I submitted an intent to appeal along with an offer in compromise, but the Department said my appeal was incomplete and closed my case -- can I still file a complete appeal after my offer in compromise is later rejected?

Plain-English summary

Virginia strictly enforces a 90-day deadline for appealing a tax assessment, and this ruling shows how little room there is to work around it once that window closes -- even if a taxpayer was pursuing a different kind of relief (an offer in compromise) in the meantime.

Under Va. Code § 58.1-1821, a taxpayer has 90 days from the date of an assessment to apply to the Tax Commissioner for correction, and Title 23 VAC 10-20-165 B 1 confirms the Department "strictly enforces" that period -- a complete appeal must be filed within the 90 calendar days.

Here, the taxpayer's sales and use tax assessments were dated August 22, 2019, making the appeal deadline November 20, 2019. Instead of filing a complete appeal by that date, the taxpayer submitted an intent to appeal along with an offer in compromise based on doubtful collectibility -- essentially, an argument that the debt should be reduced or settled because the taxpayer couldn't realistically pay it in full. When no complete appeal followed, the Department sent a letter in June 2021 explaining that a complete appeal had never been received and the case was closed. The offer in compromise itself was later rejected in September 2021, at which point the taxpayer indicated it now wanted to file an appeal after all -- and did, in correspondence postmarked well beyond the original 90-day window.

The Department held the application for correction was barred by the statute of limitations. The offer in compromise process and the formal appeal process are separate tracks; pursuing one doesn't pause, extend, or substitute for the deadline on the other. Because the assessment date fixes the appeal deadline regardless of what else may be happening with a collection-relief request, the assessment stood as issued.

What this means for you

Anyone who receives a Virginia tax assessment they disagree with

File a COMPLETE appeal within 90 days of the assessment date -- not just a notice of intent to appeal. An incomplete submission that doesn't meet the Department's appeal requirements will eventually be treated as no appeal at all, and the 90-day clock does not pause while the Department reviews an incomplete filing.

Taxpayers considering an offer in compromise instead of, or alongside, an appeal

An offer in compromise (based on doubtful collectibility or doubtful liability) is a separate process from an assessment appeal, and pursuing one does not extend, pause, or substitute for the appeal deadline. If you want to preserve your right to challenge the assessment itself, file a complete, timely appeal regardless of what happens with any settlement offer.

Anyone whose appeal or settlement request was rejected or closed for being incomplete

Don't assume you can restart the clock later. Once the 90-day window from the assessment date has passed, a later attempt to file -- even prompted by the rejection of a separate compromise offer -- is very likely to be barred by the statute of limitations, regardless of the reason for the delay.

Common questions

Q: I submitted a notice that I intend to appeal, along with an offer in compromise -- is that enough to preserve my appeal rights?
A: No. You must file a COMPLETE appeal meeting the Department's requirements within 90 days of the assessment date. A notice of intent, or a request for compromise, does not substitute for a complete appeal.

Q: Does requesting an offer in compromise pause the 90-day appeal deadline while it's being considered?
A: No. The appeal deadline and the offer-in-compromise process run independently; pursuing a compromise offer does not extend or toll the 90-day window to appeal the assessment itself.

Q: My offer in compromise was rejected months (or years) after my assessment -- can I appeal at that point?
A: Only if you're still within 90 days of the assessment date, which is very unlikely if significant time has passed. Once the original 90-day window closes, a later appeal attempt -- even one prompted by a compromise offer's rejection -- will likely be barred by the statute of limitations.

Citations and references

• Va. Code § 58.1-1821 (a taxpayer may apply for correction of an assessment within 90 days of the assessment date)
• 23 VAC 10-20-165 B 1 (the Department strictly enforces the 90-day limitations period; a complete appeal must be filed within 90 calendar days of the assessment)

Subject

Administration : Appeal - Filing Requirements, Deadline for Filing

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 22-71

Original ruling text

April 13, 2022

Re: § 58.1-1821: Retail Sales and Use Tax

Dear *:

This is in response to your letter in which you protest the retail sales and use tax assessment issued to * (the “Taxpayer”), for the audit periods February 2013 through June 2019.

FACTS

The Taxpayer was audited for the periods at issue and an assessment was issued for tax and interest. The Taxpayer simultaneously submitted an intent to appeal and an offer in compromise based on doubtful collectibility. When the Taxpayer failed to submit a complete or timely appeal, the Department issued a letter, dated June 21, 2021, indicating a complete appeal had not been received and the case was closed. After its offer in compromise was rejected in September 2021, the Taxpayer submitted a letter indicating it would now like to submit an appeal.

DETERMINATION

Virginia Code § 58.1-1821 states that “Any person assessed with any tax administered by the Department of Taxation may, within ninety days from the date of such assessment, apply for relief to the Tax Commissioner….” Title 23 of the Virginia Administrative Code (VAC) 10-20-165 B 1 provides that “the Department strictly enforces the 90-day limitations period for filing a timely administrative appeal. A taxpayer must file a complete appeal within 90 calendar days after the date of assessment.”

In this instance, the assessments issued to the Taxpayer are dated August 22, 2019. Based on the provisions in Virginia Code § 58.1-1821 and Title 23 VAC 10-20-165, the Taxpayer’s complete appeal must have been filed by November 20, 2019. The Taxpayer’s correspondence was postmarked on October 6, 2020, well beyond the 90 day period permitted by statute. Accordingly, the Taxpayer’s application for correction is barred by the statute of limitations.

Based on this determination, the assessment is correct. An updated bill, with interest accrued to date, will be mailed shortly to the Taxpayer. No further interest will accrue provided the outstanding assessment is paid within 60 days from the date of this letter.

The Code of Virginia section and regulation cited, along with other reference documents, are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s web site. If you have any questions about this response, you may contact * in the Department’s Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/3965.G