23VAC10-20 General Provisions Applicable to All Taxes Administered by the Department of Taxation

REGULATIONS

Vol. 25 Iss. 8 - December 22, 2008

TITLE 23. TAXATION

DEPARTMENT OF TAXATION

Chapter 20

Fast-Track Regulation

Title of Regulation: 23VAC10-20. General Provisions Applicable to All Taxes Administered by the Department of Taxation (amending 23VAC10-20-160, 23VAC10-20-180, 23VAC10-20-190; adding 23VAC10-20-165; repealing 23VAC10-20-170).

Statutory Authority: § 58.1-203 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comments: Public comments may be submitted until 5 p.m. on February 20, 2009.

Effective Date: March 8, 2009.

Agency Contact: Jennifer Lewis, Policy Analyst, Department of Taxation, P.O. Box 27185, Richmond, VA 23261-7185, telephone [phone] or FAX [phone].

Basis: Section 58.1-203 of the Code of Virginia provides that the "Tax Commissioner shall have the power to issue regulations relating to the interpretation and enforcement of the laws of this Commonwealth governing taxes administered by the Department." The authority for the current regulatory action is discretionary.

Purpose: The purpose of this regulatory action is to create a new regulation section, 23VAC10-20-165, concerning administrative appeals that will give TAX’s current policy the authority of a regulation. This regulatory action will also repeal 23VAC10-20-170, which is being superceded by the new regulation section. Additionally, this regulatory action will amend 23VAC10-20-160 to reference the new regulation section and remove overlapping information about administrative appeals. TAX will also move some language from 23VAC10-20-160, which will be placed in 23VAC10-20-165, 23VAC10-20-180 and 23VAC10-20-190.

A regulation section on administrative appeals will facilitate a predictable and adequate revenue stream for the government to provide for the health, safety, and welfare of its citizens by clearly stating TAX’s policy concerning administrative appeals.

Rationale for Using Fast-Track Process: As the new regulation section will not make any substantive changes to TAX’s current administrative appeals process and existing policies related to the process, this action is not expected to be controversial.

When the Administrative Appeals Guidelines set forth in Public Document 06-140 were created, TAX met with the Virginia Society of Certified Public Accountants (VSCPA). TAX and VSCPA both agreed on the guidelines before completion. The Virginia Bar Association Tax Section was also given access to the document for review.

Substance: This action will codify in the Virginia Administrative Code TAX’s current policy on appeals as set forth in Public Document 06-140. Creating a new regulation section on administrative appeals will help maximize knowledge of the process among taxpayers.

23VAC10-20-160 will be amended to reference the new regulation section and remove overlap information about administrative appeals. TAX will also remove some language from 23VAC10-20-160, which will be placed in 23VAC10-20-165, 23VAC10-20-180 and 23VAC10-20-190. 23VAC10-20-170 will be repealed because it is superceded by the new regulation section, 23VAC10-20-165.

Issues: The regulatory action poses no disadvantages to the public or the Commonwealth. The primary advantage to the public and to the Commonwealth is that by detailing the administrative appeals process, the public will better understand the process and the options available to them. The regulation section will facilitate the appeals process for both the agency and the taxpayer.

The Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Department of Taxation (Department) currently provides guidance to the public on how to appeal tax assessments within a document titled "Administrative Appeal Guidelines for Tax Assessments Issued by the Virginia Department of Taxation." The Guidelines were created to supplement Code of Virginia § 58.1-1821 and these regulations (23VAC10-20, General Provisions Applicable to All Taxes Administered by the Department of Taxation). The Department now proposes to incorporate the Guidelines into the regulations and to eliminate duplicate language and reorganize the content of some related regulation sections.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. Since the Guidelines are not more restrictive than the Code of Virginia and placing the Guidelines within the regulations may make it easier for taxpayers who are aware of the regulations but not the Guidelines to determine how and when their appeals should be filed, the proposal should provide benefit to the public with no associated cost.

Businesses and Entities Affected. These regulations potentially affect all Virginia taxpayers.

Localities Particularly Affected. The proposed amendments do not disproportionately affect particular localities.

Projected Impact on Employment. The proposal amendments do not directly affect employment.

Effects on the Use and Value of Private Property. The proposal amendments do not directly affect the use and value of private property.

Small Businesses: Costs and Other Effects. The proposal to incorporate the Guidelines within the regulations may save a small amount of time for small business owners who wish to appeal tax assessments.

Small Businesses: Alternative Method that Minimizes Adverse Impact. The proposed amendments do not adversely affect small businesses.

Real Estate Development Costs. The proposed amendments do not directly affect real estate development costs.

Legal Mandate. The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Administrative Process Act and Executive Order Number 36 (06). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPB’s best estimate of these economic impacts.

Agency's Response to the Department of Planning and Budget's Economic Impact Analysis: The agency agrees with the Department of Planning and Budget’s economic impact analysis.

Summary:

This regulatory action will promulgate a new regulation section, 23VAC10-20-165, setting forth TAX’s administrative appeals process and procedures as outlined in Public Document 06-140 issued by TAX on November 29, 2006. This regulatory action will also repeal 23VAC10-20-170, which is superceded by the new regulation section. 23VAC10-20-165 will turn the current process as detailed by Public Document 06-140 into a regulation section.

Additionally, this regulatory action will amend 23VAC10-20-160 to reference the new regulation section and remove overlapping information about administrative appeals. TAX will also move some language from 23VAC10-20-160, which will be placed in 23VAC10-20-165, 23VAC10-20-180, and 23VAC10-20-190.

23VAC10-20-160. In general; definitions Assessments and administrative remedies.

A. Types of remedies. Article 2 (§ 58.1-1820 et seq.) of Chapter 18 of Title 58.1 of the Code of Virginia provides several administrative and judicial remedies for taxpayers who believe an assessment to be erroneous. In addition, Va. Code § 58.1-105 of the Code of Virginia authorizes the Tax Commissioner to accept an offer in compromise in certain circumstances. The various remedies available for taxes administered by the department may be summarized as follows:

1. Offer in compromise under § 58.1-105 of the Code of Virginia, which may be used to waive or compromise a penalty for good cause or to compromise a tax based on a doubtful or disputed claim or a liability of doubtful collectibility.

2. Application for correction of an erroneous assessment under § 58.1-1821 of the Code of Virginia before payment of the assessment, which may be used to protest any or all issues connected with an assessment. See 23VAC10-20-165 for the full explanation of the administrative appeals process.

3. Amended return claiming a refund under § 58.1-1823 of the Code of Virginia, which may be used to amend a return based upon new or newly discovered facts such as errors discovered in the original return or a change in federal taxable income.

4. Protective claim under § 58.1-1824 of the Code of Virginia after payment of the assessment, which may be used to protest any or all issues connected with an assessment and, in certain circumstances, may extend the time in which taxpayer may apply to a court. See 23VAC10-20-190 for more information on protective claims.

5. If the above administrative remedies are not satisfactory to the taxpayer, the assessment may be paid and an application to a court may be made under § 58.1-1825 of the Code of Virginia.

B. Exhaustion of administrative remedies. Although not required by law, taxpayers are encouraged to exhaust their administrative remedies before resorting to litigation. Administrative reviews remain confidential pursuant to §§ 58.1-3 and 58.1-204 of the Code of Virginia. Even if a dispute cannot be resolved administratively, the issues in dispute may be significantly narrowed allowing expeditious court review.

C. Forms.

1. There is no form for applications for correction of assessments or protective claims but the information required for both is similar. The Department will accept any submission which sufficiently identifies the taxpayer, type of tax, taxable period, remedy sought, date of assessment and, if paid, the date of payment, and a statement signed by the taxpayer or duly appointed or authorized agent or attorney setting forth each alleged error in the assessment, the grounds upon which taxpayer relies and all facts relevant to taxpayer''s contention.

2. When a dealer is applying for a refund of sales tax, the dealer shall attach a list of the purchasers from whom the tax was collected and to whom the refund and interest, if allowed, will be paid.

3. When a consumer is applying for a refund of sales or use tax assessed against a dealer or contractor, the consumer shall identify the dealer or contractor, explain the circumstances surrounding the payment by the consumer and explain why the claim for refund could not, or would not, be made by the dealer or contractor.

4. An application for correction or a protective claim filed on behalf of a taxpayer by an attorney, accountant or tax preparer must be signed by the taxpayer or accompanied by a duly executed power of attorney in favor of such representative who signs the application or claim.

D. C. Person assessed. Any person assessed with any tax, as such term is defined in § 58.1-1820(1) of the Code of Virginia, may file an application for correction or a protective claim.

E. D. Definition of assessment Assessments.

1. When referring to taxes administered by the Department department, the terms "assess" and "assessment" mean the act of determining that a tax (or additional tax) is due and the amount of such tax. An assessment may be made by the Department department or by the taxpayer (self-assessment).

2. When an assessment is made by the Department department, a written notice of the assessment must be delivered to the taxpayer by an employee of the Department department or mailed to the taxpayer at his last known address. The date that such notice is mailed or delivered is the date of the assessment for the purpose of any limitations on the time in which administrative and judicial remedies are available and for any other administrative purposes.

3. The written notice of an assessment made by the Department department is made on a form clearly labeled "Notice of Assessment" which that sets forth the date of the assessment, amount of assessment, the tax type, taxable period and taxpayer. Subsequent statements which that merely report payments and additional accrued interest are not assessments or notices of another assessment. An assessment may be preceded by correspondence proposing adjustments to a filed return based on an audit or other information received by the Department department. Such correspondence is not an assessment but is intended to provide taxpayers an opportunity to correct any errors before an assessment is made.

4. A self-assessment is usually made when the taxpayer files a return. If an annual, quarterly or monthly return is not required to be filed for a tax then the self-assessment is usually made when the tax is paid. The date of assessment is the date of filing or payment except that:

a. A return filed or tax paid before the last day prescribed by law for the filing or payment thereof, including extensions granted pursuant to law, shall be deemed to be filed or paid on such last day.

b. After the Department department has mailed or delivered a notice of assessment a return filed or tax paid shall be deemed filed or paid pursuant to the notice. Such filing or payment is not a self assessment. The date of assessment shall be the date the notice of assessment was mailed or delivered, not the date the return was filed or the tax paid.

c. In certain circumstances the date a return or payment is mailed will be deemed the date of filing or payment. See Va. Code § 58.1-9 of the Code of Virginia.

