Tax Type
Corporation Income Tax
Description
Airline apportionment factors; Overflight miles
Topic
Allocation and Apportionment
Date Issued
09-21-1990
September 21, 1990
Re: §58.1-1821 Application/ Corporate Income Tax
Dear ****
This will reply to your letter of April 11, 1990 in which you protest the assessment of corporate income tax and interest against the Taxpayer for calendar years 1986, 1987 and 1988.
FACTS
The taxpayer, an airline, objects to an assessment of additional income tax that was primarily attributable to the inclusion of "bridge" miles (miles in which an aircraft flew over Virginia without landing).
Determination
In a similar case we recently upheld the inclusion of bridge miles (referred to as "overflight" miles in the ruling). See the enclosed Public Document P.D. No. 90-158 dated September 6, 1990 (copy enclosed).
You cite a number of states and courts which, for one reason or another, have excluded bridge miles from income tax apportionment and attempt to distinguish Alaska Airlines, Inc. v. Department of Revenue, 307 OR 406, 769 P. 2d. 193 (1989) where bridge miles were included for property tax apportionment. We are not persuaded. As stated in the enclosed P.D. No. 90-158, excluding bridge miles from the numerator, while including them in the denominator unreasonably distorts airline apportionment. If such a method were to be used in all of the states in which the airline is subject to tax, a substantial portion of its income would not be assigned to any state for purposes of state income taxation.
Based on the foregoing, the assessments are correct and are now due and payable. You will shortly receive an updated bill with interest accrued to date. The bill should be paid within thirty days to avoid the accrual of additional interest. Although you requested a conference to discuss your arguments, the policy with respect to bridge, or overflight, miles has been firmly established for years and was thoroughly considered in connection with the issuance of P.D. No. 90-158.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner