Tax Type
Corporation Income Tax
Description
Apportionment of income
Topic
Allocation and Apportionment
Date Issued
07-06-1988
July 6, 1988
Re: §58.1-1821 Application; Corporation Income Tax
§58.1-408 Apportionment of Income
Dear***************
This is in response to your letter of April 27, 1988, in which you applied for correction of an assessment of corporation income tax.
Facts
The taxpayer was audited for 1982, and numerous adjustments were made. It objects to consolidation of the Disc with the parent and to apportionment of capital gains.
The taxpayer recognizes that the Disc issue is being litigated and indicates it will file a protective claim for refund under §58.1-1824. Therefore, I will not address this issue further in my letter.
The taxpayer is concerned with the section of Virginia law that requires apportionment of capital gains (§58.1-408). Its capital gains were from sale of stock in a corporation that it claims is not part of a unitary business. It excluded the gain from Virginia taxable income because it believes the Due Process and Commerce clause of the U. S. Constitution prohibits a non-domiciliary state from apportioning to itself any income from intangible property unless a unitary relationship exists. It believes the capital gain will be taxed twice -- once by Ohio because their law requires the gain to be allocated to Ohio and once by Virginia because the auditor included it in apportionable income.
Discussion
I have recently ruled on the constitutionality of apportioning capital gains. Rulings of the Commissioner dated March 27, 1987, P. D. No. 87-104, and October 14, 1987, P. D. No. 87-224, copies enclosed.
I have also ruled on the "double taxation" issue raised by the taxpayer. Rulings of the Commissioner dated October 13, 1982, and June 13, 1988, P. D. No. 88-123, copies enclosed.
You may wish to preserve your judicial remedies by paying the assessment and filing a protective claim under §58.1-1824. In view of the issues involved, your protective claim will be held without action pending final decisions in the cases styled W. R. Grace & Co. v. Commonwealth of Virginia and Corning Glass Works, Inc., v. Virginia Department of Taxation.
Determination
Accordingly, the assessment is correct as made and is now due and payable. You will shortly receive an updated bill showing payments and interest accrued to date. The bill should be paid within thirty days to avoid the accrual of additional interest. Although you requested a conference, this letter has been issued without one because the department's policies on these issues are well established and are presently being litigated.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner