Senate Bill No. 411
(By Senator Rowe)
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[Introduced February 2, 2004; referred to the Committee on
Finance.]
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A BILL to amend and reenact §11-10-14, §11-10-17 and §11-10-17a of
the code of West Virginia, 1931, as amended; and to amend and
reenact §11-11-15 of said code, all relating to the "Prompt
Tax Refund Act"; payment of interest on tax refunds and tax
overpayments; time limits on claims for refund of personal
income taxes; requiring payment of interest on claims for
refund of personal income taxes be paid after forty-five days;
requiring payment of interest on claims for refund of
corporation net income taxes be paid after ninety days;
setting forth interest calculations; and revising interest
provisions respecting estate taxes.
Be it enacted by the Legislature of West Virginia:
That §11-10-14, §11-10-17 and §11-10-17a of the code of West
Virginia, 1931, as amended, be amended and reenacted; and that
§11-11-15 of said code be amended and reenacted, all to read as follows:
ARTICLE 10. PROCEDURE AND ADMINISTRATION.
§11-10-14. Overpayments; credits; refunds and limitations.
(a)
Refunds or credits of overpayments. -- In the case of
overpayment of any tax (or fee), additions to tax, penalties or
interest imposed by this article, or any of the other articles of
this chapter, or of this code, to which this article is applicable,
the tax commissioner shall, subject to the provisions of this
article, refund to the taxpayer the amount of the overpayment or,
if the taxpayer so elects, apply the same as a credit against the
taxpayer's liability for the tax for other periods. The refund or
credit shall include any interest due the taxpayer under the
provisions of section seventeen of this article.
(b)
Refunds or credits of gasoline and special fuel excise tax
or motor carrier road tax. -- Any person who seeks a refund or
credit of gasoline and special fuel excise taxes under the
provisions of section ten, eleven or twelve, article fourteen of
this chapter, section nine or eleven, article fourteen-a of this
chapter, or of motor fuel excise tax under section nine, article
fourteen-c of this chapter shall file his or her claim for refund
or credit in accordance with the provisions of the applicable
sections. The ninety-day time period for determination of claims
for refund or credit provided in subsection (d) of this section
does not apply to these claims for refund or credit:
Provided, That claims for refund or credit of the motor fuel excise tax under
section nine, article fourteen-c, of this chapter are subject to
the ninety-day time period provided in subsection (d) of this
section:
Provided, however, That claims for refund or credit of
the motor fuel excise tax under section nine, article fourteen-c of
this chapter made by the United States government or unit or agency
thereof, any municipal government or any agency thereof, or any
county board of education made pursuant to subdivisions one, two,
three, four, five and six, subsection (c), section nine, article
fourteen-c of this chapter will be subject to a thirty-day time
period.
(c)
Claims for refund or credit. -- No refund or credit shall
be made unless the taxpayer has timely filed a claim for refund or
credit with the tax commissioner.
A claim for refund for the
personal income tax imposed in article twenty-one of this chapter
is timely if made in an initial filing regardless of when the
return was due. A person against whom an assessment or
administrative decision has become final is not entitled to file a
claim for refund or credit with the tax commissioner as prescribed
herein. The tax commissioner shall determine the taxpayer's claim
and notify the taxpayer in writing of his or her determination.
(d)
Petition for refund or credit;
hearing. --
(1) If the taxpayer is not satisfied with the tax
commissioner's determination of taxpayer's claim for refund or credit, or if the tax commissioner has not determined the
taxpayer's claim within
ninety sixty days after the claim was
filed, or
six months ninety days in the case of claims for refund
or credit of the taxes imposed by articles twenty-one, twenty-three
and twenty-four of this chapter, after the filing thereof, the
taxpayer may file, with the tax commissioner, either personally or
by certified mail, a petition for refund or credit
with the office
of tax appeals in accordance with the provisions of section nine,
article ten-a of this chapter: Provided, That no petition for
refund or credit may be filed more than sixty days after the
taxpayer is served with notice of denial of taxpayer's claim.
