Rate of interest

# A.

In general. The Internal Revenue Code requires that interest accruing be compounded daily. Although Virginia uses the nominal interest rate established pursuant to IRC § 6621, Virginia applies simple interest computations without compounding.

# B.

Interest is computed by excluding the due date and including the date of payment in the number of days. For example, interest on $100 tax due June 20, 1983, and paid July 10, 1983, would be computed as follows:

June 21 through June 30 = 10 days at 16%

10

x 0.16 = 0.004383

365

July 1 through July 10 = 10 days at 11%

10

x 0.11 = 0.003013

365

Total Interest Factor 0.007396 x $100 = $0.74 interest

Note that June 20, the due date, is not counted, and that July 10 and all intervening days are counted.

# C.

See § 58.15 of the Code of Virginia for provisions defining rates of interest and methods to determine interest and additions to tax.