Tax Type
Individual Income Tax
Description
Railroad separation allowance
Topic
Taxable Income
Date Issued
01-04-1988
January 4, 1988
Re: Request for Ruling/Individual Income Tax
Dear******************
This is in reply to your letter dated July 26, 1987 in which you request a ruling on the tax treatment of a separation payment you received from the************************.
FACTS
You have received a lump sum separation allowance from the ***********under Title VII of the Northeast Rail Service Act of 1981 You are eligible for such a payment if you are deprived of employment, resign and relinquish all your employment rights under provisions of the Regional Rail Reorganization Act or the Northeast Rail Service Act
RULING
Title VII of the Regional Rail Reorganization Act [45 U.S.C.A §797] provides various benefits for the protection of employees of Conrail These benefits are available to certain employees deprived of employment because of actions taken by Conrail under provisions of the Regional Rail Reorganization Act or the Northeast Rail Service Act Eligible employees may elect to a) resign seniority and receive a lump sum separation allowance or b) remain in furlough status and receive the benefits provided in Article 4 of the benefit schedule (daily subsistence allowance, health and welfare coverage, retraining expenses, and relocation expenses)
45 U S C A §797 does not contain any exemption from federal or state income taxes for the separation allowance Neither is an exemption available under the federal prohibition found in 45 U S C A §231(m) for state taxation of Railroad Retirement Board annuities and supplemental annuities.
Therefore, I find no basis under federal law to preclude taxation of the separation allowance by the state of Virginia Thus, to the extent included in federal adjusted gross income, the separation allowance is subject to Virginia income tax
If you have any further questions regarding this matter, please do not hesitate to contact me
Sincerely,
W.H. Forst
Tax Commissioner
Rulings of the Tax Commissioner