February 13, 2025
Re: Appeal and Request for Reconsideration
Taxpayer: *****
Locality Assessing Tax: *****
Machinery and Tools Tax
Dear *****:
This will respond to your letter submitted on behalf of your client, ***** (the “Taxpayer”), in which you seek reconsideration of the Department’s notice of jurisdiction issued as Public Document (P.D.) 24-25 (3/20/2024). You also appeal the determination issued by the County of ***** (the “County”), in which the County declined to consider the local appeal the Taxpayer filed pursuant to the instructions given by the Department in P.D. 24-25.
The Machinery and Tools (“M&T”) tax is imposed and administered by local officials. Virginia Code § 58.1-3983.1 D 1 authorizes the Department to issue determinations on taxpayer appeals of M&T tax assessments. On appeal, a local tax assessment is deemed prima facie correct, i.e., the local denial of a refund will stand unless the taxpayer proves that it is incorrect.
The following determination is based on the facts presented to the Department summarized below. The Code of Virginia sections and regulation cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website.
FACTS
In November 2020, the Taxpayer filed amended M&T tax returns with the County, requesting refunds of M&T tax previously paid for the 2017 through 2019 tax years. In July 2021, the County issued a purported final local determination, denying the refunds and advising the Taxpayer that it had the right to appeal that determination to the Department. The Taxpayer sought relief from the Department in September 2021. In P.D. 24-25, the Department apologized for its delay in responding, noting that the appeal was timely received but that it was not forwarded to the Division of Tax Adjudication and Resolution (f/k/a Appeals and Rulings). Based on the facts presented, the Department determined, consistent with its policy published in P.D. 22-113 (6/21/2022), that it did not have jurisdiction to consider the Taxpayer’s appeal because the local appeals process was not complete. The Department instructed the Taxpayer to file a local appeal, and if the County issued a final determination with which the Taxpayer disagreed, the Taxpayer would then be eligible to appeal to the Department. To assist the parties in resolving the case, the Department observed that it had issued two relevant determinations in the intervening period of time, namely P.D. 23-43 (4/12/2023) and P.D. 23-93 (8/2/2023).
In April 2024, the Taxpayer filed an appeal with the County. In July 2024, the County advised the Taxpayer that it would not consider the appeal because the Taxpayer had not filed it within the statutory deadlines provided under either Virginia Code § 58.1-3980 or Virginia Code § 58.1-3983.1.
The Taxpayer now seeks reconsideration of the Department’s determination in P.D. 24-25 that it lacked jurisdiction. In the alternative, the Taxpayer requests that the Department treat the County’s July 2024 response as a final local determination and consider the Taxpayer’s original appeal on the merits. The Taxpayer contends that the Department’s delay in responding to its original appeal, coupled with the County’s refusal to consider its subsequent appeal, has unfairly deprived it of its administrative remedies.
ANALYSIS
Reconsideration
The County contends that the Department should deny the Taxpayer’s reconsideration request because the Taxpayer did not submit the request within 45 days as required by Title 23 of the Virginia Administrative Code (VAC) 10-20-165 F 1. The Department understands that, after the Taxpayer filed its local administrative appeal on April 5, 2024, the County conducted a site visit of the Taxpayer’s facility on June 12, 2024. As of the date of the site visit, therefore, the local appeals process was proceeding in accordance with the instructions given by the Department in P.D. 24-25. In addition, the 45-day period within which the Taxpayer could have filed a reconsideration request had already passed.
The Department questions what cause the Taxpayer would have had to file a request for reconsideration in those circumstances. Regardless of whether the Taxpayer’s reconsideration was timely filed, in the Department’s opinion, P.D. 24-25 was properly decided and consistent with the policy set forth in P.D. 22-113. We now turn to address the County’s subsequent determination issued on July 1, 2024, that the Taxpayer’s appeal of April 5, 2024, was not timely filed.
Timeliness of the Taxpayer’s Local Appeal of April 5, 2024
In its July 1, 2024, letter, the County determined that the local appeal the Taxpayer filed on April 5, 2024, was untimely, citing the statutory time limitations provided in Virginia Code § 58.1-3980 and Virginia Code § 58.1-3983.1. Of particular relevance is the provision of Virginia Code § 58.1-3983.1 B 1, requiring the local appeal to be submitted “within one year from the last day of the tax year for which such assessment is made, or within one year from the date of such assessment, whichever is later . . .
Under the Guidelines for Appealing Local Business Taxes, issued as P.D. 04-28 (6/25/2004) (the “Guidelines”), an assessment is defined in part as “a determination as to . . . ultimately the amount of tax . . . that is due.” See § 1.4 of the Guidelines. In addition, the date of assessment is considered “the date when a written notice of assessment is . . . mailed to the taxpayer at the taxpayer’s last known address.” Thus, in P.D. 22-113, the Department determined that the purported final local determination issued by the locality in response to a refund claim made on the taxpayer’s amended return was an assessment which triggered the taxpayer’s right to file a local appeal and the running of the one-year statute of limitations under Virginia Code § 58.1-3983.1 B 1.
