Tax Type
Corporation Income Tax
Description
Penalties, Interest
Topic
Collection of Tax
Date Issued
10-29-1998
October 29, 1998
Re: Sec. 58.1-1821 Application: Corporate Income Tax
Dear *****
This will respond to your letter in which you protest an assessment of late filing penalty and interest against ***** (the ``Taxpayer') for the late filing of a short period return for the taxable year ending February 15, 1996.
FACTS
The Taxpayer's stock was sold by its parent corporation and in concert with the purchaser, it was elected to treat the sale of the stock as a sale of assets under Internal Revenue Code (I.R.C.) Sec.338(h)(10). The resulting short period federal return of the Taxpayer was filed on extension and included in the parent's federal consolidated return.
The Taxpayer requested an extension for filing the short period return in Virginia. Because the short period return was made part of a federal consolidated return, the Taxpayer believed the due date of the consolidated return and the resulting short period return filed for Virginia was due 30 days after the due date of its federal return. The Taxpayer was assessed a late filing penalty. The Taxpayer protests the late filing penalty and a portion of the interest and requests that they be abated because the Virginia return was timely filed.
DETERMINATION
Assessment of Late Filing Penalty
In an I.R.C. Sec.338(h)(10) election, the Taxpayer's final federal return is filed with the selling group's consolidated federal return. The due date of the federal return is the fifteenth day of the third month following the end of the group's taxable year unless an extension is filed. In the instant case both federal and Virginia extensions were filed. The Virginia income tax return is due 30 days after the federal return is due pursuant to Code of Virginia Sec. 58.1-453. The Taxpayer's Virginia return was filed on October 15, 1997, therefore it is considered to be timely filed. Accordingly, the penalty portion of the assessment was erroneously assessed and will be abated.
Assessment of Interest
The Virginia corporate income tax return is due on the fifteenth day of the fourth month following the close of the taxable year. When the selling group extends its federal return, including the extension allowed for the election under I.R.C. Sec.338(h)(10), the Virginia return is similarly extended provided an extension is filed. However, the due date for the payment of tax is not extended. If full payment is not made with the tentative tax return, interest will accrue under Code of Virginia Sec. 58.1-453(C) on any unpaid tax liability from the due date of the return without regard to any extensions until the date the tax is paid. See Public Document (P.D.) 91-317, (12/30/91), copy enclosed.
Accordingly, the penalty assessed has been abated in full. Interest due of remains outstanding. Please remit your payment to ***** Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218, within the next 30 days.
It is noted that you requested an informal conference if the department did not decide in favor of the Taxpayer's protest. However, given the clear and unambiguous language of Code of Virginia Sec. 58.1-453(C), as it pertains to the computation of interest, this determination is issued without a conference.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/13468P
Re: Sec. 58.1-1821 Application: Corporate Income Tax
Dear *****
This will respond to your letter in which you protest an assessment of late filing penalty and interest against ***** (the ``Taxpayer') for the late filing of a short period return for the taxable year ending February 15, 1996.
FACTS
The Taxpayer's stock was sold by its parent corporation and in concert with the purchaser, it was elected to treat the sale of the stock as a sale of assets under Internal Revenue Code (I.R.C.) Sec.338(h)(10). The resulting short period federal return of the Taxpayer was filed on extension and included in the parent's federal consolidated return.
The Taxpayer requested an extension for filing the short period return in Virginia. Because the short period return was made part of a federal consolidated return, the Taxpayer believed the due date of the consolidated return and the resulting short period return filed for Virginia was due 30 days after the due date of its federal return. The Taxpayer was assessed a late filing penalty. The Taxpayer protests the late filing penalty and a portion of the interest and requests that they be abated because the Virginia return was timely filed.
DETERMINATION
Assessment of Late Filing Penalty
In an I.R.C. Sec.338(h)(10) election, the Taxpayer's final federal return is filed with the selling group's consolidated federal return. The due date of the federal return is the fifteenth day of the third month following the end of the group's taxable year unless an extension is filed. In the instant case both federal and Virginia extensions were filed. The Virginia income tax return is due 30 days after the federal return is due pursuant to Code of Virginia Sec. 58.1-453. The Taxpayer's Virginia return was filed on October 15, 1997, therefore it is considered to be timely filed. Accordingly, the penalty portion of the assessment was erroneously assessed and will be abated.
Assessment of Interest
The Virginia corporate income tax return is due on the fifteenth day of the fourth month following the close of the taxable year. When the selling group extends its federal return, including the extension allowed for the election under I.R.C. Sec.338(h)(10), the Virginia return is similarly extended provided an extension is filed. However, the due date for the payment of tax is not extended. If full payment is not made with the tentative tax return, interest will accrue under Code of Virginia Sec. 58.1-453(C) on any unpaid tax liability from the due date of the return without regard to any extensions until the date the tax is paid. See Public Document (P.D.) 91-317, (12/30/91), copy enclosed.
Accordingly, the penalty assessed has been abated in full. Interest due of remains outstanding. Please remit your payment to ***** Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218, within the next 30 days.
It is noted that you requested an informal conference if the department did not decide in favor of the Taxpayer's protest. However, given the clear and unambiguous language of Code of Virginia Sec. 58.1-453(C), as it pertains to the computation of interest, this determination is issued without a conference.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/13468P
Rulings of the Tax Commissioner