June 1, 2022
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek a refund of individual income tax paid by ***** (the “Taxpayer”) for the taxable year ended December 31, 2018.
FACTS
On his 2018 Virginia resident individual income tax return, the Taxpayer claimed a subtraction for moving expenses that were paid by his employer during the 2018 taxable year. The Department disallowed the subtraction and notified the Taxpayer of the proposed assessment amount, which included the additional tax due plus accrued interest. The Taxpayer paid that amount and appealed, claiming that the federal Tax Cuts and Jobs Act of 2017 (the “TCJA”) allowed the subtraction of moving expenses from federal adjusted gross income (FAGI).
DETERMINATION
Virginia Code § 58.1-301 provides, with certain exceptions, that the terminology and references used in Title 58.1 of the Code of Virginia will have the same meaning as provided in the Internal Revenue Code (IRC) unless a different meaning is clearly required. Conformity does not extend to terms, concepts, or principles not specifically provided in the Code of Virginia. For individual income tax purposes, Virginia “conforms” to federal law, in that it starts the computation of Virginia taxable income (VTI) with FAGI. Income properly included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it is specifically exempt as a Virginia modification pursuant to Chapter 3 of Title 58.1 of the Code of Virginia.
IRC § 217 allows taxpayers to deduct certain moving expenses paid or incurred during a taxable year in connection with the commencement of work by the taxpayer as an employee or self-employed individual at a new place of work. In addition, IRC § 132 provides an exclusion from income for any amount received from an employer as payment for, or reimbursement of, moving expenses that would be deductible under IRC § 217 if directly paid or incurred by the individual. Except for certain military personnel, these provisions were suspended by the TCJA for the 2018 through 2025 taxable years. See IRC §§ 217(k) and 132(g)(2).
Under legislation enacted by the 2019 General Assembly, Virginia’s date of conformity to the terms of the IRC was advanced from February 9, 2018, to December 31, 2018. See VTB 19-1 (2/15/2019). This legislation generally allowed Virginia to conform to the TCJA for the 2018 taxable year and thereafter. Because the Commonwealth did not make an exception for the suspension of the moving expense deduction allowable under IRC § 217 or the exclusion for payments or reimbursements by employers under IRC § 132, these provisions of the TCJA remained in effect for the 2018 taxable year for the purposes of filing Virginia income tax returns.
As stated above, income properly included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it is specifically exempt as a Virginia modification pursuant to Chapter 3 of Title 58.1 of the Code of Virginia. Virginia does not provide a separate subtraction for the payment or reimbursement of moving expenses by an employer. Thus, any moving expense payments or reimbursements included in the Taxpayer’s FAGI were not eligible for subtraction and, therefore, remained subject to Virginia income tax. See Public Document (P.D.) 19-100 (8/27/2019). As such, the Taxpayer’s request for a refund of Virginia income tax paid to satisfy the proposed assessment cannot be granted.
The Code of Virginia sections, Virginia Tax Bulletin and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s web site. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/4027.B