Tax Type
Employer Income Tax Withholding
Description
Employer provided programs and services
Topic
Withholding of Tax
Date Issued
06-20-1988
June 20, 1988
Dear**************
This is in reply to your letter of April 15, 1988, in which you request information concerning Virginia's treatment of employer-provided educational assistance programs and prepaid group legal services plans for state withholding tax purposes.
Federal adjusted gross income is the starting point for determining an individual's Virginia adjusted gross income and Virginia taxable income. Accordingly, those employee benefits that are included in federal adjusted gross income are similarly included in Virginia adjusted gross income. Conversely, employee benefits excluded from federal adjusted gross income are excluded from Virginia adjusted gross income.
The Code of Virginia is silent on whether employer-provided educational assistance programs and prepaid group legal services plans are subject to state withholding tax. However, because Virginia is a conformity state, since they are included in federal adjusted gross income, they are included in Virginia adjusted gross income and withholding of Virginia income tax is required.
In the event that the federal exemption of such plans is reinstated, Virginia income tax withholding will not be required if, at the time the benefit is provided, the employer reasonably believes the employee will be allowed to exclude it from federal adjusted gross income.
Let me know if I may be of further assistance.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner