Document Number
85-33
Tax Type
Individual Income Tax
Partnerships
Description
Nonresident unified tax returns
Topic
Partnerships
Date Issued
02-22-1985

  • February 22, 1985

    Re: Ruling Request: Nonresident Partners/Individual Income Tax


    Dear ****

    This will reply to your letter of September 27, 1984 concerning the Procedures for filing a unified Virginia nonresident income tax return for the nonresident partners of ***** (hereinafter referred to as Partnership).

    FACTS & PROPOSAL

    Partnership is a non-Virginia partnership organized under the laws of an adjoining state which maintains a satellite office in Virginia. The employees in the Virginia office receive their direction and control from the main office outside of Virginia. Even though Partnership has maintained an office and conducted business from its Virginia location since 1968, they have failed to file Virginia Partnership Returns.

    You propose that Partnership begin filing Virginia partnership returns commencing with the 1983 return. Virginia income on the partnership return would be computed by prorating Partnership's total gross receipts based on the ratio of billings of Virginia employees to total billings and deducting specifically allocated expenses. Expenses include salaries of the Virginia employees, direct office expenses and an allocable portion of the main office overhead expense. Partnership would only be deemed to have income from Virginia sources if the Virginia income, as computed above, exceeded the distributive shares of income of the Virginia resident partners.

    You also propose that Partnership be allowed to file a unified Virginia nonresident income tax return and pay the tax based on Virginia income for the Virginia nonresidents who choose to join in the filing of the unified return.

    DETERMINATION

    Virginia Code §58.1-392 requires that all partnerships organized under the laws of Virginia or having income from Virginia sources must file a Virginia partnership tax return. Partnership clearly has income from Virginia sources; therefore, is required to file a Virginia return.

    The Virginia Partnership Regulations provide in §63O-4-391 that the income attributable to Virginia sources is to be calculated in accordance with the statutory formula set forth in Virginia Code §§58.1-403 through 58.1-421, making such changes so necessary after considering the differences between corporations and partnerships. This statutory method is to be used unless an alternative method is approved by the department. The method that you propose is not consistent with the statutory method, nor is it acceptable as an alternative method.

    In order for the department to accept a unified nonresident income tax return and thus relieve the nonresident partners of the responsibility of having to file separate Virginia nonresident returns, the following conditions must be met:
      • 1. A schedule will be provided containing the total income of the partnership and the amount attributable to Virginia under either the applicable state apportionment formula, as provided in Virginia Code§§ 58.1-409 through 58.1-421, or by using an approved alternative method.
      • 2. The unified return will reflect only the income or loss attributable to Virginia nonresident partners who have no income from Virginia sources other than income attributable to the partnership.
      • 3. All nonresident partners without other income from Virginia sources must elect to join in the filing of such a return and a statement to such effect will be included in the return.
      • 4. The return will include each nonresident partner's name, address, social security number and Virginia taxable income attributable to each nonresident partner.
      • 5. The Virginia income tax will be computed at 5.75 percent of Partnership's income attributable to the nonresident partners without benefit of itemized deductions, standard deductions, personal exemptions or credit for income taxes paid to states of residence.
      • 6. The return will contain a statement indicating the responsibility of each nonresident partner for his share of the total tax and any statements made on his behalf. The statement will be signed by each nonresident partner.
      • 7. A similar unified return will be filed and payment made for declaration of estimated tax, if required.

    If the above is acceptable, Partnership may commence the unified filing effective for calendar year 1983. However, we reserve the right to withdraw or modify the foregoing authorization upon reasonable notice to you.

    If the above is not acceptable, please note that each nonresident partner having taxable income for a taxable year must file a Virginia return for the taxable year, unless the individual meets the "$3,000.00 filing exclusion" described in Virginia Code Section 58.1-321. Failure to file an individual nonresident return would subject the nonresident partner to penalty and interest, which could not be mitigated by the fact that a unified filing had been made unless the unified filing was in accordance with the conditions set forth above.

    Sincerely,


    W. H. Forst
    Tax Commissioner

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46