Administrative Code

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Virginia Administrative Code
Title 23. Taxation
Agency 10. Department of Taxation
Chapter 120. Corporation Income Tax
1/27/2023

23VAC10-120-460. Failure to pay estimated tax.

A. Definitions. The following definitions apply only to the computation of the addition to the tax for failure to pay estimated tax.

1. Underpayment. With respect to any installment, the "underpayment" is the excess of (i) the installment which would be required to be paid if the estimated tax were equal to 90% of the income tax shown on the income tax return for the taxable year (or the amount to the tax, if no return was filed) over (ii) the amount, if any, of the installment paid on or before the last day prescribed for payment of the installment.

2. Tax or income tax. For the purpose of computing the addition to the tax, the term "tax" means the income tax shown on the income tax for the taxable year less the credits allowed by Va. Code §§ 58.1-430 and 58.1-431.

3. Period of underpayment. The addition is computed with respect to each installment for which there is an underpayment. The "period of underpayment" begins with the date the installment was required to be paid and ends on the earlier of:

a. The 15th day of the 4th month following the close of the taxable year, or

b. The date on which any portion of the underpayment is paid. A payment of estimated tax on any installment date shall be considered a payment of previous underpayment only to the extent such payment exceeds the installment which would be required to be paid if the estimated tax were equal to 90% of the income tax.

4. Rate. The "rate" applied to each underpayment to determine the amount of the addition to the tax shall be the interest rate determined under Va. Code § 58.1-15.

B. Exceptions. The addition to the tax will not be imposed for any underpayment of any installment of estimated tax if, on or before the date prescribed for payment of the installment, the total amount of all payments of estimated tax made equals or exceeds the amount which would have been required to be paid on or before such date if the estimated tax were the least of the following amounts:

1. The tax shown on the return for the preceding taxable year, provided that the preceding taxable year was a year of 12 months and a return showing a liability for tax was filed for such year. For the purpose of this exception the credits allowable under Va. Code § 58.1-430 and 58.1-431 shall not be taken into account in determining the prior year's tax.

2. An amount equal to a tax determined on the basis of the tax rates for the taxable year but otherwise on the basis of the facts shown on the return for the preceding year and the law applicable to such year, in the case of a corporation required to file a return for such preceding taxable year.

3. a. An amount equal to 90% of the income tax for the taxable year computed by placing on an annual basis the taxable income

(i) For the first 3 months of the taxable year, in the case of an installment required to be paid in the 4th month.

(ii) Either the first 3 months or the first 5 months of the taxable year (whichever results in no addition being imposed), in the case of an installment required to be paid in the 6th month.

(iii) Either the first 6 months or the first 8 months of the taxable year (whichever results in no addition being imposed), in the case of an installment required to be paid in the 9th month.

(iv) Either the first 9 months or the first 11 months of the taxable year (whichever results in no addition being imposed), in the case of an installment required to be paid in the 12th month.

b. The taxable income shall be placed on an annual basis for the purpose of exception (3) by first multiplying the taxable income by 12 and dividing the resulting amount by the number of months in the taxable year (3, 5, 6, 8, 9 or 11, as the case may be). A taxpayer whose taxable year consists of 52 or 53 weeks shall use the procedure set forth in U.S. Treasury Regulation § 1.6655- 2(a) (4) to place its taxable income on an annual basis. In determining the applicability of this exception, there must be an accurate determination of the amount of income, deductions, and Virginia modifications for the appropriate period, that is, for the 3, 5, 6, 8, 9 or 11 months of the taxable year.

Statutory Authority

§§ 58.1-203 and 58.1-504 of the Code of Virginia.

Historical Notes

Derived from VR630-3-504, eff. January 1, 1985.

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