Tax Type
Corporation Income Tax
Employer Income Tax Withholding
Description
Property factor; Requirement of withholding
Topic
Allocation and Apportionment
Withholding of Tax
Date Issued
08-10-1988
August 10, 1988
Re: §58.1-1821 Application; Corporation Income Tax
§58.1-409 Property Factor
§58.1-461 Requirement of Withholding
Dear ***************
This is in response to your letter of April 8, 1988, in which you applied for correction of an assessment of corporation income tax. Two issues were raised. They will be addressed separately.
Partnership Income
Income from a limited partnership was reported on the taxpayer's tax returns as other income and apportioned along with the rest of the taxpayer's taxable income. The auditor included the taxpayer's portion of the limited partnership's payroll expense, sales, and assets in the taxpayer's apportionment factors.
The taxpayer protests the inclusion of these items. It points out that, for apportionment purposes, Virginia Regulation VR 630-3-409 A.2.b. provides, in part: "For purposes of the property factor each item of partnership property shall have the same character for a corporate general partner as if direct corporate ownership of the property existed." (Emphasis added.) The taxpayer does not believe the regulation requires inclusion of the limited partner's assets in the taxpayer's property factor because the taxpayer is a limited partner and not a general partner. The taxpayer further indicates that its research has also failed to locate any authority for including a limited partner's payroll expense or sales in its apportionment factors.
The taxpayer is correct. The regulation does not apply to limited partnerships. The audit report will be revised to exclude the taxpayer's portion of the limited partnership's payroll expense, sales, and assets from the taxpayer's apportionment factors.
Withholding Tax
The taxpayer's corporate income tax liability for 1985 was **********It made estimated payments of******* for 1985. The department applied its refund of******* against payroll tax withholdings of ********for 1985 and ********* for 1986.
The taxpayer did not have any outstanding payroll tax liabilities for 1985 or 1986, and the offsets should not have been made. Therefore, withholding tax payments totaling ******* for 1985 and 1986 will be refunded.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner