A. For partners and partnerships subject to the provisions of this article, the Department shall assess, collect from, and refund any Virginia income tax, interest, and penalties arising from final federal adjustments as set forth in this article. If any partner or partnership makes an election pursuant to § 58.1-399.1, the Department shall assess and collect in-lieu-of amounts, interest, and penalties arising from final federal adjustments as if the in-lieu-of-amounts are a corporate income tax imposed pursuant to the provisions of Article 10 (§ 58.1-400 et seq.). Penalties and interest imposed on a partner or partnership shall be determined based on the date the partnership return for the reviewed year originally was due. If any partner or partnership subject to § 58.1-399 fails to file its federal adjustments report within the time required, the provisions of § 58.1-394.1 shall be applicable to such report, mutatis mutandis.
B. Notwithstanding the provisions of subsection C of § 58.1-312 and clause (ii) of § 58.1-1823, an assessment shall be issued and an amended return for refund shall be filed by the following dates:
1. If a partner or partnership files with the Department a federal adjustments report or an amended Virginia tax return within the time period specified in § 58.1-399, or § 58.399.1, as applicable, the Department may assess any amounts, including taxes, in-lieu-of-amounts, interest, and penalties arising from those federal adjustments, if the Department issues a notice of assessment to the partner or partnership no later than the expiration of the one-year period following the date of filing with the Department of the federal adjustments report.
2. If a partner or partnership fails to file the federal adjustments report within the time period specified in § 58.1-399, or § 58.399.1, as applicable, or if the federal adjustments report filed by the partner or partnership omits final federal adjustments or understates the correct amount of tax owed, the Department may assess amounts or additional amounts including taxes, in-lieu-of-amounts, interest, and penalties arising from the final federal adjustments, if the Department issues a notice of assessment to the partner or partnership no later than the expiration of the one-year period following the date of filing with the Department of the federal adjustments report.
3. An amended return for refund arising from federal adjustments made by the Internal Revenue Service shall be filed no later than one year from the date a federal adjustments report, as required by § 58.1-399, or § 58.399.1, as applicable, was due to the Department, including any extensions issued pursuant to the provisions of this section. The partner or partnership may, on the federal adjustments report, report additional tax due, report a claim for refund or credit of a tax, and make any other adjustments resulting from adjustments to the partner's or partnership's federal taxable income, including adjustments to its net operating losses.
4. Unless otherwise agreed to in writing by the partnership or partner and the Department, any adjustments by the Department or by the partner or partnership that are made pursuant to the one-year statute of limitations provided for in this subsection are limited to adjustments to the partner's or partnership's tax liability that arise from federal adjustments.
C. The one-year statute of limitations provided for in subsection B may be extended:
1. Automatically, upon written notice to the Department, by 60 days for an audited partnership or a tiered partner that has 10,000 or more direct partners; or
2. By written agreement between the partnership or partner and the Department pursuant to § 58.1-101.
D. 1. Any extension granted pursuant to subsection C shall extend by an equal time period the last day for the Department to assess any additional amounts arising from the adjustments to federal taxable income and the period for filing a claim for refund or credit of taxes.
2. The one-year statute of limitations provided for in subsection B shall not affect the time within which or the amount for which an assessment may otherwise be made or a refund sought under this title.
2020, c. 1030.