State and Local Taxation

2020 Virginia Department of Taxation Rulings (Part 1)

2020 Virginia Department…

On its website, the Virginia Department of Taxation has released several rulings and appeal decisions. There has understandably been a delay to the posting of many rulings. Most of what has been posted is not terribly notable. However a few of these documents are noteworthy as they may affect Virginia taxpayers when these same issues are encountered. A brief summary of some of these notable rulings follows.

  • When an audit begins, taxpayers are typically asked to sign a waiver of the statute of limitations. In Public Document (P.D.) 20-6, the taxpayer refused to sign such a waiver as is his right. The auditor therefore issued a jeopardy assessment which requires immediate payment. The Tax Commissioner correctly determined that a jeopardy assessment was not warranted in this case.
  • In P.D. 20-21, a change in the law that was effective in 2005 was the issue. A problem here was that the corresponding regulation had never been updated to reflect the law change. Of course, the law change trumps the out-of-date regulation. Nonetheless, this public document points out the issue that all taxpayers have with regulations that are out-of-date and rarely updated.
  • The only corporate income tax public documents that were issued were on account of requests from taxpayers and guideline updates. There was not a document that responded to an appeal. The lack of appeal documents has been common for a number of years. The two most logical conclusions from this are that corporations are simply not appealing corporate income tax assessments or the Virginia Department of Taxation’s audit program for corporate income tax is minimal.
  • The local business, professional, and occupational license (BPOL) tax is a very troubling tax for most Virginia businesses. It is also a very unique tax. One of many ways that the BPOL tax is unique it that it has two statutes of limitations under Va. Code § 58.1-3703.1 (6 year) and Va. Code § 58.1-3903 (3 year) that apply to assessments for underpaid BPOL tax. This dichotomy is a source of inconsistent application from locality to locality. In P.D. 20-18, a locality asked the Tax Commissioner to help clarify this dichotomy. The Tax Commissioner opined that localities are required to assesses underpaid BPOL taxes for the previous 3 years. However, such assessments for prior years 4-6 are discretionary.

Christian Tennant is a Virginia tax attorney and former employee of the Virginia Department of Taxation. Mr. Tennant regularly speaks and writes on Virginia taxation. In his private practice he advises and represents businesses and individuals on a range of tax matters.

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