The Department is still trying to collect Virginia income tax assessments from 2009-2013 -- doesn't the current 7-year collection statute of limitations mean these are too old to collect anymore?

Plain-English summary

A taxpayer disputed the Department's ability to keep collecting on Virginia individual income tax assessments for the 2009 through 2013 taxable years (issued between February 2011 and July 2015), arguing the current seven-year collection statute of limitations (Va. Code § 58.1-1802.1) had expired.

Which statute of limitations actually applies. Virginia's collection deadline has changed repeatedly: unlimited before 1990, then a 20-year period starting in 1990, reduced to 10 years in 2010, and then to 7 years in 2012. The current version of § 58.1-1802.1 -- which cuts off collection after 7 years even if action was started earlier -- applies only to assessments made on or after July 1, 2016 (Va. Code § 58.1-1801.1 A). Since these assessments predate that cutoff, the newest, strictest version of the statute doesn't apply to them at all.

The older rule: start on time, then keep going until paid. For pre-2016 assessments, the Department's longstanding position is that as long as SOME collection action was started within whatever limitations period applied when the assessment was made, the Department can continue collecting until the assessment is fully satisfied -- the clock doesn't cut off ongoing collection once it's been properly started. "Collection action" is read broadly to include liens, consolidated bill notices, and Treasury Offset Program notifications (which redirect a taxpayer's federal refund toward a state debt), not just a single formal step.

Applying that here. Records showed the Department issued consolidated bill notices, bank liens, and Treasury Offset notifications on these assessments from March 2011 through January 2016 -- all comfortably within the 10-year (for the 2009 assessment) or 7-year (for the 2010-2013 assessments) limitations period that applied when each assessment was made. Because collection action started in time, the Department found the assessments remain collectible even now.

Outcome. The Department denied the taxpayer's request for relief; the 2009 and 2011 assessments had already been paid in full, and updated bills would follow for the remaining balances, with collection to resume if unpaid.

What this means for you

Anyone with an old Virginia tax assessment from before mid-2016

Don't assume the CURRENT 7-year collection cutoff applies to your older debt -- it only governs assessments made on or after July 1, 2016. Older assessments are governed by whatever limitations period was in effect when they were issued (20 years for pre-2010 assessments, 10 years for 2010-2012, 7 years for 2012 onward through mid-2016).

Anyone assuming a debt is "too old" because it predates a lien or notice you remember

Check the Department's full collection history, not just what you personally recall. A consolidated bill notice, bank lien, or Treasury Offset notification issued years ago -- even if you didn't think of it as "collection action" -- can be enough to keep an assessment alive indefinitely under the old rule, as long as it happened within the original limitations window.

Common questions

Q: Does Virginia's current 7-year collection statute of limitations apply to my old assessment from the 2000s or early 2010s?
A: Not necessarily. The current version only applies to assessments made on or after July 1, 2016. Older assessments are governed by whatever limitations period (20, 10, or 7 years) was in effect when they were made.

Q: If the Department started collecting within the deadline, can it keep collecting after the deadline passes?
A: For pre-2016 assessments, yes -- under the Department's longstanding policy, once a collection action is properly initiated within the applicable limitations period, collection can continue until the assessment is fully paid.

Q: What counts as a "collection action" that keeps the clock satisfied?
A: Liens, consolidated bill notices, and Treasury Offset Program notifications all count, among other statutory collection methods.

Citations and references

Statutes:

• Va. Code § 58.1-1802.1 -- current 7-year statute of limitations on Department collection actions
• Va. Code § 58.1-1801.1 A -- the current statute of limitations applies only to assessments made on or after July 1, 2016

Prior rulings referenced (described here, not linked): P.D. 14-177 (10/14/2014) and P.D. 23-27 (3/15/2023) -- the Department's longstanding interpretation that timely-initiated collection action keeps a pre-2016 assessment collectible until satisfied.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 24-23

Original ruling text

March 12, 2024

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will respond to your letter in which you dispute the collectability of the individual income tax assessments issued to your client, * (the “Taxpayer”), for the taxable years ended December 31, 2009, through 2013.

FACTS

The Taxpayer filed Virginia individual income tax returns for the 2009 through 2013 taxable years but did not pay the tax due, resulting in assessments issued at various times between February 2011 and July 2015. The Taxpayer made payments towards some of the assessments and the Department has collected some of the remaining balance as well. The Taxpayer filed an application for correction contending that the assessments are no longer collectable because the seven-year statute of limitations has expired.

DETERMINATION

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 within 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. See Virginia Code § 58.1-1801.1 A. Because the assessments at issue were made prior to that date, the statute as currently enacted does not apply to the Taxpayer’s assessments.

Until 1990, Virginia law provided no limitation on the Department’s ability to collect assessments. In 1990, legislation was passed that required the Department to institute collection action within 20 years from the date of the assessment. This period of limitations was reduced from 20 years to 10 years from the date of assessment in 2010 and from 10 years to seven years in 2012.

For assessments made prior to the 2016 amendments, it has been the Department’s longstanding policy that, as long as any collection action was initiated or made before the end of the period of limitations, collection could continue until the assessment was 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. As such, if the Department instituted a collection action within 10 years for the assessment for the 2009 taxable year and within 7 years for the assessments issued for the 2010 through 2013 taxable years, the assessments remained eligible for collection. See Public Document (P.D.) 14-177 (10/14/2014) and P.D. 23-27 (3/15/2023).

From March 2011 to January 2016, the Department issued various consolidated bill notices, bank liens, and Treasury Offset Program (TOP) notifications concerning the assessments at issue, all of which the Department considers collection actions. These actions were taken within the respective statute of limitations for the assessments at issue. As such, the Department considers the assessments to remain collectable, and the Taxpayer’s request for relief cannot be granted.

The Department’s records indicate that the assessments for the 2009 and 2011 taxable years have been paid in full. An updated bill for the other assessments will be issued shortly. If payment is not made, collection actions will resume.

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/4578.B

Related Documents

14-177

23-27