Bulletin Number
VTB 00-2
Tax Type
Corporation Income Tax
Individual Income Tax
Description
Tobacco Settlement
Topic
Computation of Income
Date Issued
06-16-2000
Tobacco SettlementDuring the 2000 session of the Virginia General Assembly, legislation was passed which grants an income tax subtraction to individuals and corporations for income received as a result of the recent tobacco settlements. The tobacco settlements specified in the legislation are the Master Settlement Agreement as defined in Code of Virginia § 9-380, the National Tobacco Grower Settlement Trust dated July 19, 1999, and the Tobacco Loss Assistance Program, pursuant to 7 C.F.R. Part 1464 (Subpart C, §§ 1464.201 through 1464.205). The following persons or businesses are eligible to receive this subtraction: (i) tobacco farmers or tobacco farming businesses, (ii) any person or business holding a tobacco marketing quota, or tobacco farm acreage allotment, under the Agricultural Adjustment Act of 1938, or (iii) any person or business having the right to grow tobacco pursuant to such a quota or allotment. The subtraction is retroactive back to the 1999 taxable year.
Of the three tobacco settlements listed above, only money from the National Tobacco Grower Settlement Trust was sent to its recipients in 1999. All other payments have been and will be mailed after January 1, 2000. The first National Tobacco Grower Settlement Trust payments were mailed on December 30, 1999 (the last business day of the year), and were not received by recipients until after January 1, 2000. In a letter dated February 18, 2000, the Internal Revenue Service ruled that even though these payments were mailed before the end of 1999, they were not constructively received until 2000 and; therefore, the payments are not considered taxable income for cash basis taxpayers until 2000.
1999 Income Tax Returns for Calendar Year Taxpayers
The December 30, 1999, payment from the National Tobacco Grower Settlement Trust was the only payment mailed in 1999. Therefore, for calendar year cash-basis taxpayers who received this payment, it is considered income for 2000. Consequently, it is not necessary for calendar year cash-basis taxpayers who received this income to file an amended 1999 Virginia income tax return to subtract this income.
Press Release
For a copy of the department's press release regarding the treatment of income from the tobacco settlements, you may either access the document on our web site at http:\www.state.va.us ax or you may request a copy from our Customer Services Section using the telephone number below.
If you have any questions regarding the income tax treatment of money received from the tobacco settlements or need additional information, please contact the Department of Taxation as follows:
Virginia Department of Taxation
Customer Services Section
P.O. Box 1115
Richmond, VA 23218-1115
Phone (804) 367-8031
Tax Bulletins