Tax Type
Corporation Income Tax
Individual Income Tax
Description
Interest on Virginia obligations
Topic
Subtractions and Exclusions
Date Issued
11-07-1986
November 7, 1986
Re: Request for Ruling; Individual & Corporation Income Tax
§§58.1-322 & 58.1-402 Virginia Taxable Income
Interest on Virginia Obligations
Dear *********************
This is in response to your letter of October 20, 1986, requesting a ruling on the taxability of interest on bonds to be issued by your client, the *********** (the "Issuer.') The Issuer is defined as a political subdivision of Virginia by §36-4 of the Code of Virginia.
The Issuer proposes to issue ten year, interest only term bonds which will be limited obligations payable only from certain enumerated sources. The bonds will not constitute a debt of any city, county, the Commonwealth or any political subdivision within the meaning of any constitutional or statutory debt limitations or restrictions. The bonds will not be backed by the full faith and credit of the Commonwealth.
As bond counsel for the issuance of the bonds, it is your firm's opinion that the interest on the bonds will be includible in the bondholder's Federal Adjusted Gross Income (for individuals) or Federal Taxable Income (for corporations.) You request a ruling as to whether the interest on bonds will qualify for the subtraction under §§58.1-322.C.2 and 58.1-402.C.2 for " interest on obligations of this Commonwealth or of any political subdivision or instrumentality of this Commonwealth."
DETERMINATION
The bonds will be issued pursuant to §36-29 by an organization which is clearly a political subdivision of Virginia. In spite of the limited nature of the Issuer's obligation, the bonds will still be considered to be an obligation of a political subdivision of the Commonwealth for purposes of the Virginia Income Tax. In a ruling dated July 18, 1986, Public Document No. 86-140 (copy enclosed), interest on similar bonds was held to qualify for the subtraction.
Accordingly, notwithstanding Regulations 630-2-322(C) and 630-3-402(C), I am of the opinion that the interest on the bonds will qualify for the subtraction under §§58.1-322.C.2 and 58.1-402.C.2.
Sincerely,
W. H. Forst
Tax Commissioner
Related Documents
Rulings of the Tax Commissioner