After my county issued a final determination on my BTPP tax appeal, I missed the 90-day deadline to appeal to the Department because we were still negotiating a settlement -- does that give the Department jurisdiction anyway?

Plain-English summary

This case has a long procedural history. In 1999, a company got a letter from its county confirming it qualified as a manufacturer (exempting certain equipment from Business Tangible Personal Property, or BTPP, tax), though an affiliate didn't; the county reaffirmed that guidance by email in 2009. In 2018, the county audited the company, concluded it no longer qualified as a manufacturer, and assessed BTPP tax retroactively for 2015-2018. The company appealed locally, arguing both that it was still a manufacturer and that the 1999/2009 guidance should have protected it from retroactive assessment. The county issued a final written determination on November 13, 2020, rejecting both arguments. The company then filed a circuit court case in July 2021, but took a voluntary dismissal (nonsuit).

Rather than re-filing in court or appealing to the Department within the normal window, the company waited until January 2022 -- over a year after the county's final determination -- and told the county it intended to appeal to the Department, on the theory that the county's determination had never actually resolved one specific sub-argument (whether the 2009 email itself, separate from the 1999 letter, was its own binding determination), which meant the appeal could be treated as still "pending" more than a year later. Separately, the company argued that settlement negotiations it initiated after the county's determination -- offering to drop its appeal rights if the county waived the tax, and getting a partial counter-offer to waive only penalties and interest -- had nullified the county's final determination, requiring a new one.

The Department rejected both theories. On the first, it found the company's own local appeal had only asked whether the 1999 letter was a binding written ruling, referring to the 2009 email merely as an "affirmation" of that letter -- not as a separate determination in its own right -- so the county's silence on that narrow framing didn't mean it had failed to act on the appeal. On the second, the Department found nothing in Virginia's settlement/compromise statute (which lets a local assessing officer settle a dispute where there's substantial doubt about liability) suspends appeal deadlines, and the company's own communications admitted it needed a quick answer because its Department appeal deadline was approaching -- confirming the deadline was still running throughout the negotiations. Because the company's appeal to the Department came in February 2022, more than a year past the 90-day deadline that started when the county's November 2020 determination issued, the Department found it had no jurisdiction to rule on the manufacturer classification or retroactivity questions at all.

What this means for you

Businesses appealing a local BTPP or similar business tax determination to the Department

Once your locality issues its final written determination, the clock to appeal to the Department (generally 90 days under the Guidelines for Appealing Local Business Taxes) keeps running regardless of ongoing settlement talks you may separately pursue with the locality, and regardless of a court case you file and later dismiss. Don't assume any of those activities pause or restart your appeal deadline.

Taxpayers hoping a locality's silence on a minor sub-argument reopens their appeal window

The "pending more than one year" rule (Va. Code § 58.1-3983.1 B 6) is meant for situations where a locality genuinely never resolved the appeal -- it won't help if the locality's determination in fact addressed every issue you clearly raised, even if you later wish you'd framed one point differently.

Anyone negotiating a settlement or compromise with a locality after receiving a final determination

A settlement offer and counter-offer don't nullify an existing final determination or create a new one -- if you want to preserve appeal rights while negotiating, don't let the appeal deadline lapse in the meantime.

Common questions

Q: Does negotiating a settlement with the county after its final determination pause my deadline to appeal to the Department?
A: No. Nothing in Virginia's local-tax compromise statute suspends filing deadlines, and pursuing settlement talks doesn't extend the window to appeal the underlying determination.

Q: If the county's final determination doesn't address every single point I raised, can I treat my appeal as still "pending" and appeal to the Department more than a year later?
A: Only if the county genuinely failed to resolve an issue you actually raised in your appeal. If the county addressed everything you clearly presented -- even if you feel one nuance wasn't fully separately analyzed -- that's not a failure to act that revives the one-year-pending option.

Q: Can I dismiss a circuit court case and later re-raise the same dispute through a Department appeal?
A: This ruling shows that doing so doesn't reset your Department appeal deadline -- the 90-day (or, if applicable, one-year-pending) clock still runs from the locality's original final determination.

Citations and references

• Va. Code § 58.1-3983.1 B (procedure and one-year deadline to file a local administrative appeal of a business tax assessment)
• Va. Code § 58.1-3983.1 B 6 (a taxpayer may appeal to the Department if a local appeal has been pending more than one year, with 30 days' written notice)
• Va. Code § 58.1-3983.1 D (a taxpayer may appeal to the Department only after a final local determination is issued)
• Va. Code § 58.1-3983.1 J 1 (limits retroactive assessment where a taxpayer relied on prior written guidance)
• Va. Code § 58.1-3994 (a local assessing officer may compromise a disputed local business tax assessment where there is substantial doubt as to liability)
• P.D. 04-28 (6/25/2004) (Department's Guidelines for Appealing Local Business Taxes, including the 90-day deadline to appeal a final local determination to the Department)
• P.D. 14-96 (6/26/2014) (a locality's letter is not a final determination where it shows the locality still had unresolved issues under review)

Subject

Administration: Appeal - Jurisdiction, Pending More Than One Year, Subsequent Negotiations

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 22-120

Original ruling text

July 21, 2022

Re: Appeal of Final Local Determination

Taxpayer: *

Locality: *

Business, Tangible Personal Property Tax

Dear *:

This notice of jurisdiction is issued upon the application for correction filed on behalf of your client, * (the “Taxpayer”), appealing the Final Local Determination issued by *** (the “County”) regarding the Business Tangible Personal Property (BTPP) tax assessments for the 2015 through 2018 tax years.

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

FACTS

In 1999, the Taxpayer requested a classification determination from the County regarding whether it and one of its affiliates operating at a location in the County qualified as manufacturers such that their furniture, fixtures, and computer equipment used in manufacturing were exempt from BTPP tax. By letter dated August 2, 1999 (the “1999 CO Letter”), the County determined that the Taxpayer qualified as a manufacturer but that its affiliate did not qualify. In 2009, the County clarified its position in the 1999 CO Letter indicating that although the affiliate no longer operated in the County, the terms of the 1999 guidance still applied in that, if the Taxpayer were conducting other activity separate from its manufacturing, such activity would be taxable.

In 2018, the County conducted an audit of the Taxpayer’s offices located in the County. The County concluded that the Taxpayer did not qualify as a manufacturer and issued BTPP tax assessments for the 2015 through 2018 tax years. The Taxpayer contested the assessment with the County’s audit staff. On February 7, 2020, an employee of the County denied the application and notified the Taxpayer that it could appeal directly to the County’s assessing officer.

The Taxpayer timely submitted an administrative appeal to the County under Virginia Code § 58.1-3983.1 B. The appeal disputed the County’s determination that the Taxpayer was not a manufacturer and argued that the County was precluded from retroactively assessing BTPP tax because the Taxpayer had relied in good faith on the 1999 CO Letter as “reaffirmed” in 2009. The County issued a final written determination dated November 13, 2020, in which it concluded that the Taxpayer did not qualify as a manufacturer and that the Taxpayer could not rely on the 1999 CO Letter to avoid retroactive application of the change in classification.

In July 2021, the Taxpayer filed a petition in the Fairfax County Circuit Court. Subsequently, the Taxpayer was granted a nonsuit by the court and the case was dismissed.

On January 25, 2022, the Taxpayer notified the County that it intended to appeal to the Department pursuant to Virginia Code § 58.1- 3983.1 B 6 asserting that the County had not addressed whether the auditor’s response in the 2009 email independently precluded the County from issuing retroactive assessments. The Taxpayer reasoned that, as a result, it could treat the appeal as having been pending for more than one year and thus it could appeal to the Department. On February 24, 2022, the Taxpayer submitted its appeal to the Department.

ANALYSIS

A taxpayer assessed with BTPP tax may appeal such 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 assessment, whichever is later, to the commissioner of the revenue or other local assessing official. See Virginia Code § 58.1-3983.1 B 1. If a taxpayer wishes to appeal an assessment from a locality to the Department, it must first file a local administrative appeal pursuant to the process set forth in Virginia Code § 58.1-3983.1 B. Once a proper local appeal has been filed, the locality must undertake a full review of the taxpayer’s claims and issue a written determination setting forth the facts and analysis in support of the locality’s decision. Pursuant to Virginia Code § 58.1-3983.1 D, only when a final local determination has been issued can a taxpayer file an administrative appeal with the Department if it wishes to contest any of the locality’s conclusions. Alternatively, a taxpayer may file an appeal with the Department if its appeal with the locality has been pending for more than one year and it provides the locality with at least 30 days written notice. See Virginia Code § 58.1-3983.1 B 6.

Virginia Code § 58.1-3983.1 B and the Guidelines for Appealing Local Business Taxes (the “Guidelines”), issued as Public Document (P.D.) 04-28 (6/25/2004), provide taxpayers with the procedure for appealing local business tax assessments. The County’s final local determination was issued on November 13, 2020. Accordingly, under the Guidelines, the Taxpayer had until February 11, 2021, to file an administrative appeal with the Department. The appeal filed February 24, 2022, was well after the 90 day deadline.

The Taxpayer, however, asserts the Department has jurisdiction because the County’s final local determination did not address one of the issues set forth in its local appeal, and accordingly, the provisions of Virginia Code § 58.1-3983.1 B 6 should apply with respect to that issue. Alternatively, the Taxpayer asserts that subsequent to issuing its final local determination, the County entered into negotiations with the Taxpayer which nullified the final local determination, requiring the County to issue a new final local determination.

Appeal Pending More Than One Year

The Taxpayer states that the County failed to determine whether the 2009 email affirmation of the County’s 1999 CO Letter constituted a separate determination on which the Taxpayer was entitled to rely such that the County was precluded from assessing BTPP tax retroactively pursuant to Virginia Code § 58.1-3983.1 J 1.

The Taxpayer’s third issue as set forth in its appeal to the County asked whether the 1999 CO Letter was a written ruling pursuant to Virginia Code § 58.1-3983.1. While the Taxpayer referenced the 2009 email in its analysis, it referred to it as the auditor’s “2009 affirmation” of the 1999 CO Letter and in no way asserted that the 2009 email amounted to a determination in its own right. The fact that the County did not address whether the 2009 email itself amounted to a determination on which the Taxpayer was entitled to rely, therefore, does not amount to failure by the County to act on the Taxpayer’s appeal. The Taxpayer, accordingly, may not appeal to the Department pursuant to Virginia Code § 58.1-3983.1 B 6 on the theory that more than one year had passed without the issuance of a final determination.

Settlement Negotiations

Subsequent to its receipt of the County’s final determination, the Taxpayer emailed the County and offered to forgo its appeal rights with respect to the ongoing classification of the Taxpayer for BTPP purposes if the County waived the tax, penalties and interest assessed for the 2015 through 2017 tax periods. The Taxpayer claims that the County subsequently made a counter-offer to waive the penalties and interest during a phone call, but would not waive the assessments themselves. The Taxpayer apparently rejected this counter-offer.

The Taxpayer argues that by entering into these negotiations and making a counter-offer, the County nullified the final local determination and must now issue a new final local determination. Virginia Code § 58.1-3994 authorizes an assessing officer to compromise and settle any disputed assessment of local business taxes if there is substantial doubt under applicable law, regulations, or guidelines as to the taxpayer’s liability for such taxes. Nothing in this section addresses or suspends filing deadlines for other avenues of collection or due process. In fact, the Taxpayer’s own communications admit that it needed a quick response to its settlement offer because the deadline for appealing to the Department was approaching. In addition, the negotiations initiated by the Taxpayer did not introduce new issues that would require restarting the local appeals process under the Guidelines.

The Taxpayer’s reliance on P.D. 14-96 (6/26/2014) is misplaced. In P.D. 14-96, the Department held that a letter from a county did not qualify as a final determination where the evidence clearly indicated that the county continued to work on unresolved issues and the letter did not meet the regulatory requirements for final determinations. In this case there were no unresolved issues as the County clearly analyzed and resolved each issue presented by the Taxpayer and the final determination otherwise met all the requirements set forth in the Guidelines.

DETERMINATION

For the reasons discussed above, the Taxpayer was required to file an appeal to the Department by February 11, 2021. Because this appeal was not filed until February 24, 2022, the Department lacks jurisdiction to address the Taxpayer’s 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/4110.X

Related Documents

04-28

14-96