Tax Type
Individual Income Tax
Description
Military pay earned while on duty in Virginia later deployed to a combat zone
Topic
Basis of Tax
Federal Conformity
Subtractions and Exclusions
Date Issued
06-24-2009
June 24, 2009
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This is in response to your letter appealing the individual income tax assessments issued to ***** (the "Taxpayers") for the taxable year ended December 31, 2005.
FACTS
The Taxpayers, a husband and wife, are residents of Virginia. They claimed a subtraction on their 2005 Virginia individual income tax return for military wages resulting from combat duty. The Department disallowed the subtraction for combat duty pay on the basis that the combat duty pay was not included in the husband's federal adjusted gross income. The Taxpayers appeal the assessment, asserting the military wages are eligible for the subtraction.
DETERMINATION
Virginia Code § 58.1-322 C 21 allows military service personnel to subtract all military pay and allowances attributable to service in a combat zone or a qualified hazardous duty area designated by order of the President of the United States with the consent of Congress. This subtraction is limited, however, to eligible military pay included in a taxpayer's federal adjusted gross income (FAGI)
Pursuant to Internal Revenue Code (IRC) § 112, enlisted military personnel can exclude amounts received as compensation for active duty service in a combat zone or a qualified hazardous duty area. The statute also grants commissioned officers serving in these areas an exclusion for a portion of such pay.
Because the combat duty pay of enlisted military personnel would not be included in FAGI, it would not eligible for the subtraction. Thus, the Virginia subtraction is only available for officers whose eligible military pay is partially included in FAGI.
The husband was on active duty in January 2005, but was not deployed to a combat zone until July of that year. Thus, he concedes that a portion of his military pay was earned while stationed in Virginia. The information provided shows that the husband's combat pay was not included in the Taxpayers' FAGI for the 2005 taxable year.
On their 2005 Virginia individual income tax return, the Taxpayers subtracted the military pay earned while the husband was on active duty in Virginia. Such income is not eligible for the subtraction provided by Va. Code § 58.1-322 C 21. Accordingly, the Department's assessment is correct.
A revised bill, with interest accrued to date, will be sent to the Taxpayers. No additional interest will accrue provided the outstanding balance in paid within 30 days from the date of the revised bill.
The Code of Virginia sections and tax bulletin cited, along with other reference materials, are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this determination, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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AR/1-3114296182.B
Rulings of the Tax Commissioner