Tax Type
Intangible Personal Property Tax
Description
Obligations of Virginia political subdivisions
Topic
Exemptions
Date Issued
10-11-1984
October 11, 1984
Re: §58-1118 Application to the Commissioner
Capital Not Otherwise Taxed
For the Years 1980 and 1981
Dear ********
This is in reply to your letter in which you made application pursuant to § 58-1118 of the Code of Virginia.
In your correspondence you requested review of the department's capital tax audit adjustment relating to investments made by Taxpayer in Virginia State Development Authority Bonds, Virginia Industrial Development Authority Bonds and Federal National Mortgage Association Discount Notes.
FACTS
For the tax period under audit, Taxpayer made short-term investments in the Virginia and United States obligations referenced above. The short-term investments were initially identified as repurchase agreements in Taxpayer's records. The department included the value of the investments in other taxable property for audit purposes.
Taxpayer has provided supplemental information disclosing that the repurchase agreements were actually investments in Virginia and Federal obligations. Taxpayer contends that the investments are not subject to the tax on capital not otherwise taxed under the provisions of §§ 58-406, and 407 Code of Virginia.
DETERMINATION
The Department concurs with Taxpayer's position that the obligations of the political subdivisions of the Commonwealth of Virginia are not subject to the capital tax. The Federal National Mortgage Association Discount Notes remain subject to capital tax since these notes are not backed by the full faith and credit of the United States government. The Department has consistently taken the position that such notes are not U.S. Government obligations which meet the requirements of §58-406, Code of Virginia.
Revised assessments, with interest accrued to date, will be issued which reflect the adjustments as outlined above and are due and payable upon receipt.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner