In Virginia, the current pandemic has increased the importance of administrative tax appeals. Why? There are two overriding reasons. First, it is logical that state and local governments will be more aggressive when it comes to tax audits. Local governments are already hearing from tax collection firms about how to better collect their taxes. This is no doubt coupled with a more aggressive audit strategy. The second reason, and the point of this blog post, is not necessarily as intuitive. While litigating a tax dispute remains an option, scheduling such litigation may be an issue. Litigating state and local tax disputes in Virginia has always been an issue due to the cost of litigation. Now thanks to the pandemic, there will be a long line of cases just waiting to be scheduled.
In March, the Supreme Court of Virginia declared a judicial emergency that required circuit courts to take a number of actions including the requirement that the courts “Continue all civil… matters…” This declaration has been extended thirteen times and will likely be extended again. Since the declaration was issued, only 28 circuit courts out of more than 120 have been approved to resume jury trials. While those approvals have no direct effect on tax trials, they are instructive in that the major-majority of circuit courts in Virginia cannot even schedule those jury trials. To exacerbate this situation, many people are not reporting for jury duty. Whether or not the circuit court sits with a jury, each circuit has a fixed number of judges and a fixed number of courtrooms. Therefore, the waiting list for docket positions in circuit courts across Virginia has to be very long. When and how such waiting lists can be reduced will depend on how the pandemic ends (fingers-crossed - hoping for sooner rather than later) and the ability of every circuit court to lessen the wait times. That will obviously vary by circuit court.
While the administrative appeal system for state taxes is relatively straightforward, the administrative appeal system for local taxes is quite intricate. For local taxes, there are no less than four different ways to administratively appeal a tax. Some appeal methods are limited to certain taxes and they all have differing deadlines which can vary by local government. How to appeal local taxes does not get consistent with one system on a statewide basis until the litigation stage which brings us back to the aforementioned problem.
While effectively administratively appealing a tax issue was important before, its importance has increased. Litigating an issue could take years. Filing the strongest administrative tax appeal possible and filing it correctly is now crucial to avoid the necessity of litigation.
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.