February 29, 2016
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the individual income tax assessment issued to ***** (the "Taxpayers") for the taxable year ended December 31, 2011. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayers, a husband and wife, filed a 2011 Virginia individual income tax return claiming a subtraction for basic military pay and a subtraction for National Guard pay. Under review, the Department disallowed the basic military pay subtraction and issued an assessment for additional tax and interest. The Taxpayers appeal the assessment, contending the husband was on active duty for 90 consecutive days and, therefore, qualifies for the basic military pay subtraction.
DETERMINATION
Virginia Code § 58.1-322 C 23 provides military service personnel with a subtraction for up to $15,000 of basic military pay received during a taxable year, provided they are on extended active duty for a period in excess of 90 days. The subtraction is reduced when the amount of military basic pay received by the taxpayer exceeds $15,000 and is fully phased out when basic military pay reaches $30,000. The subtraction is available whether the individual is stationed inside or outside of Virginia.
By reason of their character as legislative grants, statutes relating to deductions and subtractions allowable in computing income and credits against a tax liability must be strictly construed against the taxpayer and in favor of the taxing authority. See Howell's Motor Freight, Inc., et al. v. Virginia Department of Taxation, Circuit Court of the City of Roanoke, Law No. 82-0846 (10/27/1983).
The Taxpayers contend that the husband served an active duty assignment for 90 consecutive days during the 2011 taxable year. The Taxpayers provided a copy of the husband's military orders to support their contention. Review of the military orders shows the Taxpayer was ordered to serve "full time National Guard duty".
32 U.S.C. §101(19) defines full time National Guard duty as training or other duty, other than inactive duty, performed by a member of the National Guard. In addition, the meaning of active duty provided under 32 U.S.C. §101(12) specifically excludes full time National Guard duty.
Pursuant to 32 U.S.C. § 102, whenever Congress determines that more units and organizations are needed for national security, the Army National Guard of the United States or such parts of them shall be ordered to active Federal duty. Under 10 U.S.C. §10107, however, when not on federal active duty, members of the Army National Guard of the United States are administered in their status as members of the Army National Guard.
The Taxpayer's orders indicate the husband was called to National Guard duty and not active duty. Thus, the Taxpayers were not eligible for the active duty subtraction.
Further, a service member may not deduct the same income for both the military basic pay subtraction and the subtraction for National Guard pay. See Public Document (P.D.) 13-222 (12/13/2013). Based on the foregoing, the Department's assessment is upheld. An updated bill will be issued shortly.
The Code of Virginia sections and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-5840996682.D