Provided, however, That after the thirty-first day of December, two
thousand two, the taxpayer shall file the petition with the office
of tax appeals in accordance with the provisions of section nine,
article ten-a of this chapter
(2) The petition for refund or credit shall be in writing,
verified under oath by the taxpayer, or by taxpayer's duly
authorized agent having knowledge of the facts, and set forth with
particularity the items of the determination objected to, together
with the reasons for the objections.
(3) When a petition for refund or credit is properly filed,
the procedures for hearing and for decision applicable when a
petition for reassessment is timely filed shall be followed.
(e)
Appeal. -- An appeal from the office of tax appeal's administrative decision upon the petition for refund or credit may
be taken by the taxpayer in the same manner and under the same
procedure as that provided for judicial review of an administrative
decision on a petition for reassessment, but no bond is required of
the taxpayer. An appeal from the administrative decision of the
office of tax appeals on a petition for refund or credit, if taken
by the taxpayer, shall be taken as provided in section nineteen,
article ten-a of this chapter.
(f)
Decision of the court. -- Where the appeal is to review an
administrative decision on a petition for refund or credit, the
court may determine the legal rights of the parties but in no event
shall may it enter a judgment for money.
(g)
Refund made or credit established. -- The tax commissioner
shall promptly issue his or her requisition on the treasury or
establish a credit, as requested by the taxpayer, for any amount
finally administratively or judicially determined to be an
overpayment of any tax (or fee) administered under this article.
The auditor shall issue his or her warrant on the treasurer for any
refund requisitioned under this subsection payable to the taxpayer
entitled to the refund, and the treasurer shall pay the warrant out
of the fund into which the amount refunded was originally paid:
Provided, That refunds of personal income tax may also be paid out
of the fund established pursuant to section ninety-three, article
twenty-one of this chapter.
(h)
Forms for claim for refund or a credit; where return
constitutes claim. -- The tax commissioner may prescribe by rule
or
regulation the forms for claims for refund or credit.
Notwithstanding the foregoing, where the taxpayer has overpaid the
tax imposed by article twenty-one, twenty-three or twenty-four of
this chapter, a return signed by the taxpayer which shows on its
face that an overpayment of tax has been made constitutes a claim
for refund or credit,
regardless when filed.
(i)
Remedy exclusive. -- The procedure provided by this
section
constitutes is the sole method of obtaining any refund,
credit, or any tax (or fee) administered under this article, it
being the intent of the Legislature that the procedure set forth in
this article is in lieu of any other remedy, including the uniform
declaratory judgments act embodied in article thirteen, chapter
fifty-five of this code, and the provisions of section two-a,
article one of this chapter.
(j)
Applicability of this section. -- The provisions of this
section apply to refunds or credits of any tax (or fee), additions
to tax, penalties or interest imposed by this article, or any
article of this chapter, or of this code, to which this article is
applicable.
(k)
Erroneous refund or credit. -- If the tax commissioner
believes that an erroneous refund has been made or an erroneous
credit has been established, he or she may proceed to investigate and make an assessment or institute civil action to recover the
amount of the refund or credit, within two years from the date the
erroneous refund was paid or the erroneous credit was established,
except that the assessment may be issued or civil action brought
within five years from the date if it appears that any portion of
the refund or credit was induced by fraud or misrepresentation of
a material fact.
(l)
Limitation on claims for refund or credit. --
(1)
General rule. -- Whenever a taxpayer claims to be entitled
to a refund or credit of any tax (or fee), additions to tax,
penalties or interest imposed by this article, or any article of
this chapter, or of this code, administered under this article,
paid into the treasury of this state, the taxpayer shall, except as
provided in subsection (d) of this section, file a claim for
refund, or credit, within three years after the due date of the
return in respect of which the tax (or fee) was imposed, determined
by including any authorized extension of time for filing the
return, or within two years from the date the tax, (or fee), was
paid, whichever of the periods expires the later, or if no return
was filed by the taxpayer, within two years from the time the tax
(or fee) was paid, and not thereafter:
Provided, That a claim for
refund of taxes imposed by article twenty-one of this chapter is
timely if made upon the initial return filed not later than ten
years after the due date.
(2)
Extensions of time for filing claim by agreement. -- The
tax commissioner and the taxpayer may enter into a written
agreement to extend the period within which the taxpayer may file
a claim for refund or credit, which period shall not exceed two
years. The period agreed upon may be extended for additional
periods not in excess of
two three years each by subsequent
agreements in writing made before expiration of the period
previously agreed upon.
(3)
Special rule where agreement to extend time for making an
assessment. -- Notwithstanding the provisions of subdivisions (1)
and (2) of this subsection, if an agreement is made under the
provisions of section fifteen of this article extending the time
period in which an assessment of tax can be made, then the period
for filing a claim for refund or credit for overpayment of the same
tax made during the periods subject to assessment under the
extension agreement are also extended for the period of the
extension agreement plus ninety days.
(4)
Overpayment of federal tax. -- Notwithstanding the
provisions of subdivisions (1) and (2) of this subsection, in the
event of a final determination by the United States Internal
Revenue Service or other competent authority of an overpayment in
the taxpayer's federal income or estate tax liability, the period
of limitation upon claiming a refund reflecting the final
determination in taxes imposed by articles eleven, twenty-one and twenty-four of this chapter shall not expire until six months after
the determination is made by the United States Internal Revenue
Service or other competent authority.
(5)
Tax paid to the wrong state. -- Notwithstanding the
provisions of subdivisions (1) and (2) of this subsection, when an
individual, or the fiduciary of an estate, has in good faith
erroneously paid personal income tax, estate tax or sales tax, to
this state on income or a transaction which was lawfully taxable by
another state and, therefore, not taxable by this state, and no
dispute exists as to the jurisdiction to which the tax should have
been paid, then the time period for filing a claim for refund, or
credit, for the tax erroneously paid to this state does not expire
until ninety days after the tax is lawfully paid to the other
state.
(6)
Exception for gasoline and special fuel excise tax, motor
fuel excise tax and motor carrier road tax. -- This subsection does
not apply to refunds or credits of gasoline and special fuel excise
tax, motor carrier road tax, or motor fuel excise tax sought under
the provisions of article fourteen, fourteen-a or fourteen-c of
this chapter.
(m) Effective date. -- This section, as amended in the year
two thousand four, applies to claims for refund or credit filed on
or after the first day of January, two thousand four.
§11-10-17. Interest.
(a)
Underpayments. -- If any amount of a tax administered
under this article is not paid on or before the last date
prescribed for payment, interest on the amount at the rate of eight
percent per annum shall be paid for the period from the last date
to the date paid:
Provided, That on and after the first day of
July, one thousand nine hundred eighty-six, interest on
underpayments shall be paid at the annual rate established under
section seventeen-a of this article, from the period beginning on
the first day of July, or from the last day prescribed for payment,
whichever is the later, to the date paid, regardless of when
liability for the tax arose:
Provided, however, That on and after
the first day of July, two thousand two, interest on underpayments
shall be paid at an annual rate of one and one-half percent above
the annual rate established under section seventeen-a of this
article, from the period beginning on the first day of July, or
from the last day prescribed for payment, whichever is the later,
to the date paid, regardless of when liability for the tax arose.
For purposes of this subsection, the last date prescribed for
payment shall be the due date of the return and shall be determined
without regard to any extension of time for payment.
(b)
Last date for payment not otherwise prescribed. -- In the
case of taxes payable by stamp or other indicia of tax payment and
in all other cases in which the last day for payment is not
otherwise prescribed, the last date for payment shall be considered to be the date the liability for tax arises and in no event shall
be later than the date notice and demand for payment of the tax is
made by the tax commissioner.
