May 25, 2021
Re: Ruling Request: Bank Franchise Tax
Dear *****:
This will respond to your letter in which you request a ruling as to whether ***** (the “Taxpayer”) is subject to Virginia’s bank franchise tax.
FACTS
The Taxpayer is a federally chartered stock savings bank organized under the laws of the United States. The Taxpayer has five office locations in Virginia and provides banking services, including accepting deposits and making loans. The Taxpayer requests a ruling whether it is subject to Virginia’s bank franchise tax.
RULING
Virginia Code § 58.1-1202 requires every bank or trust company to pay an annual tax measured by its net capital as defined in Virginia Code § 58.1-1205. The bank franchise tax is paid in lieu of Virginia’s income tax and a number of other state and local taxes. Under Virginia Code § 58.1-1201, a bank includes:
any incorporated bank, banking association, savings bank that is a member of the Federal Reserve System, or trust company organized by or under the authority of the laws of the Commonwealth and any bank or banking association organized by or under the authority of the laws of the United States, doing business or having an office in the Commonwealth or having a charter which designates any place within the Commonwealth as the place of its principal office, and any bank which establishes and maintains a branch in this Commonwealth under Article 5.1 (§ 6.1-44.1 et seq.) of Title 6.1 or Article 5.2 (§ 6.1-44.15 et seq.) of Title 6.1, whether such bank or banking association is authorized to transact business as a trust company or not, and any joint stock land bank or any other bank organized by or under the authority of the laws of the United States upon which the Commonwealth is authorized to impose a tax.
In AMG National Trust Bank v. Commonwealth of Virginia, Department of Taxation, Civil Docket No.: CL10-3031 (April 2011) (AMG National Trust), issued as Public Document (P.D.) 11-152 (4/7/2011), the court interpreted the statute to provide for four separate definitions of bank for purposes of the bank franchise tax:
(1) any incorporated bank, banking association, savings bank that is a member of the Federal Reserve System, or trust company organized by or under the authority of the laws of the Commonwealth;
(2) any bank or banking association organized by or under the authority of the laws of the United States, doing business or having an office in the Commonwealth or having a charter which designates any place within the Commonwealth as the place of its principal office;
(3) any bank which establishes and maintains a branch in this Commonwealth under Article 5.1 (§ 6.1-44.1 et seq.) of Title 6.1 [now Article 6 (§ 6.2-836 et seq.) of Title 6.2] or Article 5.2 (§ 6.1-44.15 et. seq.) of Title 6.1 [now Article 7 (§ 6.2-849 et seq.) of Title 6.2], whether such bank or banking association is authorized to transact business as a trust company or not;
(4) any joint stock land bank or any other bank organized by or under the authority of the laws of the United States upon which the Commonwealth is authorized to impose a tax;
According to the evidence provided, the Taxpayer is a federally chartered stock savings bank organized under the laws of the United States. It operates five offices in Virginia, offering banking services such as accepting deposits and making loans. In the Department’s opinion, the Taxpayer qualifies as a bank for purposes of the bank franchise tax at least under the second definition above.
The Code of Virginia sections and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s website. If you have any questions regarding this ruling, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/3616.M