Tax Type
Individual Income Tax
Description
S corporation nonresident shareholders; Conditions for filing a single return
Topic
Returns/Payments/Records
Date Issued
12-28-1984
- December 28, 1984
Re: Ruling Request: Individual Income Tax
Dear **************
This will reply to your letter of February 22, 1984 concerning the possibility of filing a single nonresident individual income tax return by nonresident shareholders of a subchapter S corporation.
FACTS
Corporation X, a foreign corporation doing business in Virginia, has a portion of taxable income allocable to sources within Virginia. The corporation is a subchapter S corporation for federal and Virginia purposes and has seven shareholders, all of whom are Virginia nonresident individuals. Each shareholder is a calendar year taxpayer and has no income attributable to sources within Virginia other than his share of Corporation X's taxable income allocable to Virginia, and accordingly would not otherwise be required to file a Virginia nonresident return.
DETERMINATION
As you acknowledge in your letter, the Code of Virginia does not differentiate between the filing by a nonresident and by a nonresident subchapter S corporation shareholder and makes no provision for the filing of a single return on behalf of multiple nonresidents. However, the Department will accept, subject to the following conditions, a single unified nonresident individual income tax return by nonresident shareholders of Corporation X:
1. All nonresident shareholders must elect to join in the filing of such a return and a statement to such effect will be included in the return.
2. The unified return will reflect only the income or loss attributable to Virginia nonresident shareholders who have no income from Virginia sources other than income attributable to Corporation X.
3. A schedule will be provided containing the total income of Corporation X and the amount attributable to Virginia under the applicable state apportionment formula.
4 The return will include each such nonresident shareholder s name, address, social security number and Virginia taxable income attributable to each nonresident shareholder.
5. The Virginia income tax will be computed at 5.75 percent of Corporation X's income attributable to the nonresident shareholders without benefit of itemized deductions, standard deductions, personal exemptions or credit for income taxes paid to states of residence.
6. The return will contain a statement indicating the responsibility of each nonresident shareholder for his share of the total tax and any statements made on his behalf. The statement will be signed by each nonresident shareholder.
7. A similar unified return will be filed and payment made for declaration of estimated tax, if required.
If the above is acceptable, Corporation X may commence the unified filing effective for calendar year 1984. However, we reserve the right to withdraw or modify the foregoing authorization upon reasonable notice to you.
If the above is not acceptable, please note that each nonresident shareholder having taxable income for a taxable year must file a Virginia return for the taxable year, unless the individual meets the "$3,000 filing exclusion" described in Virginia Code § 58-151.03. Failure to file an individual nonresident return would subject the nonresident shareholder to penalty and interest, which could not be mitigated by the fact that a unified filing had been made unless the unified filing was in accordance with the conditions set forth above.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner