Tax Type
Income Tax
Description
Individual subject to Virginia Income tax
Topic
Persons Subject to Tax
Taxable Income
Date Issued
09-08-2004
September 8, 2004
Re: § 58.1-1821 Application: Individual Income Tax
Dear *********
This will reply to your letter in which you assert that you are not subject to the requirement to file Virginia individual income tax returns and pay Virginia income tax. I apologize for the delay in this response.
You believe that you are not subject to federal individual income tax or required to file a federal income tax return. In support of your position, you cite the legislative intent of the 16th amendment to the United States Constitution, which you assert stipulates that the federal income tax is levied only upon the National Government and not upon the several states of the union, that Internal Revenue Code ("IRC") Title 26 statutes are "special law," not positive law and only apply within the federal zone consisting of Washington, DC and the U.S. Territories.
Further, you believe that you are not required to file a Virginia individual income tax return on the basis that Title 23 of the Virginia Administrative Code ("VAC") 10-110-240 provides that a resident individual must first be required to file a federal income tax return or meet the $3,000 filing exception described in Title 23 VAC 10-110-130 in order to be subject to Virginia's income tax filing requirements.
Based on the above, you maintain that you are not liable for the Virginia individual income tax and, therefore, have no obligation to file a Virginia income tax return.
Virginia Code § 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 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, or "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.
Virginia Code § 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 Virginia Code § 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.
Title 23 Virginia Administrative Code ("VAC") 10-110-240(B)(1) provides that every resident individual who is required to file a federal income tax return for the taxable year must likewise file a Virginia return for such taxable year, unless such individual qualifies for the "$3,000 filing exception" described in 23 VAC 10-110-130. Every resident individual having Virginia taxable income for the taxable year as set forth in 23 VAC 10-110-140 through 23 VAC 10-110-144 must also file a Virginia return for such taxable year despite the fact that no federal return is required to be filed, unless subject to the filing exclusion as noted above. For example, a taxpayer may have FAGI below the amount for which a federal return is required to be filed, but Virginia adjusted gross income of $3,000 or more. In this instance, a Virginia return must be filed even though no federal return is required.
A claim based on the arguments set forth in your letter has no basis in fact or Virginia law. 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 is subject to a 100% fraud penalty pursuant to Va. Code § 58.1-308.
Based on the applicable law cited above and the information presented, your income is subject to Virginia taxation and you are required to file Virginia individual income tax returns. You are hereby requested to file, within 45 days from the date of this letter, any such individual income tax returns for any taxable year for which the applicable individual income tax returns have not been filed or on which the income was understated in accordance with the claims set forth in your letter. Refusal to file any such income tax return 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: Virginia Department of Taxation, Office of Policy and Administration, Appeals and Rulings, Post Office Box 1880, Richmond, Virginia 23218-1880, Attention: *****.
The Code of Virginia sections cited are available on-line in the Tax Policy Library section of the Department's web site, located at www.tax.state.va.us. If you have further questions, you may contact ***** at *****.
Sincerely,
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Kenneth W. Thorson
Tax Commissioner
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AR/49623E
Rulings of the Tax Commissioner