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Richmond business tax over-payment costs taxpayers nearly $500,000

RICHMOND, Va. -- When the City of Richmond paid out $475,000 to a business in interest on taxes the business overpaid the city, it raised eyebrows among some city officials, including the woman overseeing the finance department, Lenora Reid.

Reid said her suspicion is that the company overpaid intentionally.

"I don't impute any bad motives of the taxpayer, but it's something we have to look into each and every time we receive requests for a refund of that size," Reid said in an interview at City Hall Thursday.

The city is not naming the business because state law prohibits releasing specific taxpayer information.

The Richmond Times Dispatch first reported the concerns regarding the over-payment.

Businesses self-report their earnings and under Virginia state law a locality must pay a business the same interest rate on an accidental over-payments as they charge those businesses on delinquent taxes.

It's state code that doesn't make much sense to Jonathan Buteau who works in Richmond.

"I do feel like taxpayer dollars shouldn't go to a business's mistake when it comes to paying taxes," Buteau said.

In Richmond, the interest rate is 10 percent, which is a rate Richmond resident Adam Pflugrath said could lead to companies taking advantage of the system.

"I think that's a better rate of return than you can get on other investments currently," Pflugrath said.

That's why Reid and Councilman Parker Agelasto argue it's time the General Assembly revise the law.

"If the city collects it why should we then be obligated to pay them for penalties in interest for their mistake," Agelasto asked.

"Hopefully at some point in the future we will not have to provide interest at the same rate in which we accept interest," Reid said.

The Virginia Department of Taxation said the state pays a six percent interest rate on any tax over-payments.

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