May 10, 2017
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 “Taxpayer”) for the taxable year ended December 31, 2013.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia individual income tax return for the 2013 taxable year. A review of the Department's records showed that the Taxpayer had not filed a return. The Department requested additional information from the Taxpayer to determine if his income was subject to Virginia individual income tax. In response, the Taxpayer filed a return, claiming a credit for income tax paid to ***** (State A) on his behalf by a partnership (the “Partnership”). The Department denied the credit and made additional adjustments to the return. As a result, an assessment was issued. The Taxpayer appealed, contending the credit should be allowed to offset a portion of the tax due on the assessment.
DETERMINATION
Virginia Code § 58.1-332 A allows Virginia residents a credit on their Virginia return for income taxes paid to another state provided the income is either earned or business income. A taxpayer claiming the out-of-state tax credit for income taxes paid to another state on a unified return must attach a statement to his return verifying: (1) the taxpayer's pro rata portion of the unified return's taxable income, and (2) the taxpayer's pro rata portion of the tax paid to the applicable state by the partnership on the individual's behalf. See Public Document (P.D.) 07-207 (12/5/2007).
The statement the Taxpayer provided with his appeal lists his pro rata portion of taxable income from the Partnership that was attributable to State A and the amount of tax that was paid to State A on his behalf. As such, the statement conforms to the requirements of P.D. 07-207.
The assessment will be revised to allow a credit for income tax paid to State A and an updated bill will be issued to the Taxpayer. The Taxpayer should remit the balance due within 30 days of the bill date to avoid the accrual of additional interest and possible collections actions.
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/1097.M