Tax Type
Individual Income Tax
Description
Residency Determined
Topic
Basis of Tax
Residency
Date Issued
09-18-2001
September 18, 2001
Re: Request for Ruling: Individual Income Tax
Dear ****
This will reply to your letter in which you seek a ruling regarding your Virginia income tax liability for performance shares of stock issued to you during the 2000 taxable year. I apologize for the delay in the department's response.
FACTS
In 1998, while a resident of another state ("State A"), you were awarded performance shares of stock. Performance shares are stock shares awarded to employees based on stock performance goals. In March 2000, you were transferred by your employer to Virginia on temporary assignment through January 2001. While in Virginia, the stock performance goals were met and you were awarded stock.
You request a ruling as to when the performance shares income must be recognized for Virginia income tax purposes.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Code of Virginia § 58.1-302. The domiciliary residence of a person means the permanent place of residence of a taxpayer and the place to which he intends to return even though he may actually reside elsewhere. For a person to change domiciliary residency to Virginia, that person must intend to abandon his old domicile with no intention of returning to that same domicile. Concurrently, that person must acquire a new domicile where that person is physically present with the intention to remain there permanently or indefinitely. An actual resident of Virginia means a person who, for an aggregate of more than 183 days of the taxable year, maintains his place of abode within Virginia. A Virginia domiciliary resident working in other parts of the country who has not abandoned his Virginia residency continues to be subject to Virginia taxation. Additionally, a person who is not a domiciliary resident of Virginia, but who stays in Virginia for an aggregate of more than 183 days is also subject to Virginia taxation.
You were an actual resident of Virginia in the 2000 taxable year because you resided in Virginia for more than 183 days. As such, any income that you recognized during the portion of the 2000 taxable year in which you resided in Virginia is subject to Virginia income taxation.
Virginia's conformity to federal law is set forth in Code of Virginia § 58.1-301, which provides that the terms used in the Virginia income tax statutes will have the same meaning as used in the Internal Revenue Code ("IRC"). Therefore, federal adjusted gross income, the starting point for determining Virginia adjusted gross income, is identical to that as defined by the IRC.
Based on Virginia's definition of conformity, an item of income will be included in Virginia income at the same time it is recognized for federal income tax purposes. Performance shares are recognized for federal income tax purposes in the year that the shares of stock are actually received, not when the performance shares were granted. See Internal Revenue Service Ruling 7927021 (copy enclosed). Although the performance shares were granted prior to your temporary residence in Virginia, any shares of stock actually received during the portion of the 2000 taxable year in which you resided in Virginia are subject to Virginia state income tax.
Code of Virginia § 58.1-332, copy enclosed, does provide a Virginia income tax credit for tax paid to another state on income subject to taxation in both states. Typically, Virginia income tax would be offset by income tax paid by a taxpayer to his or her domiciliary state. As such, any Virginia income tax that you pay on performance shares of stock received in 2000 may be offset by income tax paid to State A for the 2000 taxable year.
As with any ruling issued by the department, analysis is limited to the years and the facts and circumstances identified in your letter. Any material changes in the facts could alter the results. If you have any questions, regarding this ruling, you may contact ***** in the department's Appeals and Rulings Office at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
ARO/31725B
Rulings of the Tax Commissioner