Did a corporation's brief timely letter preserve a refund claim when its detailed amended return came later?

Plain-English summary

A corporation discovered that its 2012 Virginia return omitted a foreign-source-income subtraction. Before the limitations period expired, it sent a brief protective-claim letter and promised an amended return and detailed grounds, which arrived after the deadline.

Virginia found that the letter sufficiently identified the taxpayer, corporate income tax, taxable year, requested refund, and the alleged error. Because the timely filed original return made the assessment and payment dates determinable, the letter satisfied the protective-claim regulation. The Department accepted the later amended return and grounds and directed that a refund issue as warranted.

Citations and references

• Va. Code §§ 58.1-1824, 58.1-1821, and 58.1-1820
• 23 VAC 10-20-190 A 2
• P.D. 13-121

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 18-50

Original ruling text

April 16, 2018

Re: § 58.1-1824: Protective Claim for Refund

Dear *:

This will reply to your letter in which you submit a protective claim for refund of Virginia corporate income tax for * (the “Taxpayer”) for the taxable year ended December 31, 2012. I apologize for the delay in responding to your request.

FACTS

The Taxpayer discovered it had failed to claim a subtraction for foreign source income on its Virginia corporate income tax return for the 2012 taxable year. The Taxpayer filed a protective claim for refund pursuant to Virginia Code § 58.1-1824 prior to the expiration of the statute of limitations and then subsequently filed an amended return. The Department denied the Taxpayer's request for a refund because the amended return was filed after the limitations period passed. The TP contends that its protective claim was timely filed and met the regulatory requirements.

DETERMINATION

Pursuant to the authority granted the Department under Virginia Code § 58.1-1824, a protective claim for refund can be held pending the outcome of another case before the courts or the claim may be decided based upon its merits pursuant to Virginia Code § 58.1-­1821. As permitted by statute, the Taxpayer's request has been treated as an appeal under Virginia Code § 58.1-1821.

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.” Under Title 23 of the Virginia Administrative Code (VAC) 10-20-190 A 2, no specific form is required for a protective claim. However, the protective claim must include information that sufficiently identifies the taxpayer, type of tax, taxable period, remedy sought, date of assessment, and the date of payment. In addition, an appropriately executed statement setting forth each alleged error, grounds upon which taxpayer relies, and all facts relevant to taxpayer's contention must also be included. See Public Document (P.D.) 13-121 (7/1/2013). If applicable, the taxpayer must also show that the determination of the issues depends upon the outcome of another case pending in court.

The Taxpayer submitted a brief letter in August 2016 requesting a protective claim for refund. The letter further stated that it would submit an amended 2012 return, along with a detailed grounds of support within 30 days. The amended return and grounds were submitted in December 2016. The Taxpayer's request for a refund was then denied by the Department for being outside the limitations period.

The August 2016 letter provided the Taxpayer's name and federal employer identification number. It stated that the claim was for a refund of Virginia corporate income tax paid for the 2012 taxable year. Therefore, the letter identified the Taxpayer and taxable period. Self-assessments made by a taxpayer upon the filing of a return are considered assessments for purposes of applying the protective claim provisions. See Virginia Code § 58.1-1820. In the case of taxes requiring an annual or monthly return, self-assessments are deemed made when the return is filed. Because the Taxpayer timely filed and paid its 2012 Virginia corporate income tax, the date of assessment and payment could be determined. Finally, the letter stated that the Taxpayer failed to claim an otherwise allowable foreign source income subtraction. As such, the letter stated the grounds for the protective claim.

Accordingly, because the Taxpayer's letter of August 2016 was received by the Department prior to the expiration of the limitations period, and met the requirements of Title 23 VAC 10-20-190 A, the protective claim for refund has been timely filed. The Department will accept the Taxpayer's amended return and grounds of support. The amended return will be processed and a refund issued as warranted.

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/1387.B