Did unsupported factual disagreements and previously requested but unproduced records justify reconsidering Virginia's 2005-2010 income-tax assessments?

Subject

Reconsideration failed without new residency and income records

Plain-English summary

Virginia denied reconsideration and upheld the 2005-2010 assessments because the taxpayer supplied no qualifying new evidence and did not provide repeatedly requested records. Reconsideration requires a material factual error, changed law, misapplied policy, or newly discovered evidence that could change the result.

The taxpayer claimed a State A driver's license, but State A reported that license suspended from 1999 through March 2011, while he continually renewed a Virginia license through 2010. He also refused requests for federal and State A returns and records concerning his residency and relationship with a Virginia LLC.

Virginia noted that he appeared to have Virginia-source income even if not a resident. With no adequate documentation, the estimated assessments remained presumed correct and the letter was the final determination.

What this means for you

• Reconsideration is not a second appeal based only on continued disagreement.
• Identify a permitted reconsideration ground and provide evidence capable of changing the result.
• License records, tax returns, domicile evidence, and business records must be consistent and produced when requested.
• Refusing necessary information can preserve estimated assessments and limit later court relief.

Citations and references

• 23 VAC 10-20-165 F; Va. Code §§ 58.1-310, 58.1-111, 58.1-205, and 58.1-1826.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 14-136

Original ruling text

August 8, 2014

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek reconsideration of the Department's determination letter, issued as Public Document (P.D.) 13-110 (6/20/2013), to * (the "Taxpayer") for the taxable years ended December 31, 2005 through 2010. I apologize for the delay in responding to your request.

FACTS

In P.D. 13-110, the Department held the Taxpayer was subject to Virginia income tax and upheld the assessments for the taxable years at issue. The Taxpayer contends a number of findings made by the Department were erroneous and he provided sufficient documentation to support his claim that he was not a resident of Virginia.

DETERMINATION

Title 23 of the Virginia Administrative Code (VAC) 10-20-165 F permits taxpayers to request a reconsideration of a determination issued under Va. Code § 58.1-1821. Such requests, however, must meet one of the four following requirements:

1. The facts upon which the original determination is based are misstated by the Tax Commissioner or are inaccurate, and the determination would have a different result based on a correction of the Tax Commissioner's misstatement of the facts presented or a clarification of the original facts presented in the taxpayer's administrative appeal;

2. The law upon which the original determination is based has been changed by legislation, court decision or other authority effective for the tax period(s) at issue;

3. The policy upon which the original determination is based is misapplied, and the determination would have a different result based on the application of the proper policy; or

4. The taxpayer has discovered additional evidence or documentation that was not available to the taxpayer at the time the original administrative appeal was filed with the Department, and the additional evidence or documentation could produce a result different from the original determination.

Despite the conclusion in P.D. 13-110 that the Taxpayer was subject to Virginia income tax, the Department granted the Taxpayer an opportunity to provide sufficient evidence regarding his domicile and income from Virginia sources for the 2005 through 2010 taxable years. In his response, the Taxpayer asserts the Department misstated or excluded a number of facts; however, he provided no additional documentation or complied with the Department's requests for information.

For example, the Taxpayer now states that he held a * (State A) driver's license. A report from State A shows, however, that the Taxpayer's State A driver's license was suspended from February 1999 through March 2011. Further, as indicated in P.D. 13-110, the Taxpayer obtained a Virginia driver's license in 1995 and renewed it continually, as recent as 2010.

The Taxpayer has refused several requests by the Department to provide evidence of filing income tax returns with the Internal Revenue Service and State A and other documentation to support his claims concerning his residency and his relationship with * (VALLC). In addition, as indicated in P.D. 13-110, the Taxpayer appears to have income from Virginia sources even if he was not a resident.

The Department made a determination based on the evidence provided at the time. If the facts are misstated, it was the result of the Taxpayer's failure to clearly set forth and document the facts or respond adequately to the Department's request for additional information, pursuant Va. Code § 58.1-310.

In such cases, Va. Code § 58.1-111 grants the Department authority to make an estimate of income tax based on information made available. Further, under Va. Code § 58.1-205 an assessment of tax by the Department is presumed correct and the Taxpayer has the burden of proving the assessment is improper or erroneous. Finally, Va. Code § 58.1-1826 prevents taxpayers from seeking correction of state tax assessments when the Taxpayer refuses to provide information as requested by the Department.

The Department recognizes the Taxpayer's continuing disagreement with the validity of the assessments at issue. However, the Taxpayer has not provided sufficient documentation to support his position. As such, the assessments for the 2005 through 2010 taxable years are upheld. This letter constitutes the Department's final determination on this matter.

The Code of Virginia sections, regulation, and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this determination, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-5464455649.D