The DMA Way

Double-Edged Tax Sword Cuts City of Richmond Finance Department

by DMA Staff | May 25, 2017
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The law in Virginia states that the taxing authorities must pay interest on overpayments that are equal to the interest charged for underpayment of taxes. This article explains how this is affecting the City of Richmond with respect to Business Professional and Occupational License Tax (BPOL).

While real and personal property taxes are not necessarily affected in the same way that BPOL taxes are since they are based on value and not self-reported taxes, owners of real and personal property tax refunds in Virginia are entitled to the same interest percentage for refunds that the taxing authorities charge for late, partial, or non-payment. This is true in Maryland and other states though differences exist.

Real Estate

In most Virginia jurisdictions, real estate owners can file Circuit Court appeals for the current and prior three years. For example, a Circuit Court filing made by December 31, 2017, can include 2014, 2015, 2016, and 2017 tax years. As of January 1, 2018, the appeal rights of 2014 expire.

When performing a cost/benefit analysis with respect to the feasibility of a Circuit Court challenge in Virginia, be sure to calculate the interest that you are entitled to.

There are exceptions to the three-year look back in Arlington County which requires notification to the assessment office of the taxpayer’s intention to protect his/her Circuit Court appeal rights. Henrico County limits the look back to two years and requires a Board of Equalization (BOE) appeal be filed in order to preserve Circuit Court rights for the respective years.

Business Personal Property

Taxpayers in Virginia can amend current and three prior year’s returns and are entitled to refunds including aforementioned interest consistent with taxing jurisdiction interest rates charged for non/partial/late payment.

Business Personal Property returns are often leveraged to junior staff who are working with fixed asset listings that are fluid at best. Often times, companies find that they have reported and paid tax on assets that have been disposed or are non-taxable. The personal property tax rates in Virginia are two to four times higher than the real estate tax rate thus it makes sense to make sure these returns are reviewed by an expert every three years.

The significant business personal property tax rate in conjunction with interest rates in the 10 percent range suggest a recurring three-year review of filings and supporting documentation could add up to significant refunds in Virginia and in other areas of the United States as well where refund interest is required to match late payment interest rates.

Please do not hesitate to contact your local DMA office should you have specific questions or requests.