What Virginia tax interest rates applied during the second quarter of 2013?

Plain-English summary

Virginia's tax underpayment and overpayment rates remained 5% for the second quarter of 2013. The corresponding federal underpayment and noncorporate-overpayment rates were 3%.

For qualifying assessments under administrative appeal, the standard rate applied for nine months after assessment. From nine months until Virginia issued its determination, the reduced rate was the rounded federal short-term rate—0% for this quarter. The rule applied only to administrative appeals filed on or after July 1, 2011.

The bulletin also applied the 5% rate through July 15, 2013 for specified estimated-tax computations of taxpayers with a March 31, 2012 taxable-year end. For local delinquent taxes, localities could charge up to 10% in the first year and, in later years, up to the greater of 10% or the applicable federal underpayment rate. Localities charging delinquency interest also owed the same rate on overpayments or erroneous assessments.

What this means for you

• Use the rate for the calendar quarter in which interest accrues.
• Do not apply the disputed-assessment reduction during the first nine months after assessment.
• Confirm the appeal filing date and whether a determination has issued.
• Local interest rules can differ from state rates within statutory caps.

Common questions

Q: What was Virginia's standard Q2 2013 rate?
A: 5% for both assessments and refunds.

Q: What was the reduced disputed-assessment rate?
A: 0% for qualifying periods after nine months and before the determination.

Q: Did every appeal receive the reduced rate?
A: No. The bulletin limited it to qualifying administrative appeals filed on or after July 1, 2011.

Citations and references

• Internal Revenue Code § 6621.
• Va. Code §§ 58.1-15, 58.1-1822, and 58.1-3916.
• Senate Bill 1152, Chapter 295, 2011 Acts of Assembly.

Subject

2013 Second Quarter Interest Rates

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 13-27

Original ruling text

TAX BULLETIN 13-4
Virginia Department of Taxation
March 5, 2013
VIRGINIA’S SECOND QUARTER 2013 INTEREST
RATES WILL REMAIN THE SAME

Federal Rates Remain Unchanged: State and certain local interest rates are subject to hange every quarter due to changes in federal rates established pursuant to IRC § 6621. IRC § 6621 dictates that the federal underpayment and overpayment rates are three percentage points higher than the federal short-term rate. Federal rates for the second quarter of 2013 will be 3% for tax underpayments (assessments) and 3% for tax overpayments (refunds) by taxpayers other than corporations.

Virginia Code § 58.1-15 provides that the underpayment rate for Virginia taxes will be 2% higher than the corresponding federal rate and the overpayment rate for Virginia taxes will be 2% higher than the corresponding federal rate. Accordingly, the Virginia rates for the second quarter of 2013 will be 5% for tax underpayments (assessments) and 5% for tax overpayments (refunds).
Rate for Addition to Tax for Underpayments of Estimated Tax

Taxpayers whose taxable year ends on March 31, 2012 : For the purpose of computing the addition to the tax for underpayment of Virginia estimated income taxes on Form 500C (for corporations), Form 760C (for individuals, estates and trusts), or Form 760F (for farmers and fishermen), the second quarter 5% underpayment rate will apply through the due date of the return, July 15, 2013.

Reduced Rate for Certain Assessments in Dispute

Assessments in Dispute : During the 2011 session, the General Assembly passed Senate Bill 1152 (Chapter 295, 2011 Acts of Assembly), which created a reduced rate for certain assessments in dispute. If a taxpayer files an administrative appeal with the Department of Taxation on or after July 1, 2011, interest begins accruing at the standard underpayment rate until nine months from the date of assessment. From nine months after the date of assessment until a determination is issued, interest accrues at the federal short-term rate established pursuant to IRC § 6621(b). Because the reduced rate is effective for administrative appeals filed on or after July 1, 2011, this legislation could potentially impact interest rates during the second quarter of 2013.

The federal short-term rate established pursuant to IRC § 6621(b) for the second quarter of 2013, rounded to the nearest whole percent, is 0%. Accordingly, the reduced rate for the second quarter of 2013 for qualifying assessments in dispute is 0%. This rate applies only to contested assessments for which an administrative appeal was filed on or after July 1, 2011 and the Department has not made a determination within nine months from the date of assessment. See Va. Code § 58.1-1822 for more information.
Local Tax

Assessments: Localities that assess interest on delinquent taxes under Va. Code § 58.1-3916 may impose interest at a rate not to exceed 10% for the first year of delinquency, and at a rate not to exceed 10% or the federal underpayment rate in effect for the applicable quarter, whichever is greater, for the second and subsequent years of delinquency. For the second quarter of 2013, the federal underpayment rate is 3%.

Refunds: Localities that charge interest on delinquent taxes are required to pay interest to taxpayers on all overpayments or erroneously assessed taxes at the same rate as they charge interest on delinquent taxes under Va. Code § 58.1-3916.
Recent Interest Rates

Accrual Period
Overpayment
Underpayment
Reduce

Beginning
Through
(Refund)
(Assessment)
Rate

1-Apr-00
31-Mar-01
11%
11%
-

1-Apr-01
30-Jun-01
10%
10%
-

1-Jul-01
31-Dec-01
9%
9%
-

1-Jan-02
31-Dec-02
8%
8%
-

1-Jan-03
30-Sep-03
7%
7%
-

1-Oct-03
31-Mar-04
6%
6%
-

1-Apr-04
30-Jun-04
7%
7%
-

1-Jul-04
30-Sep-04
6%
6%
-

1-Oct-04
31-Mar-05
7%
7%
-

1-Apr-05
30-Sep-05
8%
8%
-

1-Oct-05
30-Jun-06
9%
9%
-

1-Jul-06
31-Dec-07
10%
10%
-

1-Jan-08
31-Mar-08
9%
9%
-

1-Apr-08
30-Jun-08
8%
8%
-

1-Jul-08
30-Sep-08
7%
7%
-

1-Oct-08
31-Dec-08
8%
8%
-

1-Jan-09
31-Mar-09
7%
7%
-

1-Apr-09
30-Dec-10
6%
6%
-

1-Jan-11
31- Mar-11
5%
5%
-

1-Apr-11
30-Sept-11
6%
6%
-

1-Oct-11
30-Jun-13
5%
5%
0%

Additional Information: Contact Customer Services, Virginia Department of Taxation, P. O. Box 1115, Richmond, Virginia 23218-1115, or call the following numbers for more information about interest rates and penalties.

Individual & Fiduciary Income Tax (804) 367-8031
Corporation Income Tax (804) 367-8037
Withholding Tax (804) 367-8037
Soft Drink Excise Tax (804) 786-2450
Aircraft Sales & Use Tax (804) 786-2450
Other Sales & Use Taxes (804) 367-8037

This Tax Bulletin, along with other reference documents, is available online in the Laws, Rules and Decisions section of the Department of Taxation’s website, located at www.tax.virginia.gov.
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