Tax Type
Individual Income Tax
Partnerships
Description
Nonresident partners
Topic
Partnerships
Date Issued
02-26-1986
February 26, 1986
Re: Ruling Request: Nonresident Partners/Individual Income Tax
Dear *********************
This will reply to your letter of November 22, 1985, to ************* in which you requested a refund of the individual income tax paid on behalf of the nonresident partners of ************* for fiscal year ended June 30, 1985. For your information,*********** retired from the Department of Taxation June 30, 1984.
The procedure which ************* used to compute the Virginia tax liability of the nonresident partners was set forth in ********** letter of March 16, 1977 and reconfirmed by letter of December 3, 1982 The Department of Taxation has since revised its position on the unified filing of nonresident individual income tax returns by partnerships.
The Virginia Taxation of Partnerships Regulations adopted September 19, 1984, provide in §630-4-391 that the income attributable to Virginia sources is to be calculated in accordance with the statutory formula set forth in Virginia Code §§58.1-408 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.
In order for the Department to accept an 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 must 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 §§58.1-408 through 58.1-421, or by using an approved alternative method:
2. The unified return must 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 ********** 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, ************** may commence the unified filing under the above conditions effective for fiscal year ending June 30, 1986. 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 exception" 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.
The Department will accept as filed the return for fiscal year ending June 30, 1985. However, we will hold your claim for a refund in abeyance, pending the revision of the estimate of the income tax liability for fiscal year ending June 30, 1986 based upon the revised procedures. After you have revised the estimated for the fiscal year ending June 30, 1986, please contact our Technical Services Section if you still desire a refund.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner