Tax Type
Individual Income Tax
Description
Taxpayer is allowed to carry the 1993 federal NOLD forward to the 1994
Topic
Assessment
Computation of Tax
Date Issued
02-28-2005
February 28, 2005
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will respond to your letter in which you seek correction of the individual income tax assessment issued to your client, ***** (the "Taxpayer"), for the taxable year ended December 31, 1994. I apologize for the delay in the Department's response.
FACTS
The Department obtained information from the Internal Revenue Service ("IRS") indicating that the Taxpayer, a Virginia resident, received Virginia source income for the 1994 taxable year. A review of the Department's records indicated the Taxpayer had not filed a Virginia individual income tax return for the 1994 taxable year. The Department issued an assessment based on the information provided by the IRS after the Taxpayer failed to provide Virginia income tax returns or other documentation showing that the information provided by the IRS was incorrect.
The Taxpayer subsequently filed a 1994 Virginia income tax return that reflected a federal net operating loss deduction ("NOLD") carried forward from 1993. The Taxpayer did not, however, provide information requested by the Department to support the NOLD modification on the Virginia return.
The Taxpayer states that the Department's assessment does not conform to the IRS closing agreement pursuant to the Tax Court decision on August 14, 2001, and requests that the NOLD claimed on the 1994 taxable year Virginia individual income tax return be accepted in accordance with the IRS closing agreement.
DETERMINATION
Virginia income tax laws do not address net operating loss deductions (NOLDs). Nonetheless, Va. Code § 58.1-301 provides that terminology and references used in Title 58.1 of the Code of Virginia have the same meaning as provided in they 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"). As such, Virginia allows federal NOLDs to the extent that they are included in computing federal adjusted gross income. See Public Document ("P.D.") 92-133, 8/4/92.
The Taxpayer has provided a copy of a signed IRS agreement confirming that the IRS allowed the Taxpayer's NOLD to be carried forward to his 1994 federal income tax return. Under the terms of the IRS closing agreement, the Taxpayer was permitted to carry forward a NOLD from 1993 that eliminated the outstanding federal income tax assessment. Under Virginia law, the Taxpayer is allowed to carry the 1993 federal NOLD forward to the 1994 taxable year, subject to Virginia modifications. Accordingly, the assessment issued for the 1994 taxable year has been abated.
The Code of Virginia sections and public document cited, along with other reference documents, are available on-line in the Tax Policy Library section of the Department's web site, located at www.policylibrary.tax.virginia.gov. If you have any questions regarding this determination, please contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
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AR/50126E
Rulings of the Tax Commissioner