88-145 | Virginia Tax

Tax Type

Bank Franchise Tax

Corporation Income Tax

Description

Savings Bank and Subsidiary

Topic

Exemptions

Date Issued

06-20-1988

June 20, 1988

Re: §Request for Ruling; Corporate Income Tax
Banks

Dear******************

This is in response to your letter of April 27, 1988, in which you request a ruling on whether two corporations would be subject to Virginia's corporate income tax.

Facts

A federally chartered savings bank and its wholly owned subsidiary have their principal and only places of business in New York. The subsidiary is incorporated in Virginia. The bank and its subsidiary plan to make two types of loans in Virginia:

Purchase-money deed of trust loans to individuals secured by residential real property located in Virginia; and

Deed of trust construction loans to individuals and companies secured by real property located in Virginia to construct housing.

All loans will be closed through independent contractors, e.g., title companies, and all pre-closing activities, such as appraisals of the property, will be performed by independent contractors. Neither the bank nor the subsidiary will have any offices of employees located in Virginia. Loan funds will be wired or delivered from New York into bank or escrow accounts in Virginia. Borrowers will send payments to the bank or the subsidiary at their New York offices.

Determination

Based on the foregoing facts, neither the bank nor its subsidiary will be subject to income tax. See paragraph 3.b. of Va. Regulation VR 630-3-302, "Income and deductions from Virginia sources." As noted in the cited regulation, if either corporation acquires property located in Virginia by foreclosure or other means, the corporation would then be subject to income tax.

Since the subsidiary is incorporated under Virginia law, it is required to file an annual income tax return under Va. Code §58.1-441 even though it may owe no tax because it has no income from Virginia sources.

The bank will not be subject to the Virginia bank franchise tax because it has no office in Virginia and is not considered to be conducting a banking business in Virginia. See Va. Code §58.1-1201 and Va. Regulation VR 630-15-1201.

For your convenience, enclosed are copies of each section of the Virginia Code and Regulations cited in this letter.

Sincerely,

W. H. Forst
Tax Commissioner

Rulings of the Tax Commissioner