82-74 | Virginia Tax

Tax Type

Withholding Taxes

Description

Dependent Care Assistance Programs

Topic

Withholding of Tax

Date Issued

06-04-1982

June 4, 1982

Re: Request for Ruling/Withholding Tax Dependent Care Assistance Programs

Dear **********************

This will reply to your letter of February 2, 1982 requesting a ruling on the applicability of Virginia's withholding laws to dependent care assistance programs.

FACTS

A partnership has enacted a "dependent care assistance program" qualified under §129 (d) of the Internal Revenue Code of 1954, as amended hereinafter called "IRC"). Under the provisions of IRC §3401(a)(18), payments or benefits for dependent care assistance qualifying under IRC §129 are excluded from wages for purposes of withholding federal income tax.

DETERMINATION

The Code of Virginia is silent on the issue of withholding on the value of or payments for qualified dependent core assistance programs. Virginia Code §58-151.1(1) does define "wages" as:

- All remuneration...for services performed by an employee for his employer, including the cash value of all remuneration paid in any medium other than cash

This definition is fairly broad and general and in itself is unclear with respect to the exclusion from "wages" of any specific items. However, since the term "wages" is defined in some manner, the provisions of Virginia Code 58-151.01(a) which provide that, absent a contrary state provision, terms used in Virginia's income tax law will be given the same contextual meaning as that for federal purposes, are not applicable in this instance.

However, Virginia is a "conformity" state, i.e., Virginia taxable income is federal adjusted gross income subject to certain modifications. Therefore, absent any statutory provision to the contrary, allowable federal deductions are similarly allowable for state purposes and are thus not included in Virginia taxable income. Since there is no state provision requiring that dependent care assistance program payments or benefits be added to federal adjusted gross income in computing Virginia taxable income, these deductions would not be a part of an employee's Virginia taxable income.

Therefore, dependent care assistance program benefits or payments would not be included in "wages" for purposes of Virginia income tax withholding to the extent that such payments or benefits are excluded from federal adjusted gross income. This of course limits the exclusion from wages to payments or benefits made for qualifying programs under IRC §129 and not exceeding the federal earned income limitations.

Sincerely,

W. H. Forst
State Tax Commissioner

Rulings of the Tax Commissioner