5. A jeopardy assessment under §§ § 58.1-313 or 58.1-631 of the Code of Virginia occurs when the Tax Commissioner finds that collection of income, sales or use taxes will be jeopardized by delay, terminates the current taxable period and assesses tax, penalty and interest. A jeopardy assessment is an assessment for purposes of administrative remedies and a taxpayer may protest either the finding of jeopardy or the amount of liability, or both.

6. The date of an assessment is not affected if the amount of the assessment is later corrected, whether the correction is the result of an application under §§ § 58.1-1821 or 58.1-1824 of the Code of Virginia or made on the Department's department's own initiative after receiving additional information. The Department department will not correct an assessment by increasing the amount of liability (except for additional accrued interest). If the Department department determines that the proper tax is greater than the amount previously assessed and paid, the Department department will make a second assessment unless the period for assessing additional tax has expired. The second assessment may be for the total amount due (in which case the first assessment will be abated) or for only that portion of the tax due which that has not yet been assessed, whichever is appropriate in the opinion of the Department department.

7. Amended returns claiming refunds under Va. Code § 58.1-1823 of the Code of Virginia are not assessments or self-assessments. However, for the purpose of allowing a taxpayer to pursue administrative and judicial remedies, the denial or failure to act upon a refund claim is deemed to be an assessment, but only as to matters first raised in the amended return claiming a refund. A matter shall not be considered first raised in an amended return claiming a refund if it was previously the subject of an audit or an application under §§ § 58.1-1821, 58.1-1824 or 58.1-1825 of the Code of Virginia. The date of such deemed assessment shall be the date of an order of the Department department denying the refund claim or three months from the date the amended return was filed with the Department department, whichever is earlier.

23VAC10-20-165. Administrative appeals.

A. Definitions. The following words and terms when used in this section shall have the following meanings unless the context clearly indicates otherwise:

"Administrative appeal" means an application for correction of an assessment filed with the Tax Commissioner pursuant to § 58.1-1821 of the Code of Virginia.

"Assessment" means a determination of the amount of tax, including additional or omitted tax, that is due. An assessment includes a written assessment made pursuant to a notice by the department or a self-assessment made by a taxpayer upon the filing of a return or otherwise not pursuant to notice. A return filed or tax paid before the last day prescribed by law for the filing or payment thereof shall be deemed to be filed or paid on the last day specified for the filing of a return or the payment of tax, as the case may be. The denial of a refund claim is deemed to be an assessment, and a taxpayer may file an administrative appeal in response to the denial of a refund claim.

"Collection action" means the use of any means permitted by law, direct or indirect, by the department, or collection agencies authorized by the department, to obtain payment on an assessment.

"Complete appeal" means an administrative appeal containing sufficient information, as prescribed in subsection D of this section, so that the grounds upon which the taxpayer relies in contesting an assessment are fully set forth to allow the Tax Commissioner to make an informed final determination.

"Date of assessment" means, for purposes of filing an administrative appeal, the date stated on the notice of assessment. In the case of a denial of a refund claim, the date of assessment is the date of the department’s correspondence informing the taxpayer that the refund claim is denied. If the department fails to act within three months on an amended return claiming a refund, the date of assessment is the day following the expiration of the three-month period for the purpose of permitting the taxpayer to pursue an administrative appeal under § 58.1-1821 of the Code of Virginia.

"Department" means the Virginia Department of Taxation and its employees.

"Determination" means the Tax Commissioner’s written final determination issued pursuant to § 58.1-1822 of the Code of Virginia to a taxpayer’s administrative appeal. A determination also includes the Tax Commissioner’s written response to a request for reconsideration pursuant to subsection F of this section, except as provided in subdivision F 5 of this section.

"Notice of assessment" means the department’s official form labeled "Notice of Assessment" that contains written information that sets out the date of the assessment, amount of assessment, the tax type, taxable period, account number, bill number and name of the taxpayer. A subsequent statement of balance due the department does not constitute a new notice of assessment. Such subsequent statements include reports of payments applied to assessments, updated bills reflecting additional accrued interest, or other changes to an assessment. A notice of assessment may be preceded by correspondence proposing adjustments to a filed return based on an audit or other information received by the department. Such correspondence is not a notice of assessment but is intended to provide taxpayers an opportunity to correct any errors before an assessment is made.

"Notice of intent to appeal" means a taxpayer’s written statement filed with the department that informs the department of a taxpayer’s intent to file an administrative appeal of an assessment to the Tax Commissioner.

"Tax Commissioner" means the chief executive officer of the Department of Taxation.

"Taxpayer" means a person, corporation, partnership, limited liability company, organization, trust or estate or other entity subject to the taxes administered by the Department of Taxation.

