Tax Type
Individual Income Tax
Description
Intangible income received by Native American
Topic
Taxable Income
Date Issued
05-25-2000
May 25, 2000
Re: § 58.1-1821 Application: Individual Income Tax
Dear ****
This is in reference to your letter concerning individual income tax assessments for the taxable years 1994, 1995, and 1996. Your letter is being treated as an appeal pursuant to Code of Virginia § 58.1-1821. I apologize for the delay in responding to your letter.
FACTS
You reside on an Indian reservation located in Virginia. You received intangible income, such as interest and dividends, from sources off the reservation. You keep the stock certificates at your residence on the reservation. Since you live on the reservation, you believe that you should not be subject to Virginia income tax on this intangible income. This income, therefore, was not reported on the original Virginia returns. With information received from the Internal Revenue Service, the department discovered that this income was not reported to Virginia, and assessments were issued. You are requesting that these assessments be abated.
DETERMINATION
Virginia law provides that the starting point for computing Virginia taxable income is federal adjusted gross income with certain additions, subtractions, exemptions, and deduction modifications, as specified in Code of Virginia § 58.1-322. To the extent that intangible income is included in federal adjusted gross income, it is subject to taxation in Virginia.
Indians are considered residents of the state in which their reservation is located. (Eastern Band of Cherokee Indians v. Lynch, 632 F.2d 373 (4th Cir 1980)). An Indian residing on an Indian reservation located in Virginia, therefore, is a resident of Virginia. It is the policy of the Commonwealth not to impose income tax on the income a reservation Indian earns solely from pursuits on the reservation (1917 Report of the Virginia Attorney General 160 and 1918 Report of the Virginia Attorney General 86). This general state tax immunity, however, does not operate outside of the Indian reservation. Indians receiving income from outside of the reservation are subject to income taxes in the same manner as other residents of this state. As a Virginia resident, therefore, your intangible income resulting from activities outside the reservation is subject to taxation in Virginia.
Based on the information presented, there is no basis to abate the 1994, 1995, and 1996 individual income tax assessments attributable to intangible income received from activities outside the reservation while you lived on the Indian reservation. The enclosed schedule gives a summary of your assessments. Within the next 30 days, please remit your payment to the attention of *****, Office of Tax Policy, Department of Taxation, Post Office Box 1880, Richmond, Virginia 23218-1880. If you have further questions, please contact **************** at ****************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/13123N
Re: § 58.1-1821 Application: Individual Income Tax
Dear ****
This is in reference to your letter concerning individual income tax assessments for the taxable years 1994, 1995, and 1996. Your letter is being treated as an appeal pursuant to Code of Virginia § 58.1-1821. I apologize for the delay in responding to your letter.
FACTS
You reside on an Indian reservation located in Virginia. You received intangible income, such as interest and dividends, from sources off the reservation. You keep the stock certificates at your residence on the reservation. Since you live on the reservation, you believe that you should not be subject to Virginia income tax on this intangible income. This income, therefore, was not reported on the original Virginia returns. With information received from the Internal Revenue Service, the department discovered that this income was not reported to Virginia, and assessments were issued. You are requesting that these assessments be abated.
DETERMINATION
Virginia law provides that the starting point for computing Virginia taxable income is federal adjusted gross income with certain additions, subtractions, exemptions, and deduction modifications, as specified in Code of Virginia § 58.1-322. To the extent that intangible income is included in federal adjusted gross income, it is subject to taxation in Virginia.
Indians are considered residents of the state in which their reservation is located. (Eastern Band of Cherokee Indians v. Lynch, 632 F.2d 373 (4th Cir 1980)). An Indian residing on an Indian reservation located in Virginia, therefore, is a resident of Virginia. It is the policy of the Commonwealth not to impose income tax on the income a reservation Indian earns solely from pursuits on the reservation (1917 Report of the Virginia Attorney General 160 and 1918 Report of the Virginia Attorney General 86). This general state tax immunity, however, does not operate outside of the Indian reservation. Indians receiving income from outside of the reservation are subject to income taxes in the same manner as other residents of this state. As a Virginia resident, therefore, your intangible income resulting from activities outside the reservation is subject to taxation in Virginia.
Based on the information presented, there is no basis to abate the 1994, 1995, and 1996 individual income tax assessments attributable to intangible income received from activities outside the reservation while you lived on the Indian reservation. The enclosed schedule gives a summary of your assessments. Within the next 30 days, please remit your payment to the attention of *****, Office of Tax Policy, Department of Taxation, Post Office Box 1880, Richmond, Virginia 23218-1880. If you have further questions, please contact **************** at ****************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/13123N
Rulings of the Tax Commissioner