Tax Type
Corporation Income Tax
Description
Interest; Net operating loss carryback
Topic
Collection of Tax
Date Issued
10-31-1995
October 31, 1995
Re: § 58.1-1821 Application: Corporate Income Tax
Dear***************.
This will reply to your letter of September 29, 1995, in which you apply for a correction of an assessment of interest to************* (the "Taxpayer") for the taxable year ended September 30, 1988.
The Taxpayer was audited by the Internal Revenue Service (IRS) and numerous adjustments were made. As a result of the IRS audit, the Taxpayer's federal taxable income for the taxable year ended September 30, 1988, was changed from a net operating loss to positive income. For the taxable year ended December 31, 1990, the Taxpayer incurred a net operating loss. After the IRS audit changes the 1990 loss could be carried back to the taxable year ended September 30, 1988, thereby reducing taxable income in such year to zero.
On June 16, 1994, the Taxpayer filed amended Virginia returns reporting the additional federal taxable income for the September 30, 1988, taxable year, and the net operating loss carryback deduction from 1990 to 1988.
Interest was subsequently assessed on the additional Virginia tax attributable to the increase in federal taxable income (without regard to the offsetting NOLD) for the period between the original due date of the September 30, 1988, return and May 5, 1995, the date that the assessment was made by the auditor.
The Taxpayer concedes that interest is due from the due date of the original return for the taxable year ended September 30, 1988, but contends that the accrual of interest should end on September 15, 1991, the date the Virginia return for the 1990 loss year was filed.
Pursuant to Code of Virginia § 58.1-1812, interest is required to be assessed for the period between the due date and the date of full payment. There is no provision defining, for purposes of Code of Virginia § 58.1-1812, when payment occurs if a net operating loss deduction is involved.
When a net operating loss deduction results in a refund, Code of Virginia § 58.1-1833 defines the date of overpayment to be the date the loss year return was filed or the last day prescribed by law for such filing, whichever is later.
Accordingly, the assessment of interest for the September 30,1988, return will be adjusted to reflect a date of payment of September 15, 1991, the date the loss year return was filed. A refund in the amount of********will be processed in due course, and the remainder of the assessment will be abated.
If you have any questions regarding this determination, please call ********************at********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10358P
Re: § 58.1-1821 Application: Corporate Income Tax
Dear***************.
This will reply to your letter of September 29, 1995, in which you apply for a correction of an assessment of interest to************* (the "Taxpayer") for the taxable year ended September 30, 1988.
FACTS
The Taxpayer was audited by the Internal Revenue Service (IRS) and numerous adjustments were made. As a result of the IRS audit, the Taxpayer's federal taxable income for the taxable year ended September 30, 1988, was changed from a net operating loss to positive income. For the taxable year ended December 31, 1990, the Taxpayer incurred a net operating loss. After the IRS audit changes the 1990 loss could be carried back to the taxable year ended September 30, 1988, thereby reducing taxable income in such year to zero.
On June 16, 1994, the Taxpayer filed amended Virginia returns reporting the additional federal taxable income for the September 30, 1988, taxable year, and the net operating loss carryback deduction from 1990 to 1988.
Interest was subsequently assessed on the additional Virginia tax attributable to the increase in federal taxable income (without regard to the offsetting NOLD) for the period between the original due date of the September 30, 1988, return and May 5, 1995, the date that the assessment was made by the auditor.
The Taxpayer concedes that interest is due from the due date of the original return for the taxable year ended September 30, 1988, but contends that the accrual of interest should end on September 15, 1991, the date the Virginia return for the 1990 loss year was filed.
DETERMINATION
Pursuant to Code of Virginia § 58.1-1812, interest is required to be assessed for the period between the due date and the date of full payment. There is no provision defining, for purposes of Code of Virginia § 58.1-1812, when payment occurs if a net operating loss deduction is involved.
When a net operating loss deduction results in a refund, Code of Virginia § 58.1-1833 defines the date of overpayment to be the date the loss year return was filed or the last day prescribed by law for such filing, whichever is later.
Accordingly, the assessment of interest for the September 30,1988, return will be adjusted to reflect a date of payment of September 15, 1991, the date the loss year return was filed. A refund in the amount of********will be processed in due course, and the remainder of the assessment will be abated.
If you have any questions regarding this determination, please call ********************at********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10358P
Rulings of the Tax Commissioner