Tax Type
Individual Income Tax
Description
District of Columbia franchise tax; Out-of-state tax credit
Topic
Credits
Taxable Income
Date Issued
06-05-1985
June 5, 1985
Re: Section 58-1118 Application: Individual Income Tax
Dear ****
This refers to your application on behalf of ***** for correction of Virginia income tax for 1983.
FACTS
Taxpayer claimed an out-of-state credit for franchise taxes paid to the District of Columbia on his 1983 Virginia individual income tax return, in connection with his publishing business. The department disallowed the credit and issued an assessment. Taxpayer argues the credit is allowable under Section 58.1-332(A), formerly Section 58-151.015. Taxpayer states that the case of Bishop v. District of Columbia 401 A2d 955 (1979), which declared the franchise tax to be void as to professionals does not apply to him since he is a nonprofessional. Furthermore, taxpayer cites Groom v. Forst, #18809 in support of his argument that the franchise tax is a form of income tax entitled to a credit against Virginia income taxes.
DETERMINATION
The Bishop case cited by taxpayer held a 1975 change in the coverage of the D.C. franchise tax (as applied to unincorporated, non-resident professionals and personal service businesses) to be an invalid exercise of the D.C. Council's legislative authority. In support of its holding, the court stated that, as applied to such unincorporated non-resident professionals and personal service businesses, the D.C. franchise tax was in essence a net income tax rather than a gross receipts tax, and thereby exceeded the taxing authority of the D.C. Council. However, the court was silent as to the characterization of the D.C. tax as applied to other unincorporated non-resident businesses. Therefore, the holding in the Bishop case is inapplicable to the present case.
The Groom case cited by taxpayer was also limited to professionals, and was dismissed as moot by the Virginia Supreme Court on October 7, 1981. Therefore, the Groom case is similarly inapplicable to the facts presented in this case.
Since 1958, with respect to nonprofessionals, the department has allowed a deduction for the D.C. tax and has never allowed a credit. That is, the department will allow a resident nonprofessional to take a deduction for the D.C. franchise tax provided the deduction is allowable for Federal income tax purposes. According to the information furnished this office, it appears that a deduction as a business expense was taken on taxpayer's federal return for the year in question, thus reducing federal adjusted gross income.
Based on all of the foregoing, the application for correction is here by denied.
Sincerely,
W. H. Forst
Tax Commissioner
Re: Section 58-1118 Application: Individual Income Tax
Dear ****
This refers to your application on behalf of ***** for correction of Virginia income tax for 1983.
FACTS
Taxpayer claimed an out-of-state credit for franchise taxes paid to the District of Columbia on his 1983 Virginia individual income tax return, in connection with his publishing business. The department disallowed the credit and issued an assessment. Taxpayer argues the credit is allowable under Section 58.1-332(A), formerly Section 58-151.015. Taxpayer states that the case of Bishop v. District of Columbia 401 A2d 955 (1979), which declared the franchise tax to be void as to professionals does not apply to him since he is a nonprofessional. Furthermore, taxpayer cites Groom v. Forst, #18809 in support of his argument that the franchise tax is a form of income tax entitled to a credit against Virginia income taxes.
DETERMINATION
The Bishop case cited by taxpayer held a 1975 change in the coverage of the D.C. franchise tax (as applied to unincorporated, non-resident professionals and personal service businesses) to be an invalid exercise of the D.C. Council's legislative authority. In support of its holding, the court stated that, as applied to such unincorporated non-resident professionals and personal service businesses, the D.C. franchise tax was in essence a net income tax rather than a gross receipts tax, and thereby exceeded the taxing authority of the D.C. Council. However, the court was silent as to the characterization of the D.C. tax as applied to other unincorporated non-resident businesses. Therefore, the holding in the Bishop case is inapplicable to the present case.
The Groom case cited by taxpayer was also limited to professionals, and was dismissed as moot by the Virginia Supreme Court on October 7, 1981. Therefore, the Groom case is similarly inapplicable to the facts presented in this case.
Since 1958, with respect to nonprofessionals, the department has allowed a deduction for the D.C. tax and has never allowed a credit. That is, the department will allow a resident nonprofessional to take a deduction for the D.C. franchise tax provided the deduction is allowable for Federal income tax purposes. According to the information furnished this office, it appears that a deduction as a business expense was taken on taxpayer's federal return for the year in question, thus reducing federal adjusted gross income.
Based on all of the foregoing, the application for correction is here by denied.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner