Tax Type
Corporation Income Tax
Description
Deficiency assessment and Payment, Taxpayer did not have nexus with Virginia
Topic
Collection of Tax
Date Issued
07-01-1998
July 1, 1998
Re: § 1821 Application: Corporate Income Tax
Dear *****
This will reply to your letter in which you seek a redetermination of the corporate income tax liability for ***** (the ``Taxpayer'). I apologize for the delay in responding.
FACTS
As a result of information obtained from the Internal Revenue Service, the Taxpayer was assessed additional tax, penalty and interest for the taxable years ended July 31, 1985 through 1991. The Taxpayer's bankruptcy trustee and the Commonwealth negotiated a settlement agreement (the "Agreement') that the United States Bankruptcy Court approved. The settlement amount was paid to settle all years through the taxable year ended July 31, 1991. The Agreement also recognized that the Taxpayer had already filed an income tax return for its taxable year ended July 31, 1992, and had made estimated tax payments for such year. A refund has been requested for the estimated tax paid for the taxable year ended July 31, 1992.
The Commissioner has previously denied the Taxpayer a refund in Public Document (P.D.) 97-426, (10/24/97), copy enclosed, on the basis that the liability stated on the 1991 income tax return was deemed correct in the Agreement. The Taxpayer is asking for reconsideration because the Agreement was based on the assumption that it actually had nexus with Virginia during the taxable year ended July 31, 1992, when, in fact, it did not.
DETERMINATION
The Taxpayer entered into the Agreement to settle the tax, penalty and interest liability for the taxable years ended July 31, 1985 through 1991. Because the trustee failed to act within the time prescribed by the Agreement, the department must assume the Taxpayer agreed to its tax liability for the taxable year ended July 31, 1992. Further, the Agreement does not state that the Taxpayer's 1991 liability is contingent upon a finding of nexus. It is noted that the department agreed to settle the assessments for the taxable years ended July 31, 1985 through 1991 for approximately half of the original liability.
This Agreement was entered into freely by the parties and subsequently approved by the United States bankruptcy judge on June 21, 1993. A consent agreement which is entered as an order by a judge has the same effect as any other judgment. Liberty Mutual Ins. Co. V. Eades, 248 Va. 285 (1994) citing Culpeper Nat'l Bank v. Morris, 168 Va. 379, 385-87 (1937), copy enclosed. Such judgment is not subject to collateral attack except upon jurisdictional grounds or for fraud or collusion. The Full Faith and Credit Clause of the United States requires that a judgment entered in one state be respected in another provided that first state had jurisdiction over the parties and the subject matter. Nevada v. Hall, 440 U.S. 410,421 (1979). Thus, a Virginia court would accept the bankruptcy court's judgment without looking at the actual facts and circumstances of the Taxpayer's case.
Accordingly, I uphold my determination in P.D. 97-426. If you have any questions regarding this determination, you may contact ***** at *****.
Sincerely,
Re: § 1821 Application: Corporate Income Tax
Dear *****
This will reply to your letter in which you seek a redetermination of the corporate income tax liability for ***** (the ``Taxpayer'). I apologize for the delay in responding.
FACTS
As a result of information obtained from the Internal Revenue Service, the Taxpayer was assessed additional tax, penalty and interest for the taxable years ended July 31, 1985 through 1991. The Taxpayer's bankruptcy trustee and the Commonwealth negotiated a settlement agreement (the "Agreement') that the United States Bankruptcy Court approved. The settlement amount was paid to settle all years through the taxable year ended July 31, 1991. The Agreement also recognized that the Taxpayer had already filed an income tax return for its taxable year ended July 31, 1992, and had made estimated tax payments for such year. A refund has been requested for the estimated tax paid for the taxable year ended July 31, 1992.
The Commissioner has previously denied the Taxpayer a refund in Public Document (P.D.) 97-426, (10/24/97), copy enclosed, on the basis that the liability stated on the 1991 income tax return was deemed correct in the Agreement. The Taxpayer is asking for reconsideration because the Agreement was based on the assumption that it actually had nexus with Virginia during the taxable year ended July 31, 1992, when, in fact, it did not.
DETERMINATION
The Taxpayer entered into the Agreement to settle the tax, penalty and interest liability for the taxable years ended July 31, 1985 through 1991. Because the trustee failed to act within the time prescribed by the Agreement, the department must assume the Taxpayer agreed to its tax liability for the taxable year ended July 31, 1992. Further, the Agreement does not state that the Taxpayer's 1991 liability is contingent upon a finding of nexus. It is noted that the department agreed to settle the assessments for the taxable years ended July 31, 1985 through 1991 for approximately half of the original liability.
This Agreement was entered into freely by the parties and subsequently approved by the United States bankruptcy judge on June 21, 1993. A consent agreement which is entered as an order by a judge has the same effect as any other judgment. Liberty Mutual Ins. Co. V. Eades, 248 Va. 285 (1994) citing Culpeper Nat'l Bank v. Morris, 168 Va. 379, 385-87 (1937), copy enclosed. Such judgment is not subject to collateral attack except upon jurisdictional grounds or for fraud or collusion. The Full Faith and Credit Clause of the United States requires that a judgment entered in one state be respected in another provided that first state had jurisdiction over the parties and the subject matter. Nevada v. Hall, 440 U.S. 410,421 (1979). Thus, a Virginia court would accept the bankruptcy court's judgment without looking at the actual facts and circumstances of the Taxpayer's case.
Accordingly, I uphold my determination in P.D. 97-426. If you have any questions regarding this determination, you may contact ***** at *****.
Sincerely,
Rulings of the Tax Commissioner