March 15, 2023
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you dispute the collectibility of individual income tax assessments issued to ***** (the “Taxpayer”) for the taxable years ended December 31, 1987 through 1993.
FACTS
The Taxpayer did not file individual income tax returns for the taxable years 1987 through 1993. As a result, the Department issued assessments. Liens for the collection of the delinquent taxes were filed with multiple financial institutions beginning in 2004, which was within 20 years of the assessments that were issued between 1994 and 1996. In addition, a lien to collect the taxes due was filed with a financial institution in September 2021. The Department’s records show that all of the financial institutions served with the liens indicated that the Taxpayer did not have an account or any assets. As such, no money was collected and applied to any of the Taxpayer’s individual income tax assessments. The Taxpayer appeals, and requests that any liens placed on his accounts be released because the collectibility of the liabilities are beyond the seven year statute of limitations.
DETERMINATION
Liens
The Taxpayer believes the lien at issue was filed under the authority of Virginia Code § 58.1-1805, which governs memoranda of liens filed with circuit courts. The Taxpayer argues that because he was not given notice as required by the statute only and because a search of court records indicates no lien was filed, the Department only had seven years from the date of the assessments to collect. In this case, however, the Department filed a lien with a third party financial institution pursuant to Virginia Code § 58.1-1804, not Virginia Code § 58.1-1805. Thus, the question becomes whether such lien was timely filed.
Statutes of Limitations on Collections
Although Virginia Code § 58.1-1802.1 currently limits the Department’s collection actions to seven years from the date of assessment, even if collection action has been initiated within the seven-year period, the statute of limitations has been amended several times due to legislative action. The current statute of limitations applies only to assessments made on or after July 1, 2016. See Virginia Code § 58.1-1801.1 A. Because the assessments at issue were made prior to that date, the statute as currently written does not apply to the Taxpayer’s assessments.
The earliest assessment for the taxable years at issue was March 10, 1994. The latest assessment was issued on March 22, 1996. Prior to a 2010 law change, the statute of limitations for collection actions was 20 years. As such, the limitation period was 20 years at the time the assessments were issued. For assessments made prior to the 2016 amendments to the statute, it was the Department’s policy that, so long as any collection action was initiated or made before the end of the period of limitations, collection could continue until the assessment was satisfied. A collection effort with regard to a taxpayer commences when it levies an assessment and encompasses all means of collecting taxes enumerated under Virginia statutes. In general, some form of collection action is usually taken early within the limitations period. As such, so long as the Department instituted a collection action within 20 years of the assessment dates, the assessments remained subject to collection. See Public Document (P.D.) 14-177 (10/14/2014).
The Department’s records show that liens were filed under the authority of Virginia Code § 58.1-1804 against the Taxpayer in 2004 in order to collect the delinquent taxes. These liens qualify as collection actions and were filed well before the 20 year statute of limitations for collections expired. The Department, therefore, could continue to take collections actions as long as they were otherwise made in accordance with law.
Based on the foregoing, the assessments for the taxable years ended December 31,1987 through 1993 remain collectable by the Department and the Taxpayer’s request for relief cannot be granted. Updated bills with accrued interest will be issued and collection actions on any unpaid balance will resume immediately.
The Code of Virginia sections and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s web site. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/4132.B