(c)
Erroneous refund or credit. -- If any refund is made or
credit is established upon an erroneous claim for refund or credit,
interest on the amount refunded or credited at the annual rate
established under section seventeen-a of this article, shall be
paid by the claimant from the date the refund was made or the
credit was taken to the date the amount is recovered.
(d)
Overpayments. -- Interest shall be allowed and paid at the
annual rate of eight percent per annum upon any amount which has
been finally administratively or judicially determined to be an
overpayment in respect of each tax administered under this article
except the taxes imposed by articles twelve, fourteen and
fourteen-a of this chapter:
Provided, That on and after the first
day of July, one thousand nine hundred eighty-six, interest on
overpayments shall be paid at the annual rate established under
section seventeen-a of this article, from the first day of July, or
the date the claim for refund or credit is filed, whichever is the
later, regardless of when the tax was paid. The interest shall be
allowed and paid for the period commencing with the date of the
filing by the taxpayer of a claim for refund or credit with the tax
commissioner and ending with the date of a final administrative or
judicial determination of overpayment. The tax commissioner shall, within thirty days after the determination of entitlement to
refund, issue his or her requisition or establish a credit as
requested by the taxpayer. Whenever the tax commissioner fails or
refuses to issue any requisition or establish the credit within
said thirty-day period, the interest provided herein shall commence
to accrue until performance by the tax commissioner. The
acceptance of the refund check or credit shall be without prejudice
to any right of the taxpayer to claim any additional overpayment
and interest thereon:
Provided, however, That on and after the
first day of July, two thousand four, the following applies to the
calculation and payment of interest on overpayments:
(1) Rate. --
Interest shall be allowed and paid upon any
overpayment of any tax administered under this article at the
overpayment rate established under section seventeen-a of this
article.
(2) Period. -- Interest shall be allowed and paid as follows:
(i) Credits. -- In the case of a credit, from the date of the
overpayment to the due date of the amount against which the credit
is taken.
(ii) Refunds. -- In the case of a refund, from the date of the
overpayment to a date (to be determined by the tax commissioner)
preceding the date of the refund check by not more than thirty
days, whether or not the refund check is accepted by the taxpayer
after tender of the check to the taxpayer. The acceptance of the
check shall be without prejudice to any right of the taxpayer to claim any additional overpayment and interest.
(iii) Late returns. -- Notwithstanding paragraph (1) or (2) in
the case of a return of tax which is filed after the last date
prescribed for filing the return, no interest may be allowed or
paid for any day before the date on which the return is filed.
(iv) Refunds within forty-five days after return is filed. --
If any overpayment of tax imposed by this title is refunded within
forty-five days after the last day prescribed for filing the return
of the tax (determined without regard to any extension of time for
filing the return) or, in the case of a return filed after the last
date, is refunded within forty-five days after the date the return
is filed, no interest may be allowed under subsection (a) of this
section on the overpayment.
(v) Refunds after claim for credit or refund. -- If:
(A) The taxpayer files a claim for a credit or refund for any
overpayment of tax imposed by this article; and
(B) The overpayment is refunded within forty-five days after
the claim is filed, no interest may be allowed on the overpayment
from the date the claim is filed until the day the refund is made.
(vi) Tax commissioner initiated adjustments. -- If an
adjustment initiated by the tax commissioner results in a refund or
credit of an overpayment, interest on the overpayment shall be
computed by subtracting forty-five days from the number of days
interest would otherwise be allowed with respect to the
overpayment.
(vii) Net operating loss or capital loss carryback. -- For
purposes of subsection (a) of this section, if any overpayment of
tax administered under this article results from a carryback of a
net operating loss or net capital loss, the overpayment may not be
considered to have been made prior to the filing date for the
taxable year in which the net operating loss or net capital loss
arises.
(
e) Applicable rules. -- For purposes of this section:
(1) No interest payable on tax refunded or credited within
ninety forty-five days after claim for refund or credit is filed.
In the event of the overpayment of any tax administered under this
article, except the tax imposed by articles twenty-one and
twenty-four of this chapter, where the tax commissioner issues his
or her requisition or establishes a credit as requested by the
taxpayer within ninety days after the date of the filing by the
taxpayer of a claim for refund or credit, no interest shall be
allowed under this section.
(2) No interest payable where personal income tax and
corporation net income tax refunded or credited within six months
after claim for refund or credit is filed. In the event of the
overpayment of the tax imposed by articles twenty-one and
twenty-four of this chapter, where the tax commissioner issues his
or her requisition or establishes a credit as requested by the
taxpayer within six months after the date of the filing by the taxpayer of a claim for refund or credit, no interest shall be
allowed under this section.
(3) (1) Interest treated as tax. -- Interest prescribed under
this section on any tax shall be collected and paid in the same
manner as taxes.
(4) (2) No interest on interest. -- No interest under this
section
shall may be imposed on the interest provided by this
section prior to the first day of July, one thousand nine hundred
eighty-six.
(5) (3) Interest on penalties or additions to tax. -- Interest
shall be imposed under subsection (a) of this section on any
assessable penalty or additions to tax only if the penalty or
additions to tax is not paid within fifteen days from the date of
notice and demand therefor, and in that case, interest shall be
imposed only for the period from the date of the notice and demand
to the date of payment.
(6) (4) Payments made within fifteen days after notice and
demand. -- If notice and demand is made for payment of any amount,
and if the amount is paid within fifteen days after the date of the
notice and demand, interest under this section on the amount so
paid may not be imposed for the period after the date of the notice
and demand.
(7) (5) Limitation on collection. -- Interest prescribed under
this section on any tax may be collected at any time during the
period within which the tax to which the interest relates may be collected.
(8) (6) Exception as to estimated tax. -- This section does
not apply to any failure to pay any estimated tax required to be
paid under articles thirteen, thirteen-a, thirteen-b, twenty-one,
twenty-three or twenty-four of this chapter.
§11-10-17a. Determination of rate of interest.
(a)
In general. -- The annual rate of interest established
under this section shall be such adjusted rate as is established by
the tax commissioner under subsection (b):
Provided, That
such the
annual rate
shall may never be less than eight percent per annum.
(b)
Adjustments of interest rate. --
(1)
Establishment of adjusted rate. -- If the adjusted prime
rate charged by banks (rounded to the nearest full percent):
(A) During the six-month period ending on the thirtieth day of
September of any calendar year; or
(B) During the six-month period ending on the thirty-first day
of March of any calendar year, differs from the interest rate in
effect under this section on either such date, respectively, then
the tax commissioner shall establish, within fifteen days after the
close of the applicable six-month period, an adjusted rate of
interest equal to
such the adjusted prime rate.
(2)
Effective date of adjustment. -- Any such adjusted rate of
interest established under paragraph (1) shall become effective:
(A) On the first day of January of the succeeding year in the case of an adjustment attributable to paragraph (1)(A) above; and
on
(B) The first day of July of the same year in the case of an
adjustment attributable to paragraph (1)(B).
(c)
Definition of "adjusted prime rate." -- For purposes of
subsection (b)
of this section, the term "adjusted prime rate
charged by banks" means the average predominant prime rate quoted
by commercial banks to large businesses, as determined by the board
of governors of the federal reserve system.
For purposes of this
section, there is no minimum interest rate: Provided, That for
determining the rates of interest on overpayments and underpayment,
the following applies on and after the first day of July, two
thousand four:
(1) General rule. --
(A) Overpayment rate. --
The overpayment rate established under this section shall be
the sum of:
(i) The federal short-term rate determined under subsection
(b) of this section; plus
(ii) Three percentage points. --
(B) Underpayment rate. --
The underpayment rate established under this section shall
be the sum of:
(i) The federal short-term rate determined under subsection
(b) of this section; plus
(ii) Four and one-half percentage points.
(2) Federal short-term rate. --
For purposes of this section:
(A) General rule. --
The tax commissioner shall announce the federal short-term
rate for the first month in each calendar quarter.
(B) Period during which rate applies. --
(i) In general. --
Except as provided in subsection (c), (1), (ii) of this
section, the federal short-term rate determined under the general
rule described before for any month shall apply during the first
calendar quarter beginning after the month.
(ii) Special rule for individual estimated tax. --
In determining the addition to tax for failure to pay
estimated tax for any taxable year, the federal short-term rate
which applies during the third month following such taxable year
shall also apply during the first fifteen days of the fourth month
following the taxable year.
(3) Federal short-term rate. --
The federal short-term rate for any month shall be the federal
short-term rate determined during such month by the secretary of
the treasury in accordance with §1274(d) of the Internal Revenue
Code. The rate shall be rounded to the nearest full percent (or,
if a multiple of one half of one percent, the rate shall be
increased to the next highest full percent).
(4) Application of change in interest rate. --
(a) To deficiencies. -- The interest rate in effect at the
time of assessment or when the payment of delinquent tax is made
shall not be applied retroactively to the date the tax was due.
Interest on moneys owed by the taxpayer shall be the sum of the
interest amounts calculated for each year or part thereof from the
date prescribed for payment (determined without regard to any
extensions) to the date the payment is made using the interest rate
in effect for each respective year or part thereof.
(b) To overpayments. -- The interest rate in effect at the
time an overpayment of tax is refunded, or a credit therefor is
established, by the tax commissioner, shall not be applied
retroactively to the date the claim for refund or credit was filed
with the tax commissioner. Interest on moneys owed to taxpayers
shall be the sum of the interest amounts calculated for each year
or part thereof from date the claim for refund or credit was filed
with the tax commissioner until date the refund is paid or a credit
therefor is established (such dates determined as provided in
section seventeen) of this article, using the interest rate in
effect for each respective year or part thereof.
ARTICLE 11. ESTATE TAXES.
§11-11-15. Interest.
(a)
Rate. -- The tax imposed by this article does not bear
interest if it is paid before the expiration of nine months after the date of death of the decedent. If that tax is paid after that
date, the tax bears interest at the rate of twelve percent per
annum from the date by which it should have been paid (determined
without regard to any extension of time for payment) until the date
it is paid:
Provided, That after the thirtieth day of June, two
thousand four, interest on tax due shall be calculated in
accordance with the provisions of section seventeen-a, article ten
of this chapter.
(b)
Application of payment. -- Every payment of delinquent tax
shall be applied, first, to any interest due on that tax, secondly,
to any additions to tax or penalty imposed by article ten of this
chapter, and then, if there is any balance, to the tax itself:
Provided, That in all events payment shall be applied as directed
by the taxpayer.
(c) Application of change in interest rate. --
(1) To deficiencies. -- The interest rate in effect at the
time of assessment or when the payment of delinquent tax is made
may not be applied retroactively to the date the tax was due.
Interest on moneys owed by the taxpayer shall be the sum of the
interest amounts calculated for each year or part thereof from the
date prescribed for payment (determined without regard to any
extensions) to the date the payment is made using the interest rate
in effect for each respective year or part thereof.
(2) To overpayments. -- The interest rate in effect at the
time an overpayment of tax is refunded, or a credit therefor is established, by the tax commissioner, may not be applied
retroactively to the date the claim for refund or credit was filed
with the tax commissioner. Interest on moneys owed to taxpayers
shall be the sum of the interest amounts calculated for each year
or part thereof from date the claim for refund or credit was filed
with the tax commissioner until the date the refund is paid or
credit is established as provided in section seventeen of this
article using the interest rate in effect for each respective year
or part year.
NOTE: The purpose of this bill is to provide that taxpayer
claims for refund is timely made at the initial filing of personal
income taxes and it requires payment of interest on claims for
refund of corporation net income taxes be paid after ninety days.
The bill provides for interest on overpayments, sets forth interest
calculations and revises interest provisions respecting estate
taxes. It also stops interest on refunds 30 days before the
issuance of the refund check, not the date that the Tax
Commissioner issues a warrant to the state treasury.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
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