Tax Type
Individual Income Tax
Description
Federal reserve notes are not exempt from Virginia individual income tax
Topic
Collection of Delinquent Tax
Computation of Tax
Constitutional Provisions
Date Issued
09-30-2004
September 30, 2004
Re: § 58.1-1821 Application: Individual Income Tax
Dear *********:
This will reply to your letter in which you seek correction of the Virginia individual income tax assessment issued to you (the "Taxpayer") for the 2000 taxable year. I apologize for the delay in the Department's response.
FACTS
The Taxpayer is a Virginia resident who received wages from employment. The Department received information from the Internal Revenue Service ("IRS") indicating that the Taxpayer had income from Virginia sources. The Department requested that the Taxpayer file the proper Virginia individual income tax return or provide an explanation concerning why the income was not taxable. When an adequate response was not received, the Department issued an assessment based on the information provided by the IRS.
The Taxpayer states that payments received were in the form of Federal Reserve Notes and that such notes are exempt from state income taxation because they are obligations of the United States government. The Taxpayer further states that in order for Virginia to assess a tax on an individual for not filing an income tax return, the Department must prove that such an individual had "taxable income," was "liable" for a tax, that the liability made the individual a "person" required to file a specific return actually required by law, and that the individual failed to file a "required return."
DETERMINATION
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. The Virginia individual income tax "conforms" to federal law because it starts the computation of Virginia taxable income with federal adjusted gross income ("FAGI"). To the extent that income is included in FAGI, it is also subject to taxation by Virginia unless it is specifically exempt as a Virginia modification pursuant to Va. Code § 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 Va. Code § 58.1-321. Virginia Code § 58.1-302 specifically defines "resident" to include every person domiciled in Virginia and every person who maintains a place of abode in Virginia for an aggregate of more than 183 days of the taxable year. 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, Internal Revenue Code § 6103(d) authorizes the Department to obtain information from the IRS that will help in determining the resident's tax liability.
Federal reserve notes are not exempt from Virginia individual income tax. See Public Document 97-49 (2/7/97). You have provided no documentation to show that you were not subject to income tax as a Virginia resident for the 2000 taxable year.
The Taxpayer has failed to provide objective evidence as to the correct liability for the taxable year at issue. Your claim that the Taxpayer is not subject to Virginia taxation has no basis in fact or Virginia laws. Based on the information provided, there is no basis to abate the Virginia individual income tax assessment for the 2000 taxable year. A schedule is enclosed showing the balance of the 2000 assessment. Further action in your case will be held in abeyance for 30 days awaiting the filing of your 2000 Virginia income tax return.
You are requested to file a Virginia individual income tax return for the 2000 taxable year, along with any other delinquent income tax returns, within 30 days from the date of this letter. Returns and payments may be sent to: Virginia Department of Taxation, Office of Policy and Administration, Appeals and Rulings, Post Office Box 27203, Richmond, Virginia 23261-7203, Attention: *****.
Please note that a person who fails to file income tax returns based solely on a claim such as the one you have made has intentionally understated his or her income tax liability with the intent to evade tax and is subject to 100% fraud penalty pursuant to Va. Code § 58.1-308. Further, one who files an application for correction pursuant to Va. Code § 58.1-1821 based solely on such a claim has no purpose other than to hinder and delay collection of the proper tax liability. Consequently, collection activity need not be suspended on outstanding assessments while such applications for correction are being considered.
The Code of Virginia sections cited and other reference documents 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 any questions regarding this determination, you may Contact ***** in the Office of Policy and Administration, Appeals and Rulings, at ****************.
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Sincerely,
Kenneth W. Thorson
Tax Commissioner
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AR/48521E
Rulings of the Tax Commissioner