March 12, 2024
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will respond to your letter in which you dispute the collectability of the individual income tax assessments issued to your client, ***** (the “Taxpayer”), for the taxable years ended December 31, 2009, through 2013.
FACTS
The Taxpayer filed Virginia individual income tax returns for the 2009 through 2013 taxable years but did not pay the tax due, resulting in assessments issued at various times between February 2011 and July 2015. The Taxpayer made payments towards some of the assessments and the Department has collected some of the remaining balance as well. The Taxpayer filed an application for correction contending that the assessments are no longer collectable because the seven-year statute of limitations has expired.
DETERMINATION
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 enacted does not apply to the Taxpayer’s assessments.
Until 1990, Virginia law provided no limitation on the Department’s ability to collect assessments. In 1990, legislation was passed that required the Department to institute collection action within 20 years from the date of the assessment. This period of limitations was reduced from 20 years to 10 years from the date of assessment in 2010 and from 10 years to seven years in 2012.
For assessments made prior to the 2016 amendments, it has been the Department’s longstanding policy that, as 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, if the Department instituted a collection action within 10 years for the assessment for the 2009 taxable year and within 7 years for the assessments issued for the 2010 through 2013 taxable years, the assessments remained eligible for collection. See Public Document (P.D.) 14-177 (10/14/2014) and P.D. 23-27 (3/15/2023).
From March 2011 to January 2016, the Department issued various consolidated bill notices, bank liens, and Treasury Offset Program (TOP) notifications concerning the assessments at issue, all of which the Department considers collection actions. These actions were taken within the respective statute of limitations for the assessments at issue. As such, the Department considers the assessments to remain collectable, and the Taxpayer’s request for relief cannot be granted.
The Department’s records indicate that the assessments for the 2009 and 2011 taxable years have been paid in full. An updated bill for the other assessments will be issued shortly. If payment is not made, collection actions will resume.
The Code of Virginia sections and public documents 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/4578.B