B. Administrative appeal process.

1. Taxpayer appeal rights.

a. Section 58.1-1821 of the Code of Virginia gives a taxpayer the right to an administrative appeal of an assessment issued by the Department of Taxation, if the taxpayer believes that the department has incorrectly assessed tax, penalty or interest. The administrative appeal must include all elements listed in subsection D of this section.

b. 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. See subsection C of this section for computing the 90-day limitations period.

c. A taxpayer is not required to pay the portion of an assessment that is the subject of an administrative appeal until the Tax Commissioner has issued a determination that requires such payment unless the Tax Commissioner determines collection is in jeopardy.

d. An administrative appeal may be filed with the department by hand delivery, email, common carrier, delivery service, United States mail, facsimile transmission or by any other means that ensures the filing of a complete appeal to the department within the 90-day limitations period.

e. The department will determine the manner best suited to resolve an appeal, which may include submission of additional documents and memoranda, further audit, holding a conference with the taxpayer or the taking of testimony.

f. An administrative appeal of an assessment filed pursuant to § 58.1-1821 of the Code of Virginia is not subject to the Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia).

g. An application under § 58.1-1821 of the Code of Virginia does not extend the period in which a taxpayer may apply to a court under § 58.1-1825 of the Code of Virginia. See 23VAC10-20-190 C.

2. Collection action.

a. Upon receipt of a complete appeal or a notice of intent to appeal within the 90-day limitations period, the department will suspend collection action on the contested assessment unless the Tax Commissioner determines collection of the assessment is in jeopardy.

b. When a notice of intent to appeal is filed and a complete appeal is not filed within the 90-day limitations period, the suspension of collection will be released, and collection action will resume.

c. After the Tax Commissioner has made a determination on the application, the assessment, as it may have been modified by such determination, shall become immediately collectible with accrued interest.

3. Accrual of interest.

a. While the taxpayer’s administrative appeal is pending, interest will accrue on any outstanding balance pursuant to § 58.1-1812 of the Code of Virginia. To avoid the accrual of additional interest, the taxpayer may choose to make full payment of the assessment. Payment of any disputed tax, penalty, or interest shall not be construed to mean that the taxpayer is in agreement with the assessment.

b. If the taxpayer decides to make full payment and the final determination results in a refund, the taxpayer will be paid interest on the overpayment of the erroneously assessed tax pursuant to § 58.1-1833 of the Code of Virginia.

4. Acknowledgement letter.

a. The taxpayer will receive an acknowledgement letter from the department once the administrative appeal or a notice of intent to appeal has been received. The acknowledgement letter sent by the department after an appeal is filed will provide the taxpayer with the name and phone number of the analyst assigned to review the appeal.

b. The acknowledgement letter serves only to indicate receipt of the taxpayer’s administrative appeal by the department. It does not acknowledge whether the administrative appeal is complete or whether the appeal was timely filed.

c. If it is determined that the taxpayer has not filed a complete appeal, the analyst assigned to the appeal will notify the taxpayer in separate correspondence.

5. Power of attorney.

a. An administrative appeal filed on behalf of a taxpayer by an attorney, accountant, tax preparer, or other representative of the taxpayer should be accompanied by a properly executed power of attorney. The power of attorney must be signed and dated by both the taxpayer and the taxpayer’s representative(s).

b. A power of attorney must be filed if the taxpayer will be represented in a taxpayer conference with the department by an attorney, accountant, tax preparer, or other representative, and a power of attorney has not been previously filed with the department with regard to the administrative appeal.

c. Form PAR 101, Power of Attorney and Declaration of Representative can be found on the department’s website. Form PAR 101 or any other power of attorney form that includes the same information will be accepted by the department.

d. Failure to provide a power of attorney within the 90-day limitations period does not preclude consideration of the administrative appeal; however, it may delay the issuance of the final determination.

6. Tax Commissioner’s determination. The Tax Commissioner will issue a determination letter in response to the taxpayer’s administrative appeal. The determination will be based on the issues raised in the taxpayer’s administrative appeal.

C. Time for filing an administrative appeal. Section 58.1-1821 of the Code of Virginia provides that a taxpayer assessed with any tax administered by the department may, within 90 calendar days after the date of such assessment, file an administrative appeal with the Tax Commissioner.

1. The 90-day limitations period begins on the calendar day after the date of assessment and continues for 90 consecutive calendar days (including weekends and holidays).

2. Regardless of the delivery method used, if the 90th calendar day after the date of assessment is a Saturday, Sunday, federal holiday or Virginia state holiday, the administrative appeal will be considered timely if filed on the Commonwealth’s next business day.

3. An administrative appeal that is delivered to the department using the United States mail must be postmarked or have a metered date that is on or before the 90th calendar day after the date of assessment to be considered timely filed. The department will use the United States mail postmark in cases where there is both a postmark date and a metered date on the administrative appeal. In the case of metered mail not bearing a United States mail postmark, an appeal or a request for redetermination will be deemed to be filed untimely if:

a. The metered date is missing from the metered imprint and the item is received by the department more than three business days after the last day for filing the appeal or a request for redetermination; or

b. The metered date is present bearing a timely date for the filing, but the filing is received by the department more than 10 business days after the last day for filing, in which case it is presumed that the metered date does not accurately reflect the date on which the filing was deposited with the United States Postal Service.

4. An administrative appeal that is delivered to the department by hand, by common carrier or delivery service, facsimile transmission, electronic mail (email) or any means of delivery other than by United States mail, must be dated and received on or before the 90th calendar day after the date of assessment to be considered timely filed, except as noted below.

a. An administrative appeal delivered by hand will be date-stamped by an employee of the department on the day received. This date will be the filing date for purposes of determining if the administrative appeal is filed within the 90-day limitations period.

b. The date of receipt by the carrier or delivery service shown on the shipping or address label or elsewhere on the envelope or package delivered to the department by common carrier or delivery service will be the filing date of the administrative appeal for purposes of determining if the administrative appeal is filed within the 90-day limitations period.

c. The most recent date printed on a facsimile transmission or shown on an email transmission will be the filing date of the administrative appeal for purposes of determining if the administrative appeal is filed within the 90-day limitations period unless, for whatever reason, that date is patently inconsistent with the date actually received by the department.

d. An administrative appeal received by the department via hand delivery, in an envelope or package, by facsimile transmission, by email, or by any other means of delivery bearing no legible date will be considered filed on the date of actual receipt by the department.

5. Examples of the 90-day limitations period for administrative appeals.

Example 1. The department issues Taxpayer A a notice of assessment with an assessment date of February 28, 2006. Taxpayer A files an administrative appeal with the Tax Commissioner by United States mail. The 90-day limitations period to file an administrative appeal starts on March 1, 2006, the first calendar day after the date of assessment. The 90th day after the date of assessment falls on May 29, 2006, which is a state holiday. Taxpayer A’s administrative appeal will be considered timely filed if postmarked on or before May 30, 2006, the next business day following a state holiday.

Example 2. The department issues Taxpayer B a notice of assessment with an assessment date of March 13, 2006. The 90-day limitations period to file an administrative appeal starts on March 14, 2006. The 90th day after the date of assessment falls on June 11, 2006, which is a Sunday. Taxpayer B’s administrative appeal will be considered timely filed if it is emailed to the department on or before June 12, 2006.

Example 3. The department issues Taxpayer C a notice of assessment with an assessment date of May 2, 2006. The department later sends Taxpayer C a statement dated June 5, 2006, showing that the original assessment remains outstanding and that additional interest has accrued on the assessment. The 90-day limitations period to file an administrative appeal begins on May 3, 2006, the first calendar day after the date of assessment. The 90th day after the date of assessment falls on August 1, 2006, which is a regular business day. Taxpayer C’s administrative appeal will be considered timely filed if the envelope is postmarked or dated by a delivery service on or before August 1, 2006. The 90-day limitations period is not extended by the department’s issuance of the statement dated June 5, 2006, to Taxpayer C.

D. Complete administrative appeal.

1. In order to be complete, an administrative appeal shall contain the following:

a. Identification of the taxpayer (to include mailing address, federal tax identification number or social security number);

b. Type of tax;

c. Taxable period;

d. Date of assessment (if paid, include date of payment);

e. Remedy sought;

f. A statement signed by the taxpayer or duly appointed or authorized agent or attorney setting forth each alleged error in the assessment, the grounds upon which the taxpayer relies and all facts relevant to the taxpayer’s contention; and

g. Controlling legal authority (statutes, regulations, rulings of the Tax Commissioner, court decisions, etc.) upon which the taxpayer’s position is based.

2. Administrative appeal form.

a. The department has available an administrative appeal form that can be used to file an administrative appeal with the Tax Commissioner. While use of this form is not mandatory, the information required on the form must be included in the administrative appeal.

b. The form can be found in the appendix of the Taxpayer Bill of Rights on the department’s website at www.tax.virginia.gov.

3. Supporting documentation.

a. The taxpayer should include with the administrative appeal all the essential documentation that supports its contentions.

(1) When a dealer is applying for a refund of sales tax, the dealer shall attach a list of the purchasers from whom the tax was collected and to whom the refund and interest, if allowed, will be paid.

(2) When a consumer is applying for a refund of sales or use tax assessed against a dealer or contractor, the consumer shall identify the dealer or contractor, explain the circumstances surrounding the payment by the consumer and explain why the claim for refund could not, or would not, be made by the dealer or contractor.

(3) If the supporting documentation cannot be provided at the time of filing the administrative appeal, the taxpayer should state the reasons why.

b. The department may allow the taxpayer up to 60 additional days from the date the department acknowledges receipt of the administrative appeal to submit the necessary documents. It will be within the department’s discretion to allow any additional time beyond the 60 additional days.

c. In some instances, the taxpayer may be permitted to submit a sample of the supporting documents. The taxpayer must agree to make the remainder of the documents available for review by the department.

d. During the course of the administrative appeal process, the department may request additional information from the taxpayer to facilitate rendering a determination of the taxpayer’s administrative appeal.

4. Incomplete appeal/notice of intent to appeal.

a. An incomplete appeal or notice of intent to appeal does not satisfy or extend the 90-day limitations period. Informal contact made by a taxpayer with the department after an assessment has been issued does not constitute a complete appeal or a notice of intent to file an administrative appeal.

b. Examples of informal contact include a phone call to an auditor or other department personnel or a meeting with department personnel to discuss the assessment.

