Does a county's later partial reduction of a BPOL assessment create a new appealable event and restart the local appeal deadline?

Plain-English summary

The county issued BPOL assessments for 2013 and 2014, then partially reduced them in November 2016 after a court decision concerning the out-of-state deduction. The taxpayer argued that the reductions created a new appealable event and allowed a new local appeal.

The Commissioner disagreed. The statutory appealable events were the original assessment increases in December 2013 and April 2014. A later reduction did not become an assessment increase, refund denial, new assessment, or classification appeal, and it did not revive the earlier event.

The local appeal deadline was the later of one year after the appealable event or one year after the last day of the tax year. That produced deadlines of December 31, 2014 for 2013 and December 31, 2015 for 2014. The taxpayer's August 2017 local appeal was therefore late, leaving the Department without jurisdiction.

The ruling also clarifies the normal sequence. When a taxpayer timely files a local appeal and the locality only partially reduces the assessment, the taxpayer can appeal the final local determination to the Department. The final determination does not need to create another appealable event; the original event triggered the local appeal.

What this means for you

Businesses receiving a BPOL assessment

Do not wait for a later audit adjustment or favorable legal development. File the local administrative appeal within the original statutory deadline.

Taxpayers receiving a partial reduction

If your original local appeal was timely, you may continue to the Department after the final local determination. If you never timely appealed, the reduction generally does not restart the clock.

Common questions

Q: Does lowering an assessment create a new appealable event?
A: No, not under the circumstances in this ruling.

Q: What were the deadlines here?
A: December 31, 2014 for the 2013 assessment and December 31, 2015 for the 2014 assessment.

Q: Did the Commissioner decide how the out-of-state deduction should be calculated?
A: No. The appeal was dismissed for lack of jurisdiction.

Citations and references

• Va. Code § 58.1-3703.1(A)(5)(a)-(b) (appealable events and local deadline)
• Va. Code § 58.1-3703.1(A)(6)(a) (appeal to the Department)
• P.D. 17-90 (earlier jurisdiction determination involving the same taxpayer)
• P.D. 04-67, P.D. 11-91, P.D. 13-217, and P.D. 16-3 (appealable-event authorities)

Subject

Appealable Event and Statute of Limitations

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 18-213

Original ruling text

December 18, 2018

Re: Appeal of Final Local Determination

Taxpayer: *

Locality: *

Business, Professional and Occupational License (BPOL) tax

Dear *:

This notice of jurisdiction is issued upon the application for correction filed by you on behalf of * (the “Taxpayer”), with the Department of Taxation. The Taxpayer appeals BPOL tax assessments issued by the *** (the “County”) for the 2013 and 2014 tax years.

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

FACTS

The Taxpayer claimed the out-of-state deduction on each of its 2013 and 2014 BPOL tax returns. The County initially denied the deductions and issued assessments. After the decision was reached in Nielsen Company (US), LLC v. County Board of Arlington County, 289 Va. 79, 767 S.E. 2d 1 (2015), the County allowed the deduction in part and reduced the assessments accordingly. The County communicated that action to the Taxpayer in a November 2016 letter that was styled as a final determination. The Taxpayer appealed to the Department, contending that the County had improperly used the Taxpayer’s total payroll to compute the deduction.

In Public Document (P.D.) 17-90 (6/8/2017), the Department determined that the Taxpayer had not filed a local appeal with the County with respect to the 2013 and 2014 assessments. Accordingly, the Department determined that it lacked jurisdiction to issue a determination and advised the Taxpayer to file a local appeal if it was still within the statute of limitations.

The Taxpayer filed a local appeal in August 2017, and the County determined that it lacked jurisdiction because the appeal had not been filed pursuant to an appealable event. Alternatively, the County determined that the methodology it had used to compute the deduction was correct.

The Taxpayer appealed to the Department, contending the County’s decision to reduce the assessments at issue as communicated in the November 2016 letter was an appealable event, and the County should have only considered the Taxpayer’s productive payroll in computing the deduction.

ANALYSIS

Appealable Event

Virginia Code § 58.1-3703.1 A 5 b provides that any person assessed with a local license tax as a result of an appealable event may file an administrative appeal of the assessment within one year from the last day of the tax year for which such assessment is made, or within one year from the date of the appealable event, whichever is later, with the commissioner of the revenue or other local assessing official. An appealable event is an increase in the assessment of a local license tax payable by a taxpayer, the denial of a refund, or the assessment of a local license tax where none previously was assessed. See P.D. 04-67 (8/20/2004), P.D. 11-91 (6/2/2011), P.D. 13-217 (12/12/2013), and P.D. 16-3 (2/2/2016).

The County contends that because the adjustment was not an increase in the assessment of a local license tax, the denial of a refund or the assessment of a local license tax where none was previously assessed, no appealable event occurred. The Taxpayer contends that Virginia Code § 58.1-3703.1 A 5 a defines “appealable event” broadly to include “any other action taken by the locality” in addition to the three events stated above. The Department disagrees. The phrase “any other action taken by the locality” appears in the part of the statute that refers to appeals of a taxpayer’s classification of its business as an appealable event, “regardless of whether the taxpayer’s appeal is in conjunction with an assessment, examination, audit or any other action taken by the locality ” (Emphasis supplied). Because the current appeal does not involve a classification issue, that provision is not applicable.

The Taxpayer also argues that the County’s denial of its appeal was an appealable event because it was the denial of an application for correction of erroneous assessment or simply an action taken by the County as above. Again, the Department disagrees. An appealable event, as stated above, is an increase in the assessment of a local license tax payable by a taxpayer, the denial of a refund, or the assessment of a local license tax where none previously was assessed. See Virginia Code § 58.1-3703.1 A 5 a. The statute lists four circumstances out of which the appealable event can arise, including the “denial of an application for correction of erroneous assessment attendant to the filing of an amended application for license.” This appeal does not appear to involve an amended application for license, and even if it did, the purpose of the appealable event in the statute is to establish when a taxpayer has the right to appeal to a locality, not to the Department. See Virginia Code § 58.1-3703.1 A 5 b. The right to appeal to the Department depends on whether the locality has issued a valid final determination, not whether another appealable event has occurred. See Virginia Code § 58.1-3703 A 6 a.

In addition, the Taxpayer argues that the partial reduction of an assessment is analogous to the circumstances of P.D. 17-215 (12/22/2017), P.D. 17-216 (12/22/2017) and P.D. 17-217 (12/22/2017). In each of those cases, the locality indicated it would issue partial refunds to the taxpayer but failed to issue any refunds for more than a year. As a result, it appeared that the locality had denied the refunds, and the taxpayer was instructed to file an appeal with the locality if in fact that was the case. Denied refund claims are clearly appealable events under Virginia Code § 58.1-3703.1 A 5 a. The act of reducing an assessment that has already been issued is not the denial of a refund.

In correspondence to the Department while the appeal was pending, the Taxpayer argued further that the mere reduction of an assessment should not negate the fact that there still had been “an increase in the assessment,” namely, the Taxpayer’s self-assessment with the filing of the returns. While the Department does not disagree that a later partial reduction of the assessment does not negate the fact that the County previously increased the Taxpayer’s self-assessment, it does not follow that a later reduction of the assessment effectively revived the previous increase for purposes of determining when the appealable event occurred.

In this case, the appealable events were the issuance of the assessments in December 2013 and April 2014, respectively. The reduction of the assessments in November 2016 did not constitute a separate appealable event. The question, therefore, becomes whether the Taxpayer’s local appeal was filed within the statute of limitations.

Statute of Limitations

As stated above, under Virginia Code § 58.1-3703.1 A 5 b, a taxpayer may file an administrative appeal of the assessment within one year from the last day of the tax year for which such assessment is made, or within one year from the date of the appealable event, whichever is later, with the commissioner of the revenue or other local assessing official.

In P.D. 17-90, the Department determined that a local appeal had not been filed by the Taxpayer and advised the Taxpayer to file a local appeal if it was still within the statute of limitations for filing one. Based on the information provided in this case, the statute of limitations to file local appeals of the 2013 and 2014 assessments expired on December 31, 2014, and December 31, 2015, respectively. In each case, the last day to file an appeal was one year from the last day of the tax year for which the assessment was made, because that was later than one year from the date of the appealable event.

DETERMINATION

The appealable events were the issuance of the 2013 and 2014 tax year assessments in December 2013 and April 2014, respectively. The later reduction of the assessments by the County did not constitute an appealable event as defined under Virginia Code § 58.1-3703.1 A 5 a. Therefore, the Taxpayer had until the later of one year from the date of the appealable event or one year from the last day of the tax year for which the assessment was issued to file its local appeal. The last days to file the local appeals of the 2013 and 2014 tax year assessments were December 31, 2014, and December 31, 2015, respectively. In P.D. 17-90, the Department directed the Taxpayer to file its local appeal if it was within the statute of limitations. Because the statute of limitations had expired, however, the Taxpayer’s local appeal was not timely. Accordingly, the Department has no jurisdiction to decide the Taxpayer’s appeal.

Nothing in this determination should be construed to limit a taxpayer’s right to appeal to the Department in the event that a taxpayer timely files a local appeal pursuant to an appealable event, the locality partially reduces the assessment as a result of the local appeal, and the taxpayer believes a further reduction or abatement of the assessment is warranted. An appealable event triggers the taxpayer’s ability to file a local appeal. If the taxpayer is not satisfied with the locality’s final determination, it may then appeal to the Department. The locality’s final determination is not required to, nor does it generally, create another appealable event for Department to have jurisdiction over the appeal.

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/1701.M