Bulletin Number
VTB 80-6
Tax Type
BPOL Tax
Local Taxes
Description
Local Penalties and Interest on Delinquent Taxes
Topic
Local Power to Tax
Date Issued
09-12-1980
DATE: September 12, 1980.
SUBJECT: Local Penalties and Interest on Delinquent Taxes. 1980 Amendments to §§ 58-847 and 58-964 of the Code of Virginia.
§ 58-847
§ 58-847 authorizes the governing bodies of counties, cities or towns to provide by ordinance the time for filing applications for local licenses and returns of tangible personal property, machinery and tools and merchants' capital and the time for payment of taxes on real estate, tangible personal property, machinery and tools and merchants' capital. It also authorizes localities to impose penalties for failure to file timely returns or to make timely payments and to provide for interest on delinquent taxes.
The limitation on penalties authorized by this section was not changed. Neither a penalty for failure to pay a tax nor a penalty for failure to file a return may exceed the greater of ten dollars or ten percent of the past due tax.
However, this section was amended to provide that any such penalties assessed become a part of the tax. This section was also amended to increase the maximum rate of interest imposable on delinquent local taxes from eight percent per annum to ten percent per annum, subject to the qualification that such interest may not commence earlier than the first day of the month following the month in which the taxes are due by ordinance to be filed.
It should be noted that any changes in interest rate pursuant to this section must be made by local ordinance and that interest may commence on any date prescribed by such ordinance not earlier than the first day of the month following the due date of the taxes.
Because this was emergency legislation, the amendments are effective from the date of enactment, April 4, 1980. Therefore, any penalties assessed on or after that date become a part of the tax and the total amount of tax plus such penalties will be subject to the assessment of interest. Furthermore, under the amended authority of this section, localities may now by ordinance increase the rate of interest accruing on delinquent taxes on and after April 4, 1980 to a maximum of ten percent per annum.
Example 1:
By ordinance pursuant to § 58-847 (prior to amendment), County A imposes penalties of ten percent each for late filing and for late payment of tangible personal property tax returns and imposed interest on delinquent returns at the rate of eight percent per annum.
By ordinance pursuant to § 58-847 (after 1980 amendments), County A increased its annual interest rate to ten percent, effective June 1, 1980.
Tangible personal property tax returns are due for filing in County A on May 1 of each year and the tax is payable on December 5. Therefore, penalties and interest on delinquent 1979 returns remaining unpaid at June 30, 1980 will be computed as follows:- Tax assessed $1,000.00
Penalties assessed:
Penalty for failure to file by May 1, 1979 . 100.00
Penalty for failure to pay by December 5, 1979 100.00
Total tax and penalties $1,200.00
Interest on tax only, because penalties were assessed pursuant to authority of § 58-847 prior to 1980 amendments
Interest at 8% from January 1, 1980 through May 31, 1980
(on $1,000.00 for 152 days) 33.23
Interest at 10% from June 1, 1980 through June 30, 1980
(on $1,000.00 for 30 days) 8.20
Total assessment of tax, penalties and interest. $1,241.43
- Tax assessed $1,000.00
- By ordinance pursuant to § 58-847 (prior to amendment) County B imposes penalties of ten percent each for late filing and for late payment of tangible personal property tax returns and imposed interest on delinquent returns at the rate of eight percent per annum.
By ordinance pursuant to § 58-847 (after 1980 amendments), County B increased its annual interest rate to ten percent, effective June 1, 1980.
Tangible personal property tax returns are due for filing in County B on May 1 of each year and the tax is payable with the return. Therefore, penalties and interest on delinquent 1980 returns remaining unpaid at June 30, 1980 will be computed as follows:
Tax assessed $1,000.00
Penalties assessed:
Penalty for failure to file by May 1, 1980 100.00
Penalty for failure to pay by May 1, 1980 110.00
Total tax and penalties (penalties become a part of tax). 1,210.00
Interest on tax and penalties because penalties were assessed pursuant to authority of § 58-847 after 1980 amendments
Interest at 10% from June 1 through June 30, 1980
on $1,210.00 for 30 days) 9.92
Total assessment of tax, penalties and interest. $1,219.92
§ 58-964 is applicable in counties which do not impose interest by local ordinance under the authority of § 58-847 and in cities and towns which do not regulate penalties or interest by charter, by local ordinance, under § 58-847, or by other special provisions of law. In such localities, the collection of interest on delinquent local taxes is mandatory under the provisions of § 58-964.
This section was amended to increase the mandatory rate of interest in the localities in which it is applicable, from eight percent per annum to ten percent per annum and to provide that such interest is applicable from the first day following the day the taxes were due.
Therefore, counties which do not provide for interest by local ordinance and cities and towns which do not regulate interest or penalties by their charters, by local ordinance, or by other special provisions of their law, must collect interest on delinquent local taxes under the requirements of this section.
- County C does not have a local ordinance which imposes interest or penalty. The locality is subject to § 58-963 (penalty) and § 58-964 (interest).
Tangible personal property tax returns are due for filing in County C on May 1 of each year and the tax is payable on December 5. Therefore, penalty and interest on delinquent 1979 returns remaining unpaid at April 4, 1980 and paid at any time after April 4 will be computed as follows:
(For this example, taxpayer paid the amount due on August 4, 1980).
Tax assessed for 1979 $1,000.00
Penalties assessed:
Penalty for failure to pay by December 5, 1979-5% 50.00
Total tax and penalty $1,050.00
Interest at 10% from April 4, 1980 until August 4, 1980
(on $1,050.00 for 122 days) 35.09
Total assessment of tax, penalties and interest. $1,085.09
Example 2: (For current year returns)
- County D does not have a local ordinance which imposes interest or penalty. The locality is subject to § 58-963 (penalty) and § 58-964 (interest).
Tangible personal property tax returns are due for filing in County D on May 1 of each year and the tax is payable on December 5. Therefore, penalties and interest on delinquent 1980 returns remaining unpaid after December 5, 1980 and paid at anytime after December 5 will be computed as follows:
(For this example, taxpayer paid the amount due on January 13, 1981).
Tax assessed for 1980 $1,000.00
Penalties assessed:
Penalty for failure to pay by December 5, 1980-5% 50.00
Total tax and penalty $1,050.00
Interest at 10% from December 6, 1980 until paid on January 13, 1981
(on $1,050.00 for 38 days) 10.93
Total assessment of tax, penalties and interest. $1,060.93
- 1. Under the optional provisions of § 58-847, localities may by local ordinance impose interest at any rate not exceeding ten percent per annum, whereas under the requirements of § 58-964, localities must collect interest at the rate of ten percent per annum.
2. Under the optional provisions of § 58-847, interest may be imposed on unpaid taxes from the first day of the month following the month in which the taxes were due, whereas under the requirements of § 58-964, interest must be collected from the first day following the due date of the taxes.
Because this was also emergency legislation, the amendments are effective from the date of enactment, April 4, 1980. Therefore, under § 58-964 the increased interest rate is applicable to (1) interest accruing on and after April 4, 1980 on taxes assessed prior to that date and (2) interest accruing from the first day following the due date of taxes assessed on and after April 4, 1980.
Example 1:
In County E, tangible personal property tax returns are due for filing by May 1 of each year and the tax is payable by December 5. By ordinance pursuant to § 58-847 (prior to amendment), County E imposes penalties of ten percent each for late filing and for late payment of tangible personal property tax returns, but its ordinance does not impose interest on delinquent taxes. The County must therefore collect interest under the requirements of § 58-964.
Penalties and Interest on delinquent 1979 returns remaining unpaid at June 30, 1980 will be computed as follows:
Tax assessed. $1,000.00
Penalties assessed:
Penalty for failure to file on May 1, 1979 100.00
Penalty for failure to pay on December 5, 1979 100.00
Total tax and penalties $1,200.00
Interest-on tax only, because penalties were assessed pursuant to authority of § 58-847
prior to 1980 amendments
Interest at 8%- Because interest under the provisions of- § 58-964 prior to 1980 amendments accrued only from June thirtieth of the year next following the assessment year, no interest accrues on 1979 assessments prior to
April 4, 1980, the effective date of 1980 amendments. -0-
Total assessment of tax, penalties and interest . $1,224.04- § 58-964 prior to 1980 amendments accrued only from June thirtieth of the year next following the assessment year, no interest accrues on 1979 assessments prior to
Example 2:
In County F, tangible personal property tax returns are due for filing on May 1 of each year and the tax is payable with the return. By ordinance pursuant to § 58-847 (prior to amendment), County F imposes penalties of ten percent each for late filing and for late payment of tangible personal property tax returns, but its ordinance does not impose interest on delinquent taxes. The County therefore must collect interest under the requirements of § 58-964.
Penalties and Interest on delinquent 1980 returns remaining unpaid at June 30, 1980 will be computed as follows:
Tax assessed $1,000.00
Penalties assessed:
Penalty for failure to file by May 1, 1980. 100.00
Penalty for failure to pay by May 1, 1980 110.00
$1,210.00
Total tax and penalties (penalties become a part of tax because they were assessed subsequent to the effective date of amendments to §58-847)
Interest at 10% from May 2, 1980 through June 30, 1980 19.83
Total assessment of tax, penalties and interest $1,229.83
1. While § 58-964 is applicable in all counties which do not impose interest by local ordinance, it does not apply in any city or town when penalty or interest is regulated by its charter, by local ordinance, or by other special provisions of its law.
2. In most of the examples contained herein interest has been computed as of June 30, 1980. This date has no special significance and any other date may have been used in such computations.
3. Attached is a copy of a 10% interest chart (not reproduced).
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