5. Examples.

a. Complete administrative appeal.

Example 1. An administrative appeal is filed within the 90-day limitations period and includes the relevant facts, the basis for the appeal and the legal authority that support the taxpayer’s position. A sample of the documentation that supports the taxpayer’s position is also included. The taxpayer notes that the remainder of the documentation is available for review.

b. Incomplete administrative appeals.

Example 2. The taxpayer’s representative files a notice of intent letter with the department within the 90-day limitations period, indicating that it will supplement the letter of intent with the complete grounds for appeal and documentation. The 90-day limitations period expires before the department receives the supplement.

Example 3. A taxpayer submits a written request for a conference to discuss an assessment. This action, by itself, does not constitute a complete appeal.

E. Appeal conference. Any taxpayer assessed with any tax administered by the department as stated in Title 58.1 of the Code of Virginia, and any person assessed a penalty pursuant to § 58.1-1813 of the Code of Virginia, and who has filed a complete appeal is entitled to a conference, if requested, prior to the Tax Commissioner issuing a determination.

1. Purpose of conference.

a. The appeal conference is an informal means by which a taxpayer can present legal arguments and factual documentation to the department concerning the protested issue(s) in its administrative appeal.

b. A conference to resolve an administrative appeal is not subject to the Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia).

2. Taxes discussed in the conference.

a. Any tax administered and assessed by the department as stated in Title 58.1 of the Code of Virginia may be discussed in the conference.

b. The taxes in Subtitle II (§ 58.1-2020 et seq.) of Title 58.1 of the Code of Virginia are administered by other state agencies. Administrative issues related to these taxes should be resolved through the appropriate agency.

3. Requesting a conference.

a. A taxpayer may request a conference at the time a complete appeal is filed with the Tax Commissioner. The conference request must be related to an audit assessment being addressed in the appeal.

b. A taxpayer may also request a conference separately while the administrative appeal is pending. The taxpayer may mail, fax, telephone or email a request for a conference to the department using the contact information located on the administrative appeals form found in the appendix of the Taxpayer's Bill of Rights on the department’s website at www.tax.virginia.gov.

4. Granting a conference.

a. A taxpayer will be granted a conference provided a complete appeal has been filed within the 90-day limitations period.

b. The department will not grant a conference for an administrative appeal deemed frivolous or for cases in which a taxpayer requests a conference for the purpose of delaying collection action on a valid assessment.

5. Scheduling a conference. Every attempt will be made to schedule a date and time that is mutually convenient for both the taxpayer and the department. The department will notify the taxpayer by a confirmation letter of the date and time for the conference.

6. Location of conference.

a. A conference will normally be held in the department’s main office in Richmond, Virginia. As a convenience for taxpayers, a conference may be held by telephone.

b. A conference may also be held, upon request and at the department’s discretion, at other locations. A taxpayer should provide the department sufficient information to support requests for conferences at other sites.

7. Conference attendees.

a. The conference will be conducted by the Tax Commissioner or a designee(s) of the Tax Commissioner. The analyst assigned to the taxpayer’s administrative appeal will also attend the conference.

b. The taxpayer and the taxpayer’s representative(s) may attend the conference. The taxpayer is not required to attend. See subdivision B 5 of this section for information regarding a power of attorney.

8. Documentation.

a. The taxpayer should be prepared to submit documentation that supports or validates the issues raised in the administrative appeal, as appropriate.

b. A sample of documentation is acceptable, provided the taxpayer agrees to give the department access to the remainder of the documentation for review.

9. After the conference.

a. The Tax Commissioner or his designee will not issue a determination at the conference. The information and supporting documentation presented will be considered as part of the administrative appeal.

b. The Tax Commissioner will issue a determination to the taxpayer’s administrative appeal after careful consideration of all information provided, applicable statutes and regulations.

F. Request for reconsideration. A taxpayer who disagrees with the Tax Commissioner’s final determination issued pursuant to § 58.1-1822 of the Code of Virginia may request a reconsideration of the determination.

1. Requirements. In order for the Tax Commissioner to grant a request for reconsideration, the request must be received by the department not later than 45 days after the final determination and the taxpayer must demonstrate one of the following:

a. The facts upon which the original determination is based are misstated by the Tax Commissioner or are inaccurate, and the determination would have a different result based on a correction of the Tax Commissioner’s misstatement of the facts presented or a clarification of the original facts presented in the taxpayer’s administrative appeal;

b. The law upon which the original determination is based has been changed by legislation, court decision or other authority effective for the tax period(s) at issue;

c. The policy upon which the original determination is based is misapplied, and the determination would have a different result based on the application of the proper policy; or

d. The taxpayer has discovered additional evidence or documentation that was not available to the taxpayer at the time the original administrative appeal was filed with the department, and the additional evidence or documentation could produce a result different from the original determination.

In addition, a taxpayer’s request for reconsideration must include the information required for a complete appeal. The taxpayer’s request should also include the appropriate documentation (if applicable) to support the taxpayer’s position. A sample of the documentation is acceptable, provided the taxpayer agrees to give the department access to the remainder of the documentation for review. Documentation provided with the original administrative appeal does not need to be resubmitted.

If at least one of the four requirements listed above is satisfied, and the request for reconsideration includes the information required for a complete appeal, the Tax Commissioner will grant a taxpayer’s request for reconsideration.

2. Collection action.

a. Collection action will be suspended on the portion of the assessment related to the contested issues while the request for reconsideration is pending with the department.

b. Collection action will not be suspended on any portion of the contested assessment if the request for reconsideration fails to satisfy the requirements in subsection A of this section. For example, a notice of intent to file a request for reconsideration or a request for a conference without any other information does not meet the requirements specified in subdivision 1 of this subsection and is not sufficient to suspend collection action.

c. Collection action will not be suspended on the assessed amount attributable to any uncontested issues.

3. Conference.

a. A conference to discuss the issues raised in the request for reconsideration may be granted at the discretion of the department. In the event a conference is granted, it will be scheduled at a date and time that is mutually convenient for both the taxpayer and the department.

b. If appropriate and agreed to by both the taxpayer and the department, the conference may be held by telephone.

4. Denial of request for reconsideration. A request for reconsideration will not be granted if the Tax Commissioner determines the request is:

a. Frivolous or intended to delay collection action on an assessment ruled to be proper in a determination issued pursuant to § 58.1-1822 of the Code of Virginia.

(1) A request for reconsideration will be deemed frivolous if it is based on arguments that are not grounded in law or fact.

(2) A request for reconsideration will be deemed as intending to delay collection action if it repeats the same information contained in the taxpayer’s original administrative appeal letter and offers no new information or new legal arguments.

b. Received by the department more than 45 days after the final determination.

5. The Tax Commissioner’s written response denying a request for reconsideration based on a finding that (i) the request fails to meet the requirements in subdivision 1 of this subsection or (ii) one of the conditions specified in subsection D of this section exists is not a final determination pursuant to § 58.1-1822 of the Code of Virginia for purposes of filing an application for correction with the circuit court pursuant to § 58.1-1825 of the Code of Virginia.

G. The appropriate contact and mailing information related to the content of this section can be found on the department’s website at www.tax.virginia.gov.

H. See 23VAC10-20-160 A for the types of administrative remedies. See 23VAC10-20-160 B for information about the exhaustion of administrative remedies.

23VAC10-20-170. Application for correction (before payment). (Repealed.)

A. Application.

1. A taxpayer may apply to the Commissioner for correction of an erroneous assessment before payment of the assessment. The application must contain all of the information specified in 23VAC10-20-160 C. The application will be handled within the Department in the manner best determined by the Commissioner to resolve the dispute, which may include submission of additional documents and memoranda, further audit, holding a conference with the taxpayer or the taking of testimony. Applications should be addressed to: Tax Commissioner, Virginia Department of Taxation, P.O. Box 1880, Richmond, VA 23282-1880.

2. After receiving a written notice of assessment taxpayers sometimes contact the auditors or other Department personnel with additional information seeking a corrected assessment. Such informal contact will not be considered an application under this section.

B. Collection and billing. When an application has been duly filed the Commissioner will not take any action to collect the tax, penalty and interest assessed unless he determines that collection is in jeopardy. Interest under § 58.1-1812 of the Code of Virginia and additional incremental penalties for nonpayment of taxes may accrue while the application is pending. After the Commissioner has made a determination on the application, the assessment, as it may have been modified by such determination, shall become immediately collectible with accrued interest.

C. Statute of limitations. An application under this § 58.1-1821 of the Code of Virginia does not extend the period in which a taxpayer may apply to a court under § 58.1-1825 of the Code of Virginia. See 23VAC10-20-190 C.

23VAC10-20-180. Amended returns claiming a refund.

A. Filing.

1. Amended returns claiming a refund of any tax administered by the Department department are governed by § 58.1-1823 of the Code of Virginia. Amended returns claiming a refund must be filed within three years from the last day prescribed by law for the timely filing of the original return or, if later, within 60 days from the final determination of any change or correction in the liability of the taxpayer for any federal tax upon which the Virginia tax is based.

2. The amended return shall supply all the information required in an original return and, in addition, the taxpayer must attach a statement explaining the changes made and the reasons for the changes. If the refund claim is due to a change in federal taxable income or estate, the taxpayer must furnish a copy of the Revenue Agent''s Agent's Report or other appropriate notice that the change has been accepted by the Internal Revenue Service. For additional information required from dealers claiming a refund of sales and use tax see 23VAC10-20-160 C.

a. When a dealer is applying for a refund of sales tax, the dealer shall attach a list of the purchasers from whom the tax was collected and to whom the refund and interest, if allowed, will be paid.

b. When a consumer is applying for a refund of sales or use tax assessed against a dealer or contractor, the consumer shall identify the dealer or contractor, explain the circumstances surrounding the payment by the consumer and explain why the claim for refund could not, or would not, be made by the dealer or contractor.

3. The time limit specified above applies only to amended returns claiming a refund and does not apply to amended returns showing a tax due. The period for assessing taxes due may vary for each type of tax and may also depend on circumstances such as fraud or failure to file a return.

4. See § 58.1-9 of the Code of Virginia for provisions relating to filing a return by mail.

B. Final determination. For the purposes of this regulation, any one of the following shall be deemed a final determination of a change in liability for the federal tax:

1. Payment or refund of any federal income or estate tax, not the subject of any other final determination described in subdivisions subdivision 2, 3, 4, or 5 of subsection B. The payment of a federal income or estate tax is a final determination for Virginia purposes even though a refund suit may be pending or contemplated which could result in another "final determination";

2. The receipt of an assessment or other notice that the amount of deficiency or overassessment stated on federal Form 870 or similar form has been agreed to by the IRS;

3. The expiration of the 90-day time period (150-day period in the case of notice addressed to a person outside the states of the union and the District of Columbia) within which a petition for redetermination may be filed with the U.S. Tax Court with respect to a statutory notice of deficiency issued by the Internal Revenue Service, if a petition is not filed with that court within such time;

4. A closing agreement entered into with the Internal Revenue Service under Section 7121 of the Internal Revenue Code. The "final determination" shall occur when the taxpayer receives notice of the signing by the Commissioner of Internal Revenue;

5. A decision by the U.S. Tax Court, U.S. District Court, U.S. Claims Court, U.S. Court of Appeals or the United States Supreme Court which that has become final, or the date the court approves a voluntary agreement stipulating disposition of the case.

C. Assessment. The denial in whole or in part of taxpayers claim for refund, or the department's failure to act within three months, is treated as an assessment for the purpose of permitting taxpayer to pursue other administrative and judicial remedies, but only as to matters first raised by the amended return. Therefore an amended return should not be filed if the claim for refund involves issues that were previously considered in the course of an audit, application for correction or protective claim.

23VAC10-20-190. Protective claims (after payment).

A. Filing.

1. If all assessed taxes, penalties and accrued interest have been paid and taxpayer desires to preserve his judicial remedies he may file a protective claim with the Tax Commissioner within three years of the assessment. The protective claim must furnish all information specified in subsection C of 23VAC10-20-160

2. There is no form for applications for protective claims. The department will accept any submission that sufficiently identifies the taxpayer, type of tax, taxable period, remedy sought, date of assessment and the date of payment, a statement signed by the taxpayer or duly appointed or authorized agent or attorney setting forth each alleged error in the assessment, the grounds upon which taxpayer relies, and all facts relevant to taxpayer's contention, and, if appropriate, should show that determination of the facts or law applicable to taxpayer depends upon the outcome of another case pending in the Department department or the courts. See the department’s website at www.tax.virginia.gov for the appropriate contact and mailing information.

3. An application for a protective claim filed on behalf of a taxpayer by an attorney, accountant or tax preparer must be signed by the taxpayer or accompanied by a duly executed power of attorney in favor of such representative who signs the application or claim.

Protective claims shall be addressed to the Tax Commissioner, Virginia Department of Taxation, P.O. Box 1880, Richmond, VA 23282-1880.

2. 4. Taxpayer may submit a protective claim even if the merits have already been administratively considered under either § 58.1-1821 or § 58.1-1823 of the Code of Virginia.

B. Issues held pending litigation. If the Tax Commissioner determines that the protective claim involves facts or law which depend upon resolution of a pending case, he may, in his discretion, hold that portion of the protective claim without decision until the pending case has been decided. Upon resolution of the pending case the Tax Commissioner will decide those issues held pending such resolution. The provisions of this subsection will be strictly limited to those issues which actually depend upon resolution of a pending case; all other issues will be decided on the merits. The Tax Commissioner may require additional information about the protective claim as limited to particular issues involved in a pending case. Taxpayer will be advised as to what portion, if any, of his protective claim is being held without decision pending resolution of another case.

C. Statute of limitations.

1. Taxpayer may apply to the court under § 58.1-1825 of the Code of Virginia within one year after decision on taxpayer''s protective claim, or three years from the assessment, whichever is later.

2. If an application for correction is pending under § 58.1-1821 of the Code of Virginia and taxpayer desires to extend his right to apply to a court under § 58.1-1825 of the Code of Virginia, taxpayer may pay all assessed taxes, penalties and accrued interest and, within three years of the assessment, reapply under this section. Such reapplication may simply refer to the pending § 58.1-1821 of the Code of Virginia application, state that the assessment has been paid and request consideration under § 58.1-1824 of the Code of Virginia.

NOTICE: The forms used in administering the above regulation are listed below. Any amended or added forms are reflected in the listing and are published following the listing.

FORMS (23VAC10-20)

Power of Attorney and Declaration of Representation, PAR 101 (rev. 6/06).

Offer in Compromise Business Request for Settlement, OIC-Bus (eff. 11/08).

Offer in Compromise Individual Request for Settlement, Form 21 OIC-Ind (eff. 11/08).

Administrative Appeal Pursuant to Virginia Code § 58.1-1821.

VA.R. Doc. No. R09-1096; Filed December 2, 2008, 12:08 p.m.