virginia 206 Va. 517 (1965). In fact, a circuit court recently held that legislation retroactive to January 1 four years before enactment was constitutional. See the enclosed copy of Giesecke v. Department of Taxation Fairfax Circuit Court (opinion letter dated September 22,1994, petition for appeal filed January 27,1995). Therefore, it is clear that the provision of Virginia's Constitution making laws generally effective on the first day of the fourth month after adjournment does not prohibit the General Assembly from making income tax legislation effective from the first day of January, six months earlier.
In addition to having the power to make income tax legislation effective from the preceding January 1, it is also clear that the General Assembly intends its income tax legislation to be applied in this manner. In many years of providing revenue estimates to legislative committees describing the impact of income tax legislation, the department has always interpreted laws expressly made effective for a taxable year as applying to the entire taxable year. Every income tax law implemented by the department has been applied to the entire taxable year specified by the General Assembly. The department has never prepared its forms or instructions recognizing a bifurcated application of a law expressly made applicable to an entire taxable year.
Therefore, there is no basis for the department to change the June 20, 1994, determination. Likewise, I do not find any basis for a compromise under Code of Virginia §58.1-105, as the assessment is neither of doubtful collectibility nor doubtful legality. Attached is a schedule showing the balance due on the assessment with interest accrued to date. If you have any questions about this matter, please contact *********at P.O. Box 1880, Richmond, Virginia 23282-1880.
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- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
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OTP7646L
Rulings of the Tax Commissioner