September 18, 2019
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the assessments of individual income tax issued to ***** (the “Taxpayer”) for the taxable years ended December 31, 2015 through 2017.
FACTS
The Taxpayer filed Virginia resident income tax returns for the 2015 through 2017 taxable years and claimed fixed date conformity subtractions. The Department denied the subtractions and issued assessments. The Taxpayer appeals, contending the subtractions were taken to correct an amount of ***** (State A) income he mistakenly reported to Virginia on the Virginia nonresident income tax return he filed for the 2011 taxable year.
DETERMINATION
Virginia Code § 58.1-301 provides, with certain exceptions, 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. Conformity does not extend to terms, concepts, or principles not specifically provided in the Code of Virginia. 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 properly included in the FAGI of a Virginia resident is subject to taxation by Virginia, and income properly excluded from FAGI is not subject to taxation, unless it is specifically subject to a Virginia modification pursuant to Virginia Code § 58.1-322.01 through § 58.1-322.04.
In 2003, Virginia began conforming to the IRC as of a specific or fixed date. Since then the General Assembly has enacted legislation to move the fixed date forward each year. When the date is advanced forward, Virginia’s conformity to the IRC is set as of that date, except for certain provisions of the IRC that Virginia expressly chooses not to conform to. These exceptions may cause a taxpayer to have to adjust their computation of Virginia taxable income by taking so-called fixed date conformity additions or subtractions.
Fixed date conformity additions and subtractions are not considered to be Virginia modifications. Rather, these exceptions are added to or subtracted from FAGI as computed under the IRC in order to determine an individual taxpayer’s FAGI for Virginia income tax purposes.
In this case, the Taxpayer claimed fixed date conformity subtractions for the 2015 through 2017 taxable years. It appears that the Taxpayer believes he mistakenly reported State A income to Virginia when he filed a Virginia nonresident income tax return for the 2011 taxable year, and tax preparation software carried forward adjustments for it to subsequent years.
If the Taxpayer overreported State A income to Virginia for a prior taxable year, his remedy would have been to claim an out-of-state tax credit on his Virginia return as provided under Virginia Code § 58.1-332 or the other state’s return as provided by law. For Virginia, the Taxpayer would have been required to file an amended return to claim a refund within the applicable statute of limitations period. See Virginia Code § 58.1-1823. Because there was no subtraction the Taxpayer could have claimed to account for State A income mistakenly reported to Virginia for a prior year, the Department correctly disallowed the subtraction. Accordingly, the assessments are upheld.
The Taxpayer will receive updated bills which will include accrued interest to date. The Taxpayer should remit the balance due within 30 days of the bill date to avoid the accrual of additional interest and possible collections actions.
The Code of Virginia sections are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s web site. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/2075.M