Tax Type
Corporation Income Tax
Description
Net operating loss deduction; Interest on omitted taxes
Topic
Penalties and Interest
Taxable Income
Date Issued
07-09-1984
July 9, 1984
Re: §58-1118 Application; Corporation Income Tax
§58-1160 Interest on Omitted Taxes;
Net Operating Loss Deduction
Dear *************
This is in response to your application under § 58-1118 for a correction of assessments of corporate interest.
FACTS
Taxpayer's 1977 and 1978 federal taxable income was increased as a result of an audit by the Internal Revenue Service. Taxpayer's 1979 net operating loss was large enough to absorb the additional income so that no additional federal tax was due. On October 22, 1982, Taxpayer filed amended Virginia returns reporting the additional federal taxable income for 1977 and 1978 and the offsetting increases in the federal net operating loss deductions. No additional Virginia tax was due.
Subsequently interest was assessed on the additional Virginia tax attributable to the increase in federal taxable income (without regard to the offsetting NOLD) for the period between the original due dates of the 1977 and 1978 returns and January 10, 1983, the date that the assessment worksheet was prepared by the auditor.
Taxpayer concedes that interest is due from the due dates of the original returns but contends that accrual of interest should end on June 12, 1981, the date the Virginia return for the 1979 loss year was filed.
DETERMINATION
Under Virginia Code § 58-1160 interest is required to be assessed for the period between the due date and the date of full payment. There is no provision defining, for purposes of § 58-1160, when payment occurs if a net operating loss deduction is involved.
When a net operating loss deduction results in a refund, § 58-1140.1 defines the date of overpayment to be the date the loss year return was filed or the last day prescribed by law for such filing, if later. § 58-1140.1 refers only to the date of overpayment for purposes of beginning the accrual of interest on a refund. However, the rational and equitable administration of tax law requires that the term "payment" in § 58-1160 have the same meaning as "overpayment" in § 58-1140.1 for the purpose of computing interest on assessments and refunds.
Accordingly the assessments of interest for 1977 and 1978 will be adjusted to reflect a date of payment of June 12, 1981, the date the loss year return was filed.
You should receive a revised bill in a few weeks.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner