Tax Type
Bank Franchise Tax
Description
Out-of-state trustees
Topic
Taxpayers' Remedies
Date Issued
04-28-1989
April 28, 1989
Re: Request for Ruling; Bank Franchise Tax
Common Trust Fund
Dear*****************
This is in response to your letter of February 23, 1989, in which you requested a ruling on the applicability of the Virginia Bank Franchise Tax.
Facts
An out-of-state bank plans to act as trustee of a common trust fund for various employee benefit trusts. The fund has entered into a joint venture in the form of a partnership under the Virginia Uniform Partnership Act and acquired property in Virginia from which income will eventually be earned. The bank has no office in Virginia; its charter does not designate any place in Virginia as its principal place of business; it does not accept deposits in Virginia; and it does not hold itself out to the public as engaged in the banking or trust business in Virginia.
Determination
Virginia regulation VR 630-15-1201 defines a bank on which the Virginia Bank Franchise Tax is imposed as a corporation organized as a bank under Virginia or U.S. law which:
-
- (1) conducts a banking business in this Commonwealth or
(2) maintains an office in this Commonwealth for the conduct of a banking business or
(3) has a charter which designates any place within this Commonwealth as the place of its principal office regardless of whether or not the bank or banking association is authorized to transact business as a trust company.
- (1) conducts a banking business in this Commonwealth or
For the purposes of the Bank Franchise Tax, acting as trustee for a common trust fund is not the conduct of a banking business. Therefore, based on the facts provided, the bank does not satisfy any of the three criteria and is not subject to the Virginia Bank Franchise Tax.
It should be noted, however, that an out-of-state bank may be subject to the Virginia income tax on corporations if it conducts any type of business in Virginia or owns property in Virginia. Based on the facts given, merely acting as trustee for the common trust fund would not subject the bank to Virginia income tax.
Any income from the property in Virginia would be income from Virginia sources and the recipient would be subject to Virginia income tax. Based on the facts provided and a recent ruling (copy enclosed), the anticipated income from the Virginia property would flow through the partnership and the common trust fund to the employee benefit trusts. However, the trusts appear to be exempt from federal and Virginia tax on the assumption that they were created as part of "qualified plans" under the Internal Revenue Code.
Sincerely,
W. H. Forst
Tax Commissioner
Related Documents
Rulings of the Tax Commissioner