Did Virginia's seven-year collection limit bar old income tax liabilities for 1998 and 2000 through 2002?

Subject

Assessment and Statute of Limitations

Plain-English summary

Virginia rejected a taxpayer's attempt to stop collection of income tax liabilities for 1998 and 2000 through 2002.

The taxpayer had paid the 2000 through 2002 assessments through the 2017 Virginia Tax Amnesty Program. Under the amnesty terms, payment withdrew any protest and waived administrative and judicial appeal rights for those tax periods.

The 1998 assessment was issued in July 2005. Although Va. Code § 58.1-1802.1 later adopted a seven-year collection limit, that version applied only to assessments made on or after July 1, 2016. A 20-year limit applied when the 2005 assessment was made, so the liability remained collectible.

What this means for you

The collection deadline depends on the law applicable to the assessment date, not necessarily today's limitation period. Accepting tax-amnesty benefits can also waive the right to challenge the covered tax and period.

Common questions

Did the current seven-year limit apply to the 2005 assessment? No. The ruling says it applies only to assessments made on or after July 1, 2016.

Could the taxpayer appeal the years paid through amnesty? No. Payment under the amnesty program waived those appeal rights.

What happened to the 1998 balance? The appeal was denied, and the Department said an updated bill with accrued interest would issue.

Citations and references

• Va. Code § 58.1-1840.2 — Virginia Tax Amnesty Program.
• Va. Code § 58.1-1802.1 — collection limitations period.
• P.D. 17-156, P.D. 15-15, and P.D. 14-177, cited by the Commissioner.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 18-38

Original ruling text

March 29, 2018

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you dispute the collectability of individual income tax assessments issued to * (the “Taxpayer”) for the taxable years ended December 31, 1998 and 2000 through 2002.

FACTS

The Taxpayer did not file an individual income tax return for the taxable year 1998, and the Department issued an assessment on July 27, 2005. For taxable years 2000 through 2002, the Taxpayer filed returns but failed to pay the tax due. As a result, the Department issued assessments. On November 8, 2017, the Taxpayer satisfied his liability for taxable years 2000 through 2002 through the Virginia Tax Amnesty Program. The Taxpayer now disputes the collectability of the liabilities for taxable years 1998, and 2000 through 2002, contending that they are beyond the statute of limitations as set out in Virginia Code § 58.1-1802.1.

DETERMINATION

Amnesty

The Taxpayer satisfied the assessments for taxable years 2000 through 2002 through the Virginia Tax Amnesty Program established by Virginia Code § 58.1-1840.2. By choosing to pay under the amnesty terms, a taxpayer withdraws any current protest and waives the right to an administrative or judicial appeal on the respective tax and tax period receiving amnesty benefits. See Public Document (P.D.) 17-156 (9/5/2017). Therefore, the Taxpayer waived his rights to an administrative appeal by paying the assessments for the taxable years 2000 through 2002 pursuant to the Virginia Tax Amnesty Program. Accordingly, the appeal regarding the collectability of assessments for taxable years 2000 through 2002 is not approved.

Statutes of Limitations on Collections

The Taxpayer argues that, absent an agreement between the Commonwealth and the Taxpayer, the assessments are beyond the statute of limitations period for collections activities provided by Virginia Code § 58.1-1802.1.

Although Virginia Code § 58.1-1802.1 currently limits the Department's collection actions to seven years from the date of assessment, even if collection action has been initiated before the seven-year period, the statute of limitations has been amended several times due to legislative action. The current statute of limitations applies only to assessments made on or after July 1, 2016. Because the Taxpayer's assessment at issue was made prior to that date, the statute as currently written is inapplicable.

The assessment for taxable year 1998 was made July 27, 2005. Prior to July 1, 2010, the statute of limitations for collection actions was twenty years. As such, because the limitation period was twenty years at the time of the assessment, the Department is well within the limitations period for collection. See P.D. 15-15 (2/3/2015). Prior to the 2016 amendments to the statute, it has been the Department's policy that so long as any collection action is initiated or made before the end of the period of limitations, collection may continue until the assessment is satisfied. A collection effort with regard to a taxpayer commences when it levies an assessment and encompasses all means of collecting taxes enumerated under Virginia statutes. In general, some form of collection action is usually taken early within the limitations period. See P.D. 14-177 (10/14/2014).

Based on the foregoing, the assessment for taxable year 1998 is collectable by the Department and the Taxpayer's appeal is denied. An updated bill with accrued interest will be issued. The outstanding balance should be paid within 30 days of the bill date to avoid the accrual of additional interest.

The Code of Virginia sections and public documents 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/1504.C