Tax Type
Individual Income Tax
Description
Money market interest income; Treasury bill interest
Topic
Exemptions
Taxable Income
Date Issued
04-30-1985
April 30, 1985
RE: Ruling Request/Individual Income Tax
Dear ****
This will reply to your letter of March 22, 1985. requesting a ruling on the correct application of Virginia income tax law to interest earned on ***** money market account.
***** account is a federally insured money market deposit account which pays interest based on the latest 3 month Treasury Bill discount rate, plus a premium, compounded daily. Additional features of the account include-investment liquidity, FDIC or FSLIC insurance, free check writing, and no service charges.
§58.1-322 of the Virginia Code provides for a subtraction from Virginia taxable income in an amount equal to the amount of "Interest or dividends on obligations of the U. S. and on obligations or securities of any authority, commission, or instrumentality of the U. S." However, this provision is referable only to individuals who own such U. S. government obligations in their individual capacities, and not to co-ownership of such obligations with other individuals through a money market fund.
If, however, the money market fund described qualifies as a regulated investment company, under federal law, the portion of shareholder distributions representing interest from U.S. obligations will be exempt from Virginia income tax. In order to determine whether the money market fund described is a regulated investment company, and if so, what portion of the fund's distributions represent interest from U.S. obligations, I would recommend that you contact an account represen-tative of the fund.
For your convenience, I have enclosed a copy of a Tax Bulletin recently published by the Department on this issue, which you may want to share with your account representative. I refer you specifically to item 6(d) of the bulletin. under the heading "Regulated Investment Companies."
I hope that all of the above will be of assistance to you, but please let me know if you have any further questions.
Sincerely
W. H. Forst
Tax Commissioner
RE: Ruling Request/Individual Income Tax
Dear ****
This will reply to your letter of March 22, 1985. requesting a ruling on the correct application of Virginia income tax law to interest earned on ***** money market account.
***** account is a federally insured money market deposit account which pays interest based on the latest 3 month Treasury Bill discount rate, plus a premium, compounded daily. Additional features of the account include-investment liquidity, FDIC or FSLIC insurance, free check writing, and no service charges.
§58.1-322 of the Virginia Code provides for a subtraction from Virginia taxable income in an amount equal to the amount of "Interest or dividends on obligations of the U. S. and on obligations or securities of any authority, commission, or instrumentality of the U. S." However, this provision is referable only to individuals who own such U. S. government obligations in their individual capacities, and not to co-ownership of such obligations with other individuals through a money market fund.
If, however, the money market fund described qualifies as a regulated investment company, under federal law, the portion of shareholder distributions representing interest from U.S. obligations will be exempt from Virginia income tax. In order to determine whether the money market fund described is a regulated investment company, and if so, what portion of the fund's distributions represent interest from U.S. obligations, I would recommend that you contact an account represen-tative of the fund.
For your convenience, I have enclosed a copy of a Tax Bulletin recently published by the Department on this issue, which you may want to share with your account representative. I refer you specifically to item 6(d) of the bulletin. under the heading "Regulated Investment Companies."
I hope that all of the above will be of assistance to you, but please let me know if you have any further questions.
Sincerely
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner