Tax Type
Individual Income Tax
Description
Refund statute of limitations
Topic
Payment and Refund
Statute of Limitations
Date Issued
03-23-1989
March 23, 1989
Re: §58.1-1821 Application: Individual Income Tax
Dear********************
This will reply to your letter of June 17, 1988, in which you requested a refund of individual income tax paid by *************** for taxable year 1983.
FACTS
Your client is a resident of Virginia and timely filed his 1983 Virginia income tax return, including therein income from all sources within and without Virginia. As the result of an audit by North Carolina tax officials, on August 11, 1987 your client was assessed additional tax on 1983 income derived from real property located in that state. on September 1, 1987 your client sought a credit against his 1983 Virginia tax for the additional tax he paid to North Carolina for that year, but this claim was denied by the department under the provisions of Va. Code §58.1 - 1823.
You contest the denial of refund on the grounds that Virginia may not legally or constitutionally tax income derived from property located outside the state. In addition, you assert that your client may still seek redress from the courts under Va. Code §§58.1-1825 and 58.1-1827, and that the common law action of "assumpsit" is applicable to your client in this instance.
DETERMINATION
§58.1-1823 of the Code of Virginia provides:
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- Any person filing a tax return required for any tax administered by the Department of Taxation may, within three years from the last day prescribed by law for the timely filing of the return ... file an amended return with the Department. If the Department is satisfied ... that the tax assessed and paid upon the original return exceeds the proper amount, the Department may reassess the taxpayer and order that any amount excessively paid be refunded to him. Emphasis added
A three year period of limitations also applies to the department in the assessment of omitted taxes. Except in the case of a false or fraudulent return with the intent to evade the tax, or the failure to file a return, Va. Code §58.1-1812 mandates the issuance of tax assessments within three years from the date the tax became due.
The due date of your client's 1983 income tax return was May 1, 1984; however, your client requested a refund of 1983 tax paid on September 1, 1987 - - four months after the expiration of the statutory period for requesting a refund. As such, the denial of your client's refund request was proper.
You contend that Virginia does not have the authority to tax income derived from property located outside the state. However, Va. Code §58.1 -322 provides that "[t]he Virginia taxable income of a resident individual means his federal adjusted gross income for the taxable year." As your client's federal adjusted gross income for 1983 included his income from real estate located in North Carolina, that income was properly included in his Virginia taxable income.
Va. Code §58.1 - 1825 also requires that an application to the circuit court for correction of an assessment be filed "within three years from the date such assessment is made. " Under Va. Code §58.1 - 1823, the denial of a timely filed refund request is deemed an "assessment" for purposes of pursuing judicial remedies under §58.1 - 1825; however, the refund request in this case was not timely filed. Va. Code §58.1-1827 provides for the correction of a double assessment by the Virginia courts, whether or not the application was made within the period of limitation; however, it is implicit in this statute that both assessments must be made by the same taxing authority.
You also contend that the common law action of assumpsit is applicable in this instance. However, the Virginia Supreme Court in Charlottesville v. Marks' Shows, 179 Va. 321, 18 S.E.2d 890 (1942), held that:
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- the right to recover, in an action at law, taxes which have been illegally levied and collected has its limitations. In an unbroken line of decisions this court has held that in the absence of statute taxes illegally assessed and paid voluntarily and not under compulsion cannot be recovered in an action at law.
- the right to recover, in an action at law, taxes which have been illegally levied and collected has its limitations. In an unbroken line of decisions this court has held that in the absence of statute taxes illegally assessed and paid voluntarily and not under compulsion cannot be recovered in an action at law.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner