March 21, 2024
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will respond to your letter in which you seek a hold on collection activity with respect to the individual income tax assessments issued to ***** (the “Taxpayer”) for the taxable years ended December 31, 1999, through December 31, 2009. I apologize for the delay in responding to your letter.
FACTS
The Department issued assessments to the Taxpayer for unpaid taxes, penalties, and interest for each of the taxable years at issue. The Department has initiated a number of collection actions over time, but balances remain due, and the Department continues to take collection actions. The Taxpayer has now filed an “Application for Relief from Collections Actions.” The Taxpayer contends that because the Internal Revenue Service (IRS) has determined that his federal income tax debt is uncollectible, the Department must honor that determination and cease its own collection actions.
DETERMINATION
Filing Deadline
Virginia Code § 58.1-1821 states that “[a]ny person assessed with any tax administered by the Department of Taxation may, within ninety days from the date of such assessment, apply for relief to the Tax Commissioner.” Title 23 of the Virginia Administrative Code (VAC) 10-20-165 B 1 provides that “[t]he Department strictly enforces the 90-day limitations period for filing a timely administrative appeal. A taxpayer must file a complete appeal within 90 calendar days after the date of assessment.” In this instance, the assessments were issued to the Taxpayer between January 9, 2003, and July 12, 2012. Based on the provisions of Virginia Code § 58.1-1821 and Title 23 VAC 10-20-165, the latest the Taxpayer could have timely filed an application for correction for any of the taxable years at issue was October 10, 2012. The Taxpayer filed this application on July 14, 2023, well after the 90-day limitations period.
The Taxpayer asserts that the issuance of a consolidated bill notice on April 24, 2023, started the 90-day period for filing an application for correction under Virginia Code § 58.1-1821. “Date of assessment” is defined, in part, as the date stated on the “notice of assessment.” See Title 23 VAC 10-20-165 A.
Title 23 VAC 10-20-165 A further defines “notice of assessment” as:
The department’s official form labeled “Notice of Assessment” that contains written information that sets out the date of the assessment, amount of assessment, the tax type, taxable period, account number, bill number and name of the taxpayer. A subsequent statement of balance due the department does not constitute a new notice of assessment. Such subsequent statements include reports of payments applied to assessments, updated bills reflecting additional accrued interest, or other changes to an assessment. [Emphasis added.]
Under this regulation, the consolidated bill notice dated April 24, 2023, does not constitute a notice of assessment that would extend the Taxpayer’s time for filing an application for correction of the original assessments. Accordingly, the Taxpayer’s application under Virginia Code § 58.1-1821 is barred by the statute of limitations.
Collectibility of Assessment
The Taxpayer states that the IRS has determined that its own assessments issued to the Taxpayer are currently not collectible. The Taxpayer contends that effective for taxable years beginning after January 1, 2023, Virginia Code § 58.1-301 provides for rolling conformity to the Internal Revenue Code (IRC), which would include an IRS determination on collectibility.
Virginia Code § 58.1-301 provides, with certain exceptions, that terminology and references used in Title 58.1 of the Code of Virginia will have the same meaning as provided in the IRC unless a different meaning is clearly required. Conformity does not extend to terms, concepts, or principles not specifically provided in the Code of Virginia. For individual income tax purposes, Virginia “conforms” to federal law, in that it starts the computation of Virginia taxable income with federal adjusted gross income (FAGI).
Conformity, however, does not mean that every provision of the IRC is imported directly into Virginia law. Procedural matters such as the collection of unpaid taxes are not in conformity with the IRC because Title 58.1 of the Code of Virginia has specific statutes setting forth the collection procedures for delinquent taxes administered by the Department. See, e.g., Public Document (P.D.) 94-30 (3/4/1994), P.D. 95-83 (4/19/1995), and P.D. 21-34 (3/9/2021). Thus, although the IRS has determined that the Taxpayer’s federal income tax assessments are currently not collectible, the collectibility of assessments issued by the Commonwealth remain due and payable.
CONCLUSION
For the reasons discussed above, the Department cannot grant the Taxpayer’s request that it cease collection activity with respect to the assessments at issue. The Taxpayer will receive updated bills that will include accrued interest to date. The Taxpayer should remit the balance due within 30 days of the bill date to avoid the accrual of additional interest and further collection actions.
The Taxpayer indicated that the assessments will create a financial hardship. If the assessments create a financial hardship, the Taxpayer may pursue an offer in compromise based on doubtful collectibility. To begin that process, the Taxpayer should complete the enclosed Individual Offer in Compromise: Doubtful Collectibility form and Financial Statement for Individuals and include the required fee or fee waiver request. The completed forms and statement will allow the Department to review and analyze the Taxpayer’s financial situation. Upon completion of that review, a response will be issued to the Taxpayer. The Taxpayer also has the option to request a payment agreement with the Department’s Collections Unit. The Collections Unit may be contacted at (804) *****.
The Code of Virginia sections, regulations and public documents cited are available online at www.tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at (804) *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/4637.X