Tax Type
Individual Income Tax
Description
Intent to evade taxation
Topic
Collection of Delinquent Tax
Persons Subject to Tax
Residency
Taxable Income
Date Issued
09-03-2002
September 3, 2002
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter concerning Virginia individual income tax assessments issued to you for taxable years 1990, 1992, 1993, 1997, 1998 and 1999. Your letter is being treated as an application for correction pursuant to Code of Virginia § 58.1-1821.
FACTS
You are a Virginia resident who received income from employment. You state that you are "not a person under the jurisdiction of your agency." You state that you filed a Declaration of Expatriation/Reparation with the President of the United States. You further state that you are a citizen in the Virginia Republic and do not reside, earn income or compensation in any Territory, Possession, Instrumentality or Enclave which is under the "sovereignty of or "subject to the jurisdiction of the United States.
The department has received information from the Internal Revenue Service ("IRS") indicating that you had income for the 1990, 1992, 1993, 1997, 1998, and 1999 taxable years. Letters were sent to you requesting that you file the proper Virginia returns or provide an explanation concerning why your income was not taxable. When an adequate response was not received, the department issued assessments.
RULING
Code of Virginia § 58.1-301 provides that 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. For individual income tax purposes, Virginia "conforms" to federal law, in that it starts the computation of Virginia taxable income with federal adjusted gross income ("FAGI"). Income 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 Code of Virginia § 58.1-322.
Code of Virginia § 58.1-341 provides that a Virginia resident who is required to file a federal income tax return is also required to file a Virginia income tax return, unless the resident is exempt from filing under Code of Virginia § 58.1-321. Additionally, even if a resident is not required to file a federal return but has Virginia adjusted gross income that exceeds the filing threshold, the resident is required to file a Virginia income tax return. When a resident does not file a proper Virginia return, IRC § 6103(d) authorizes the department to obtain information from the IRS that will help in determining the resident's tax liability.
Your claim that your income from employment is not subject to Virginia taxation has no basis in fact or Virginia law. Further, a person who fails to file income tax returns based solely on such a claim has intentionally understated his or her income tax liability with the intent to evade tax and would be subject to a 100% fraud penalty pursuant to Code of Virginia § 58.1-308.
Additionally, anyone who files an application for correction pursuant to Code of Virginia § 58.1-1821 based solely on such claims has no purpose other than to hinder and delay collection of the proper tax liability. Consequently, collection activity need not be suspended while such applications for correction are being considered.
Based on the applicable law cited above and the information presented, there is no basis to find that you are not subject to Virginia income taxation on your income. You are hereby requested to file individual income tax returns for the 1992 through 2001 taxable years and any other delinquent income tax returns within 45 days from the date of this letter. Refusal to file the requested returns or any future returns in accordance with Virginia law by continuing to make the claims you have stated in your letter would justify the 100% fraud penalty and other legal actions to collect the proper tax.
Returns or payments may be sent to the attention of ***** in the department's Office of Policy and Administration, Appeals and Rulings, Post Office Box 1880, Richmond, Virginia 23218-1880.
Copies of the Code of Virginia sections cited are included for reference purposes. These and other reference documents are also available online in the Tax Policy Library section of the department's web site, located at www.tax.state.va.us. If you have further questions, ***** may be contacted at *****.
Sincerely,
Kenneth W. Thorson
Tax Commissioner
AR/40638E
Rulings of the Tax Commissioner