Tax Type
Individual Income Tax
Description
Taxpayer claims income from activities conducted on an Indian reservation.
Topic
Persons Subject to Tax
Subtractions and Exclusions
Date Issued
03-14-2011
March 14, 2011
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter seeking reconsideration of the Department's determination letter, issued as Public Document (P.D.) 10-157 (7/30/2010), to ***** (the "Taxpayers") for the taxable years ended December 31, 2005 through 2007.
FACTS
During the taxable years at issue, the Taxpayers, a husband and wife, resided on an Indian reservation. The wife is an Indian. On their individual income tax return, the Taxpayers subtracted wages, interest, gains, dividends and retirement income in computing their Virginia taxable income. As a result of an audit, the Department disallowed the subtraction and issued assessments. The Taxpayers appealed the assessments, contending the income resulted from activities on an Indian reservation.
In P.D. 10-157, the Department upheld assessments because certain pension, dividend and interest income received by the Taxpayers and subtracted on their income tax returns did not result from pursuits conducted by an Indian residing on a reservation. The Taxpayers request a redetermination, contending that the 1677 treaty between Virginia and the Indians is still in effect and the situs of the income at issue, received by tribe members living on the reservation, is exempt from taxation by Virginia under the treaty.
DETERMINATION
The Taxpayers reiterate their argument that the treaty between Virginia and the Indians in 1677 exacts an annual tax on the Indians and the Commonwealth can impose no other tax on Indians in Virginia. While the annual tax established by the treaty satisfies the tax obligation of the tribe, it does not satisfy the individual obligations of the members of the tribe as residents and citizens of the Commonwealth of Virginia. See Public Document (P.D.) 00-96 (5/25/2000) and P.D. 10-157.
Further, in P.D. 10-157, the Department determined that income resulting from activities conducted by an Indian residing on an Indian reservation, including income from intangible sources received from institutions or providers located on the reservation and pension income resulting from employment pursued on the reservation, would be income exempt from Virginia income tax.
The Taxpayers have not shown evidence that the dividend or interest income at issue was received from pursuits conducted on the reservation or that the pension income at issue resulted from employment conducted by an Indian residing and working on the reservation. As such, the Department is unable to conclude such income was exempt from taxation.
While I recognize your continuing disagreement with the validity of the assessment, P.D. 10-157 clearly explains the Department's authority for disallowing the Taxpayers' subtraction for the income at issue, and constitutes the Department's final determination on this issue. Accordingly, the assessments for the 2005 through 2007 taxable years are upheld.
A schedule is enclosed showing the current outstanding balance. No additional interest will accrue provided the total outstanding balance is paid within 30 days from the date of this letter. Payment should be sent to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, Post Office Box 27203, Richmond, Virginia 23218-7203, Attention: *****.
The Code of Virginia sections cited, along with other reference documents, 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 regarding this determination, you may contact ***** at *****.
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- Sincerely,
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- Craig M. Burns
Tax Commissioner
- Craig M. Burns
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AR/1-4556554595.E
Rulings of the Tax Commissioner