Consistent with the policy of P.D. 22-113, the Department determined in P.D. 24-25 that the County’s purported final local determination issued on July 1, 2021, was in fact the denial of the refund claim, and thus the assessment which triggered the Taxpayer’s right to file a local appeal. As a result, the Department remanded the case in order to allow the Taxpayer to file a local appeal.
Had it been clear to the parties from the beginning that the County’s July 1, 2021, letter was the denial of a refund claim and thus an assessment, the Taxpayer would have had one year from that date in order to file its local appeal under Virginia Code § 58.1-3983.1 B 1. The parties were not aware, however, until P.D. 24-25 was issued on March 24, 2024, that the Department would consider the County’s July 1, 2021, letter to be an assessment. As such, in order to preserve a right that the Taxpayer would otherwise lose due to no fault of its own, the Department will treat the date of assessment in this case as the date the Department clarified that the County’s July 1, 2021, letter was in fact the denial of a refund and thus an assessment. That date was March 24, 2024, the date P.D. 24-25 was issued. The Taxpayer subsequently filed its local appeal on April 5, 2024, well within the one-year limitations period.
Additional Considerations
The Department apologizes for the significant delay in issuing P.D. 24-25. Upon further review, the Department has discovered that the case was mistaken as a duplicate of another case that was submitted around the same time, involving essentially the same issues and the same Taxpayer, except in another local jurisdiction. Certainly, it would be unconscionable for a taxpayer to be stripped of an administrative remedy because of a clerical error made by the agency tasked with adjudicating such matters. In addition, the Department observes that the County has taken inconsistent positions in the course of reviewing this case.
The County previously treated the amended return as a valid and timely filed local appeal and proceeded to issue a purported final local determination. On remand from P.D. 24-25, however, the County is now attempting to take advantage of the Department’s clerical error to claim the Taxpayer is precluded from timely filing a local appeal. Although the Department believes its analysis above is sufficient to resolve the immediate controversy as to timeliness, the County’s inconsistent position also strikes the Department as one vulnerable to potential estoppel claims.
The Supreme Court of Virginia (the “Court”) has “made clear that ‘[a] party may not approbate and reprobate by taking successive positions in the course of litigation that are either inconsistent with each other or mutually contradictory.” See Rowe v. Commonwealth, 277 Va. 495, 502 (2009) (quoting Cangiano v. LSH Bldg. Co., 271 Va. 171, 181 (2006)). “The prohibition against approbation and reprobation forces a litigant to elect a particular position, and confines a litigant to the position that she first adopted.” See Matthews v. Matthews, 277 Va. 522, 528 (2009).
Approbate has been defined as “to express approval of formally or legally” or “to accept as legal or valid.” See Commonwealth v. Holman 303 Va. 62, 73 (2024) (quoting Webster’s Third New International Dictionary 106 (2002)). Reprobate has been defined as “to disapprove, condemn” or “to disapprove of: reject as unworthy.” See id. (quoting Webster’s Third New International Dictionary 1927 (2002)).
In this case, the County accepted the Taxpayer’s amended return as a valid local administrative appeal and proceeded to issue a final local determination. That determination also expressly provided that the Taxpayer had the right to appeal the determination to the Department. With respect to the issue of timeliness, by accepting the Taxpayer’s amended return as a valid and timely filed local administrative appeal, the County “approbated” by treating the Taxpayer’s submission as proper. On remand from P.D. 24-25, the County “reprobated” by taking the contradictory position that the Taxpayer cannot file a local administrative appeal because the statute of limitations had expired.
As a practical matter, this act of reprobation deprived the Taxpayer of its ability to participate any further in the administrative appeals process through no fault of its own. The Department stated that it did not have jurisdiction until the local appeals process was complete, and the County decided not to allow the Taxpayer to proceed through that process by invoking an issue of timeliness that was inconsistent with how the County treated the case in 2021. As a result, the Taxpayer was unfairly caught in an impossible predicament, the only outcome of which was the deprivation of its administrative appeal rights as a result of contradictory determinations issued by two governmental entities.
DETERMINATION
For the reasons stated above, the date of the Department’s determination issued as P.D 24-25, namely March 20, 2024, was the date the parties were first made aware that the County’s purported final local determination was in fact an assessment from which the Taxpayer had the right to appeal. Thus, to protect the integrity of the administrative appeals process and ensure that fundamental principles of due process are not violated by depriving the Taxpayer of an administrative remedy through no fault of its own, the Department considers March 20, 2024, to be the date from which the Taxpayer had one year to file its local appeal. Because the Taxpayer filed its local appeal on April 5, 2024, it was timely filed well within the one-year period.
Therefore, the Department is remanding the case to the County to proceed to evaluate the Taxpayer’s local appeal and issue a final local determination on the merits. If the Taxpayer disagrees in whole or in part with the County’s final local determination, it may appeal to the Department within 90 days of the date of such determination.
If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at ***** or *****@tax.virginia.gov.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR/5046.X