Tax Type
Corporation Income Tax
Description
Refund/tax due; Offsetting years; Adjustment to federal taxable income
Topic
Returns/Payments/Records
Date Issued
06-13-1995
June 13, 1995
Re: §58.1-1821 Application: Corporation Income Tax
Dear**********
This will reply to your letter of February 13, 1995, in which you protest the denial of an offset and netting of corporation income tax refunds and an assessment for*********(the"Taxpayer").
FACTS
The Taxpayer's federal corporation income tax returns for the taxable years ended June 30, 1987 and October 31, 1987 were audited by the IRS. Federal taxable income was increased for the June 30, 1987, return resulting in an increase in tax liability and reduced to zero for the October 31, 1987, return. The adjustments were due to the IRS making changes in the carryback of net operating losses. When these changes were applied to income for the taxable years ended June 30,1988 and June 30, 1989, the results were in favor of the taxpayer and refunds were created. Based on these changes, the Taxpayer requested that the tax liability for the taxable year ended June 30,1987, be offset by the overpayment for the taxable years ended June 30, 1988, and June 30, 1989. The refund offset was denied because the Taxpayer failed to notify the department within the limitations period prescribed in Code of Virginia §58.1 -1823. You now request that the department reconsider your refund request.
DETERMINATION
Under Code of Virginia §58.1 - 1823, a taxpayer has three years from the date a return is due, or 90 days from the final determination of a federal change or correction, whichever is later, to file an amended return to request a refund. This is consistent with Code of Virginia §58.1 -311, which requires a taxpayer audited by the IRS to file an amended return and report the change within 90 days.
The Taxpayer in this case has not filed an amended return, or reported the changes made by the IRS to the department. Further, the Taxpayer's representative has presented no evidence that the current request is within the statute as stated above. The presumption of the Taxpayer's representative that the department can act under Code of Virginia §58.1-1823 when the statute has otherwise expired is incorrect (in this case, the department received the audit information for 1987 from the IRS after the 90 day statute had passed and never received any information from the IRS relative to subsequent periods on which refunds were claimed; as such, the department was precluded from issuing a refund or providing an offset against the tax due). Therefore, the department had no choice but to deny the offset.
You further state that under Code of Virginia §58.1 -1827, that Taxpayer has been subject to a double assessment. We cannot agree with this assumption since this section does not apply to assessments for different taxable years. Clearly, the offset and netting occur for different taxable years.
It was noted that you requested a conference for the resolution of this matter. Since the law is clear on these issues, a ruling has been issued without a conference. Should you have any additional information that might alter the conclusions reached herein, such as information regarding the date of the final federal determination, please contact****************.
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- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
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OTP/9375P
Rulings of the Tax Commissioner