What Virginia tax interest rates applied during the third quarter of 2019 to assessments, refunds, disputed assessments, estimated tax, and certain local taxes?

Plain-English summary

Virginia Tax Bulletin 19-5 announced the interest rates for July 1 through September 30, 2019.

• State assessment underpayments: 7%
• State refund overpayments: 7%
• Reduced rate on qualifying disputed assessments: 2%

These are historical quarterly rates, not current standing rates.

Why the state rate was 7%

IRC § 6621 set third-quarter 2019 federal underpayment and noncorporate overpayment rates at 5%. Va. Code § 58.1-15 adds two percentage points to the corresponding federal rates, producing Virginia's 7% assessment and refund rates.

Estimated-tax additions

• Taxable years ending March 31, 2019: the second-quarter 8% rate applied through the July 15, 2019 return due date.
• Taxable years ending June 30, 2019: the third-quarter 7% rate applied through the October 15, 2019 return due date.

The bulletin identifies Forms 500C, 760C, and 760F for corporations, individuals/estates/trusts, and farmers/fishermen.

Reduced rate for assessments under appeal

For qualifying administrative appeals filed on or after July 1, 2011, the federal short-term rate applies beginning nine months after assessment and continuing until the Department issues its determination. That rounded federal short-term rate was 2% for the third quarter of 2019.

Local delinquency and refund interest

Under Va. Code § 58.1-3916, a locality could impose up to 10% during the first year of delinquency. For later years it could impose up to the greater of 10% or the applicable federal underpayment rate; that federal rate was 5% for this quarter.

A locality that charged interest on delinquent taxes also had to pay the same rate on overpayments or erroneous assessments.

What this means for you

• Match the rate to the exact accrual quarter. The 7% and 2% figures applied only during Q3 2019.
• Estimated-tax computations may cross quarters. Use the rate specified through the return due date.
• Appeal-rate relief begins after nine months, not immediately. It also requires a qualifying Department administrative appeal.
• Local rates can differ from state rates. Check the locality's policy within the statutory cap.

Common questions

Q: What was Virginia's ordinary assessment interest rate in Q3 2019?

A: 7%.

Q: What rate applied to qualifying disputed assessments after nine months?

A: 2% for the third quarter of 2019.

Q: Did every local delinquent tax use 5%?

A: No. The bulletin says localities could use statutory rates up to the stated limits; 5% was the federal underpayment reference for that quarter.

Citations and references

• IRC § 6621 — federal rates
• Va. Code § 58.1-15 — Virginia state rates
• Va. Code § 58.1-3916 — local delinquency and refund interest

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 19-66

Original ruling text

TAX BULLETIN 19-5

Virginia Department of Taxation

June 17, 2019

VIRGINIA’S INTEREST RATES WILL CHANGE FOR THE THIRD QUARTER OF 2019

Federal Rates Decreased: State and certain local interest rates are subject to change every quarter due to changes in federal rates established pursuant to Internal Revenue Code (“IRC”) § 6621. IRC § 6621 dictates that the federal underpayment and overpayment rates are three percentage points higher than the federal short-term rate. Federal rates for the third quarter of 2019 will be 5% for tax underpayments (assessments) and 5% for tax overpayments (refunds) by noncorporate taxpayers.

Virginia Code § 58.1-15 provides that the underpayment rate for Virginia taxes will be 2% higher than the corresponding federal rate and the overpayment rate for Virginia taxes will be 2% higher than the federal overpayment rate for noncorporate taxpayers. Accordingly, the Virginia rates for the third quarter of 2019 will be 7% for tax underpayments (assessments) and 7% for tax overpayments (refunds).

Rate for Addition to Tax for Underpayments of Estimated Tax

Taxpayers whose taxable year ends on March 31, 2019: For the purpose of computing the addition to the tax for underpayment of Virginia estimated income taxes on Form 500C (for corporations), Form 760C (for individuals, estates, and trusts), or Form 760F (for farmers and fishermen), the second quarter 8% underpayment rate will apply through the due date of the return, July 15, 2019.

Taxpayers whose taxable year ends on June 30, 2019: For the purpose of computing the addition to the tax for underpayment of Virginia estimated income taxes on Form 500C (for corporations), Form 760C (for individuals, estates, and trusts), or Form 760F (for farmers and fishermen), the third quarter 7% underpayment rate will apply through the due date of the return, October 15, 2019.

Reduced Rate for Certain Assessments in Dispute

For administrative appeals filed with the Department of Taxation on or after July 1, 2011, a reduced interest rate equal to the federal short term rate established pursuant to IRC § 6621(b) applies, beginning nine months after the date of assessment until a determination is issued. The federal short-term rate established pursuant to IRC § 6621(b) for the third quarter of 2019, rounded to the nearest whole percent, is 2%. Accordingly, the reduced rate for the third quarter of 2019 for qualifying assessments in dispute is 2%.

Local Tax

Assessments: Localities that assess interest on delinquent taxes under Virginia Code § 58.1-3916 may impose interest at a rate not to exceed 10% for the first year of delinquency, and at a rate not to exceed 10% or the federal underpayment rate in effect for the applicable quarter, whichever is greater, for the second and subsequent years of delinquency. For the third quarter of 2019, the federal underpayment rate is 5%.

Refunds: Localities that charge interest on delinquent taxes are required to pay interest to taxpayers on all overpayments or erroneously assessed taxes at the same rate as they charge interest on delinquent taxes under Virginia Code § 58.1-3916.

Recent Interest Rates

Accrual Period

Overpayment (Refund)

Underpayment (Assessment)

Reduced

Rate

Beginning

Through

1-Jul-04

30-Sept-04

6%

6%

-

1-Oct-04

31-Mar-05

7%

7%

-

1-Apr-05

30-Sept-05

8%

8%

-

1-Oct-05

30-Jun-06

9%

9%

-

1-July-06

31-Dec-07

10%

10%

-

1-Jan-08

31-Mar-08

9%

9%

-

1-Apr-08

30-Jun-08

8%

8%

-

1-Jul-08

30-Sept-08

7%

7%

-

1-Oct-08

31-Dec-08

8%

8%

-

1-Jan-09

31-Mar-09

7%

7%

-

1-Apr-09

31-Dec-10

6%

6%

-

1-Jan-11

31-Mar-11

5%

5%

-

1-Apr-11

30-Sept-11

6%

6%

-

1-Oct-11

31-Mar-16

5%

5%

0%

1-Apr-16

31-Mar-18

6%

6%

1%

1-Apr-18

31-Dec-18

7%

7%

2%

1-Jan-19

30-Jun-19

8%

8%

3%

1-Jul-19

30-Sept-19

7%

7%

2%

Additional Information: This Tax Bulletin, along with other reference documents, is available online in the Laws, Rules and Decisions section of the Department’s website, located at www.tax.virginia.gov . If you have questions about interest rates, please visit the Department’s website or contact the Department at 804.367.8031 (for individuals), 804.786.2450 (for Soft Drink Excise Tax and Aircraft Sales and Use Tax), or 804.367.8037 (for all other business taxes).