Tax Type
Individual Income Tax
Partnerships
Description
Unified nonresident income tax return; Conditions to file
Topic
Partnerships
Returns/Payments/Records
Date Issued
12-11-1987
December 11, 1987
Re: Ruling Request/Individual Income Tax/Unified Nonresident Returns
Dear ********************
This is in reply to your letter of August 17, 1987 in which you request permission on behalf of the nonresident partners of one of your clients (Partnership) to file a unified nonresident individual income tax return.
FACTS
There are 54 partners in the Partnership, consisting of 25 individuals, 28 S corporations and 1 C corporation. In 1987 the Partnership opened an office in Virginia; therefore, the partners became subject to the Virginia income tax on their pro-rata share of the income earned by the Partnership from Virginia sources. You are requesting that the department allow the Partnership permission to adopt a unified filing arrangement with respect to the Virginia nonresident individual and S corporation partners.
RULING
Section 630-4-391(C)(2) of the Virginia Taxation of Partnerships Regulations provides that the Tax Commissioner may grant permission to nonresident partnerships to file a statement of combined partnership income attributable to nonresident partners. This provision of the regulations relieves the nonresident partners of the responsibility of having to file nonresident individual income tax returns. However, since some of the partners of Partnership are S corporations, which do not come under the definition of "individuals" as defined under Virginia Code §58.1-302, these partners may not be directly included in the filing of a unified Virginia nonresident "individual" income tax return.
The department has also granted permission to S corporations to file unified nonresident individual income tax returns in a manner similar to partnerships. This serves to relieve the nonresident shareholders of S corporations of the responsibility of having to file nonresident individual income tax returns. Accordingly, the department will allow the S corporations, which are partners in Partnership, each to file a unified nonresident individual income tax return on behalf of their shareholders.
In order for the department to accept these unified nonresident individual income tax returns and thus relieve the nonresident individuals (both the individual partners and the individual shareholders in the S corporations) of the responsibility of having to file separate Virginia nonresident individual income tax returns, each unified return must meet the following conditions:
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. Such schedule shall also display each partner's pro-rata share of income from the Partnership.
2. Each unified return must reflect only the income or loss attributable to the Virginia nonresident individuals who have no income from Virginia sources other than income attributable to the Partnership.
3. All nonresident individual partners and nonresident individual shareholders, 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 individual partner's or each nonresident individual shareholder's name, address, social security number and Virginia taxable income attributable to the Partnership.
5. The Virginia income tax will be computed at the rates specified under Virginia Code §58.1-320 on the income attributable to Partnership's income from Virginia sources without benefit of itemized deductions, standard deductions, personal exemptions or credit for income taxes paid to states of residence.
6. Each return will contain a statement indicating the responsibility of each nonresident individual for his share of the total tax and any statements made on his behalf. The statement will be signed by each nonresident individual.
7. Similar unified returns will be filed and payment made for the declaration of estimated tax, if required.
8. The partner, which is a C corporation, shall file separately as required under Virginia Code §58.1-441.
If the above is acceptable, the eligible partners may commence the unified filings under the above conditions effective for calendar year 1987. Based upon the information that you have provided, there will be one unified nonresident individual income tax return filed for the individual partners and 28 unified nonresident individual income tax returns filed for the partners which are S corporations. 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, unless an individual meets the filing exceptions' described in Virginia Code §58.1-321. Failure to file an individual nonresident return would subject the nonresident 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