Would the Virginia Department order a county to issue a machinery-and-tools-tax refund after two prior determinations?

Subject

Department would not direct locality's implementation of M&T rulings

Plain-English summary

The Department would not order the county to issue the requested machinery-and-tools-tax refund after already issuing a final determination and a reconsideration determination. It said it had completed its statutory and regulatory responsibilities and would not interfere with the county's duty to implement those determinations.

The earlier decisions had treated the machinery as potentially idle and remanded factual questions to the county. The county did not request more information or issue the refund the taxpayer sought. In this third request, the Commissioner explained that the prior determination did not prescribe one specific outcome and that factual questions about whether local property is taxable are typically left to the locality.

If the county's lack of action represented its implementation decision, the ruling said the taxpayer could seek judicial review in the appropriate circuit court under the cited statutes. The Tax Commissioner and Department would not become parties merely because the Commissioner had ruled on the issue.

What this means for you

• A Tax Commissioner remand may leave factual implementation to the local assessing official.
• A later request to the Department does not necessarily produce a new merits determination after final and reconsideration decisions have issued.
• If local implementation remains adverse, the next remedy may be circuit-court review rather than another Department ruling.

Common questions

Q: Did this ruling hold that all the machinery was taxable?

A: No. It addressed the Department's completed procedural role and the county's responsibility to implement the earlier determinations.

Q: Did the Commissioner direct the county to pay a refund?

A: No. The Commissioner declined to interfere with the county's implementation decision.

Q: What remedy did the ruling identify?

A: Judicial review in the appropriate circuit court if the county's inaction was how it chose to implement the prior determination.

Citations and references

• Va. Code § 58.1-3983.1 D, F, and G.
• Va. Code § 58.1-3984.
• 23 VAC 10-20-165 F.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 15-23

Original ruling text

February 19, 2015

Re: Taxpayer: *
Locality: ***
Machinery and Tools Tax

Dear *:

This will reply to your letter in which you request that the Department determine that certain machinery and tools owned by * (the "Taxpayer") located in the *** (the "County") were not subject to Machinery and Tools (M&T) Tax for the 2011 taxable year.

The following determination is based on the facts on the facts presented to the Department summarized below. The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Decisions and Rulings section of the Department's web site.

FACTS

In P.D. 12-177 (11/05/2012), the Department determined that the Taxpayer provided sufficient documentation to demonstrate that the equipment at issue was idle machinery for the 2011 tax year. The case, however, was remanded back to the County in order for it to request documentation and reconsider its decision.

The Taxpayer submitted additional documentation to the County. Based on this information, the County sought a reconsideration of P.D. 12-177, contending that the Taxpayer should be subject to M&T tax on all of its machinery and tools for 2011. In P.D. 13-96 (6/11/2013), the Department determined that some of the machinery may not be idle, but remanded the case back to the County to request specific documentation in order for it to reconsider its determination. The Department further determined that, if the County agreed with the Department that the machinery and tools were idle, then it should adjust the Taxpayer's tax liability for the 2011 tax year.

The County has not requested any additional information and has not issued a refund of M&T tax as requested by the Taxpayer. As such, the Taxpayer has requested that the Department overturn the County's determination and direct the County to refund the excess M&T tax paid along with interest.

ANALYSIS

Under Va. Code § 58.1-3983.1 D, the Tax Commissioner must treat a local business tax appeal as an appeal under Va. Code § 58.1-1821 and issue a final determination correcting the local tax assessment if an appealing taxpayer has met its burden of proof. Title 23 of the Virginia Administrative Code (VAC) 10-20-165 F allows a reconsideration of a final determination when certain requirements are met. In this case, the Department issued P.D. 12-177, which was the final determination addressing the Taxpayer's appeal. It subsequently issued P.D. 13-96, which was the Department's final determination in response to the County's reconsideration request.

Virginia Code § 58.1-3983.1 F requires a local assessing official implement the determination of the Tax Commissioner. The statutory language, however, is silent as to how a locality may implement the Department's final determination. In this case, the Department's determination did not set forth a specific result. Instead, it requested the County reconsider its assessment in light of the apparent facts. In matters involving only factual issues, the Department will typically defer to a locality's authority to decide whether an item of property is subject to tax.

DETERMINATION

The Department has issued a final determination and a second determination letter in response to a request for reconsideration of the final determination. The Department has fulfilled its statutory and regulatory requirements and will not interfere with the County's statutory duty to implement the Department's determination.

In addition, if the County's lack of action in response is how it has decided to implement the Department's reconsideration, the Taxpayer may appeal the County's decision to the appropriate circuit court for judicial review pursuant to Va. Code §§ 58.1­3983.1 G and 58.1-3984. Neither the Tax Commissioner nor the Department shall be made a party to such an appeal merely because the Tax Commissioner had ruled on the issue.

If you have any questions about this response, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns
Tax Commissioner

AR/1-5869101737.B