Tax Type
Corporation Income Tax
Description
Interest charged on assessments
Topic
Penalties and Interest
Date Issued
11-07-1988
November 7, 1988
Re: §58.1-1821 Application; Corporation Income Tax
§58.1-312 Limitations on assessments
Dear***********
This is in response to your letter of September 6, 1988, in which you applied for correction of two "Notice[s] of Assessment" charging interest on corporation income tax.
Facts
The taxpayer filed amended federal and Virginia income tax returns for several taxable years in September, 1987, and paid the additional Virginia income tax due. On July 12, 1988, the department sent a "Notice of Assessment" for each taxable year charging interest on the additional tax from the due date to the date of payment as required by §58.1-1812. You protest two of these notices on the grounds that they were mailed more than three years after the due date of the original return.
Discussion
Virginia starts with federal taxable income. Therefore, any change to a corporation's federal taxable income automatically makes a similar change to Virginia taxable income. However, Virginia laws relating to the computation of interest and the limitation on the period for assessing tax, penalty and interest are significantly different from federal laws. Thus, the fact that the Internal Revenue Service rescinded an assessment for interest because it is outside the period for assessments under federal law does not automatically mean that Virginia is similarly prohibited from assessing interest.
Generally, under §58.1-104 a tax (or penalty) must be assessed within three years from the date the tax was due and payable. There are, however, a number of exceptions to the general rule. one of of the exceptions, §58.1-312.B, provides in pertinent part:
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- If the taxpayer pursuant to §58.1-311 . . . files an amended return increasing his federal taxable income . . . the assessment . . . may be made at any time within one year after such report or amended return was filed.
- If the taxpayer pursuant to §58.1-311 . . . files an amended return increasing his federal taxable income . . . the assessment . . . may be made at any time within one year after such report or amended return was filed.
Determination
Accordingly, the assessments are correct as made and are now due and payable. You will shortly receive updated bills with additional interest which has accrued on the assessment. The bills should be paid within thirty days to avoid the accrual of additional interest.
Sincerely
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner