Title of Regulation: 23VAC10-112. Declaration of Estimated Income Tax by Individuals (repealing 23VAC10-112-40, 23VAC10-112-41).

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

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: January 17, 2017.

Effective Date: February 1, 2017.

Agency Contact: James Savage, Tax Policy Analyst, Department of Taxation, P.O. Box 27185, Richmond, VA 23261-7185, telephone (804) 371-2301, or email james.savage@tax.virginia.gov.

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

Purpose: This regulatory action is needed to repeal 23VAC10-112-40 and 23VAC10-112-41, which provide no additional guidance to clear and unambiguous statutes. Repealing these sections does not reflect any change in existing tax policy and has no impact on the administration of the tax. As these sections of the regulation are unnecessary, this regulatory action has no effect on the health, safety and welfare of citizens. This regulatory action does not reflect a change in existing departmental policy.

Rationale for Using Fast-Track Rulemaking Process: The fast-track rulemaking process is intended for proposed regulations that are expected to be noncontroversial. As these sections of the regulation provide no additional guidance to clear and unambiguous statutes, this action is not expected to be controversial.

Substance: This action repeals two sections of the Declaration of Estimated Income Tax by Individuals (23VAC10-112) that provide no additional guidance to clear and unambiguous statutes. Repealing these sections does not reflect any change in existing tax policy and has no impact on the administration of tax.

23VAC10-112-40 sets forth the addition to tax applicable in the case of any underpayment of estimated tax by an individual. 23VAC10-112-41 sets forth the amount of the underpayment for the purposes of calculating the addition to tax. Because these sections merely restate Section 58.1-492 A of the Code of Virginia and provide no additional guidance, the repeal of these sections is not expected to be controversial.

Issues: This regulatory action will ease voluntary taxpayer compliance and the department's administration of the state tax laws by eliminating unnecessary regulation sections. As these regulation sections are unnecessary, their repeal will result in no disadvantage to the public or the Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Department of Taxation (Department) proposes to repeal sections 40 and 41 of the regulation that governs individuals in declaring and paying their estimated state income tax.

Result of Analysis. Benefits outweigh costs for all proposed changes.

Estimated Economic Impact. Current regulation contains two sections that govern the failure of individuals to pay estimated tax. The Department proposes to eliminate these sections because they are completely duplicative of unambiguous requirements in the Code of Virginia (COV). While there is likely some small benefit that accrues to taxpayers from having the rules that they must abide by in both regulation and the COV, that benefit is lost when laws change and the regulation becomes obsolete and confusing because it would be in conflict with the actual controlling legal requirement. Because of this, the benefits of eliminating regulation not needed to interpret the COV likely outweigh the costs of doing so.

Businesses and Entities Affected. This proposed regulatory change will affect all individuals who are subject to paying estimated taxes. Board staff reports that, for taxable year 2013, there were approximately 215,000 individuals who made estimated tax payments of Virginia individual income tax.

Localities Particularly Affected. No locality will be particularly affected by these proposed regulatory changes.

Projected Impact on Employment. These proposed regulatory changes are unlikely to affect employment in the Commonwealth.

Effects on the Use and Value of Private Property. These proposed changes will likely not affect the use or value of private property in the Commonwealth.

Real Estate Development Costs. These proposed regulatory changes are unlikely to affect real estate development costs in the Commonwealth.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. No small businesses are likely to incur any additional costs on account of these clarifying changes.

Alternative Method that Minimizes Adverse Impact. No small businesses are likely to incur any additional costs on account of these clarifying changes.

Adverse Impacts: 

Businesses. No businesses are likely to incur any additional costs on account of these clarifying changes.

Localities. Localities in the Commonwealth are unlikely to see any adverse impacts on account of these proposed regulatory changes.

Other Entities. No other entities are likely to be adversely affected by these proposed changes.

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

Summary:

This regulatory action repeals 23VAC10-112-40 and 23VAC10-112-41, which are unnecessary as they restate § 58.1-492 A of the Code of Virginia and provide no additional requirements. The repeal of these sections does not reflect a change in existing tax policy and has no impact on the administration of the tax.  

23VAC10-112-40. Failure by individual to pay estimated tax; additions to the tax. (Repealed.)

In the case of any underpayment of estimated tax by an individual, except as provided in 23VAC10-112-43, there shall be added to the individual income tax for the taxable year an amount determined at the rate established for interest, under § 58.1-15 of the Code of Virginia upon the amount of the underpayment (determined under 23VAC10-112-41), for the period of the underpayment (determined under 23VAC10-112-42). The amount of such addition to the tax shall be reported and paid at the time of filing the individual income tax return for the taxable year.

23VAC10-112-41. Failure by individual to pay estimated tax; amount of underpayment. (Repealed.)

For purpose of 23VAC10-112-40, the amount of the underpayment shall be the excess of:

1. The amount of the installment which would be required to be paid if the estimated tax were equal to 90% (66-2/3% in the case of a self-employed farmer or fisherman referred to in 23VAC10-112-23 B) of the tax shown on the individual income tax return for the taxable year, or if no return was filed, 90% (66-2/3% in the case of self-employed farmers or fishermen referred to in 23VAC10-112-23 B) of the tax for such year, over

2. The amount, if any, of the installment paid on or before the last date prescribed for such payment.