Was an April 2014 claim timely for a corporate estimated payment deemed paid and self-assessed on September 15, 2009?

Subject

Both the self-assessment and payment in this case was deemed to have occurred as of September 15, 2009. The Taxpayer, therefore, had until September 17, 2012 (September 15 was on a Saturday), to file its protective claim. In this case, however, the request was not made until April 2014, well after the three year limitations period had expired.

Plain-English summary

Virginia denied the corporation's April 2014 request to recover an estimated payment made for the tax year ending May 31, 2009. The corporation said the payment should have gone to another state and argued that refund limits should not apply because it never filed a Virginia return.

Virginia assumed for the ruling that no return was required, but the claim was still late. An estimated payment with no return was deemed paid on the original corporate return due date, September 15, 2009. Payment also constituted a self-assessment, so the three-year protective-claim period expired September 17, 2012.

The payment did not need to be tied to a filed return for the limitation to apply. Virginia also rejected the idea that physical location alone told the Department no tax was due, because foreign corporations can owe tax on Virginia-source income.

What this means for you

• Investigate a misdirected estimated payment immediately; not filing a return does not leave the refund period open indefinitely.
• Identify the deemed payment and assessment date before calculating the claim deadline.
• A corporation's lack of a Virginia office does not by itself establish that it has no Virginia filing obligation.
• Keep estimated declarations, canceled checks, management-provider records, nexus analysis, and refund submissions.

Common questions

Q: When was the payment deemed made?

A: September 15, 2009, the original due date for the corporate return.

Q: When did the claim period expire?

A: September 17, 2012, because September 15 fell on a Saturday.

Q: Did the missing return prevent the refund statute from applying?

A: No.

Citations and references

• Va. Code §§ 58.1-400, 58.1-441, 58.1-1820, and 58.1-1824.
• 23 VAC 10-20-160(D)(4)(a) and 23 VAC 10-120-440(E).
• P.D. 86-224.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 15-65

Original ruling text

April 15, 2015

Re: § 58.1-1824 Application: Corporate Income Tax

Dear *:

This will reply to your letter in which you appeal the denial of a Virginia corporate income tax refund on behalf of your client, * (the "Taxpayer"), for the taxable year ended May 31, 2009.

FACTS

The Taxpayer made an estimated payment of corporate income tax for the taxable year at issue in May 2009 but never filed a return. In April 2014, the Taxpayer requested that the Department refund the payment, stating that it should have been remitted to the * (State A), not Virginia. The Department denied the Taxpayer's request on the basis that the statute of limitations had expired for claiming a refund. The Taxpayer appeals, contending that the Department should not have deposited the payment because the Taxpayer was not located in Virginia. In addition, the Taxpayer contends that the statute of limitations should not apply because the payment was not related to a Virginia tax return.

DETERMINATION

Generally, no refunds of estimated tax may be obtained except upon filing of the income tax return for the taxable year. In extraordinary circumstances, a refund may be requested if the taxpayer is not required to file a return. See Title 23 of the Virginia Administrative Code (VAC) 10-120-440 E. Because the Taxpayer asserts that it sent the payment to Virginia in error, the Department will assume for the purposes of this determination that the Taxpayer was not required to file a Virginia corporate income tax return for the taxable year at issue. The remaining question, therefore, becomes whether the Taxpayer's refund request was timely.

Virginia Code § 58.1-1824 provides that "any person who has paid an assessment of taxes administered by the Department of Taxation may preserve his judicial remedies by filing for refund with the Tax Commissioner . . . within three years of the date such tax was assessed." Virginia Code § 58.1-1824, therefore, expressly limits the right to file a protective claim to cases in which both the filing of the claim and the payment of the assessment occurred within three years of the assessment. See Public Document (P.D.) 86-224 (11/3/1986).

Pursuant to Va. Code § 58.1-1820, an assessment results when a notice is issued by the Department or a taxpayer self-assesses a tax. Self-assessments are deemed to be made when a taxpayer pays a tax or when the return is filed. Construed together, nothing in Va. Code § 58.1-1824 or Va. Code § 58.1-1820 requires that a payment must be tied to a return for the statute of limitations on refunds to apply.

When a taxpayer has made an estimated payment but not filed a return, the payment is deemed to have been made as of the original due date of the return. See Title 23 VAC 10-20-160 D 4 a. Virginia Code § 58.1-441 requires Virginia corporate income tax returns to be filed on or before the fifteenth day of the fourth month following the close of the taxable year. Therefore, both the self-assessment and payment in this case was deemed to have occurred as of September 15, 2009. The Taxpayer, therefore, had until September 17, 2012 (September 15 was on a Saturday), to file its protective claim. In this case, however, the request was not made until April 2014, well after the three year limitations period had expired.

In addition, Va. Code § 58.1-400 imposes income tax "on the Virginia taxable income for each taxable year of ... every foreign corporation having income from Virginia sources" (emphasis supplied). As such, the fact that a business entity is not located in Virginia is not determinative of whether it is required to pay Virginia corporate income tax or required to file a Virginia return. It would be impossible, therefore, for the Department to know that a business entity was not required to pay corporate tax or file a return merely if it was not located in Virginia. In any event, there was no indication the Taxpayer even was a foreign corporation based on the check submitted in payment and the Taxpayer's estimated tax declaration, both of which came from a third-party management services provider with a Virginia address.

While I empathize with your situation, the Department is not authorized to issue a refund under these circumstances. Accordingly, the refund claim made by the Taxpayer for the taxable year ended May 31, 2009, is denied.

The Code of Virginia sections, regulations 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 Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns
Tax Commissioner

AR/1-5830004972.M