July 22, 2026
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 assessments issued to you (the “Taxpayer”) for the taxable years ended December 31, 2018, and December 31, 2019.
FACTS
The Department received information from the Internal Revenue Service (“IRS”) indicating that the Taxpayer, a Virginia resident, may have been required to file a Virginia individual income tax return for the 2019 taxable year. The Department requested information to verify whether the Taxpayer was subject to Virginia income tax. In response, the Taxpayer submitted Virginia resident income tax returns for the 2018 and 2019 taxable years claiming subtractions for net foreign derived intangible income and global intangible low-taxed income reported as other income on her federal tax returns. Under review, the Department denied the subtractions and issued assessments accordingly. The Taxpayer applied for correction, contending that the income at issue was not subject to tax in Virginia because it was foreign corporate income that was taxed in other countries.
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 (“VTI”) with the federal adjusted gross income (“FAGI”). Income properly 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 Chapter 3 of Title 58.1 of the Code of Virginia.
It is well established that a state may tax all the income of its residents, even income earned outside the taxing jurisdiction. In New York ex rel. Cohn v. Graves, 300 U.S. 308, 312-313 (1937), the United States Supreme Court explained “[t]hat the receipt of income by a resident of the territory of a taxing sovereignty is a taxable event is universally recognized.”
Because the income at issue was included in FAGI, it must be included in the computation of VTI as a result of Virginia’s conformity to the IRC. Virginia law does provide for certain specified deductions and subtractions from FAGI. Neither Virginia Code § 58.1-322.02 nor Virginia Code § 58.1-322.03, however, provides an individual income tax subtraction for net foreign derived intangible income or global intangible low-taxed income. As such, the Department properly disallowed the subtractions, and the assessments are upheld.
The Taxpayer will receive updated bills that will include accrued interest to date. The Taxpayer should remit the balance due within 30 days of the bill dates to avoid the accrual of additional interest and possible collection actions.
The Code of Virginia sections cited are available online at law.lis.virginia.gov. If you have any questions regarding this determination, you may contact ***** in the Office of Legal Affairs, Tax Adjudication and Resolution Division, at ***** or *****.
Sincerely,
Kristin L. Collins
Tax Commissioner
Commonwealth of Virginia
AR/5114.Y