Virginia Administrative Code › Title 23 - TAXATION › Agency 10 - DEPARTMENT OF TAXATION › Chapter 120 - Corporation Income Tax › Section 23VAC10-120-40 - Limitations on assessments

Current through Register Vol. 40, No. 24, July 15, 2024
A. In
				general. Except as otherwise provided, the department must assess any tax
				deficiency within three years from the date the tax was due and payable. See
				§ 58.1-104 of the Code of Virginia.
B. Exceptions. The three-year statute of
				limitations for assessment shall not be applicable to the situations set forth
				below.
1. Failure to file a return. When any
				corporation fails to file a return as required by law, an assessment may be
				made at any time.
2. False or
				fraudulent return. If any corporation files a false or fraudulent return with
				intent to evade the tax legally due, an assessment may be made at any
				time.
3. Failure to report change
				in federal income. When any corporation fails to report a change or correction
				which increases its federal taxable income as required by § 58.1-311 of
				the Code of Virginia, fails to report a change or correction in federal taxable
				income which is treated as a deficiency for federal purposes, or fails to file
				an amended return as required by law, the tax may be assessed at any
				time.
4. Waiver. When the
				Department and the taxpayer, before the expiration of the statute of
				limitations, agree to extend the period for assessing the tax beyond such
				statute, the tax may be assessed at any time prior to the expiration date of
				such agreement. Subsequent agreements further extending the period of
				assessment may be executed prior to the expiration date of the previous
				agreement. Any agreement waiving and extending the statutory assessment period
				must be in writing and must clearly specify the date to which the assessment
				period has been extended. Any such extension will also extend the period in
				which a taxpayer may file an amended return claiming a refund. See §§
				58.1-101, 58.1-1823 of the Code of Virginia.
5. Report of change or correction in federal
				income. When any taxpayer reports a change or correction or files an amended
				return pursuant to an increase in federal taxable income pursuant to §
				58.1-311 of the Code of Virginia, or reports a change or correction in federal
				taxable income which is treated as a deficiency for federal purposes, an
				assessment may be made at any time within one year after such report,
				correction, or amended return is filed. Any additional tax assessed pursuant to
				this provision may not exceed the amount of additional Virginia tax due as a
				result of the federal change or correction. However, an assessment for
				additional amounts due which is not attributable to the federal change or
				correction may be made provided such assessment is made within the otherwise
				applicable statute of limitations. Further, if any other provision of law
				allows the assessment of tax during a period which exceeds the one-year period
				specified in this subsection, e.g., filing of a false or fraudulent return,
				such other provision shall prevail.
6. Carryback deficiencies. Any deficiency
				which is attributable to the carryback of a net operating loss or net capital
				loss may be assessed at any time an assessment may be made for the taxable year
				in which the loss occurred. For example, if a taxpayer incurs a net operating
				loss in taxable year 1983 and a portion of the loss is carried back to taxable
				year 1980 resulting in a refund for taxable year 1980, and a subsequent audit
				reduces or eliminates the loss which was carried back to 1980, an assessment
				relative to such deficiency may be assessed within the statute of limitations
				applicable to taxable year 1983.
7.
				Recovery of erroneous refund.
a. An erroneous
				refund of tax shall be considered an underpayment of tax on the date the refund
				is made. An assessment for recovery of the erroneous refund may be made within
				two years of the date such refund is made except that recovery may be made
				within five years if any part of the refund was the result of fraud or
				misrepresentation of a material fact.
b. Erroneous refund defined. As used in this
				chapter, the term "erroneous refund" means the issuance of a refund to which a
				taxpayer is not entitled. Where a taxpayer provides complete and current
				information and an erroneous refund results from a departmental error, such as
				a clerical error, the department is limited to recovery within the two year
				statute of limitations.
However, the department may make an assessment for recovery
				  of the amount erroneously refunded within five years from the date of the
				  refund if the issuance of the erroneous refund results from a misrepresentation
				  of a material fact by the taxpayer, including inadvertent taxpayer error, e.g.,
				  the omission of information or the incorrect listing of information which has a
				  direct bearing on the computation of Virginia taxable income or tax
				  liability.