Tax Type
Individual Income Tax
Description
S corporation modifications; Out-of-state tax credit
Topic
Credits
Date Issued
03-08-1988
March 8, 1988
Re: §58.1-1821 Application/Individual Income Tax
Dear**************
This will reply to your letter dated December 11, 1987 in which you submit an application for relief of income tax assessed for tax year 1985.
FACTS
*********(taxpayer) is a shareholder in three Virginia S-Corporations Taxpayer was assessed additional tax on his 1985 Virginia individual income tax return for modifications to taxable income from the S-Corporations' returns that were not reported by the shareholder. The S-Corporations' returns show the taxpayer's share of modifications to be**********. Therefore, taxpayer's taxable income for 1985 was increased by********** with additional tax plus**** interest remaining past due.
Taxpayer is in agreement with the increase in taxable income resulting from the S-Corporation modifications. However, upon reviewing his 1985 individual income tax return, taxpayer overlooked claiming an out-of-state income tax credit for taxes paid to West Virginia on income earned in that state which was subject to a business and occupation tax. Taxpayer contends that the business and occupation tax is an income tax and that he should be allowed an out-of-state tax credit for taxes paid to West Virginia.
DETERMINATION
§58.1-332 of the Code of Virginia provides credits for taxes paid other states by residents and nonresidents of Virginia. Virginia Regulation 630-2-332 sets forth the policies and procedures applicable to §58.1-332 of the Code of Virginia and is enclosed for your perusal.
§58.1-332(A) of the Code of Virginia provides:
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- Whenever a resident of the Commonwealth has become liable for income tax to another state, on earned or business income, or any part thereof, for the taxable year, derived from sources without the Commonwealth and subject to taxation under this chapter, the amount of income tax payable by him shall, upon proof of such payment, be credited on his return with the income tax so paid by him to such other state....The credit provided for by this section shall not be granted to a resident individual when the laws of another state, under which the income in question is subject to tax assessment, provide a credit to such resident individual substantially similar to that granted by subsection 9 of this section.
- Whenever a resident of the Commonwealth has become liable for income tax to another state, on earned or business income, or any part thereof, for the taxable year, derived from sources without the Commonwealth and subject to taxation under this chapter, the amount of income tax payable by him shall, upon proof of such payment, be credited on his return with the income tax so paid by him to such other state....The credit provided for by this section shall not be granted to a resident individual when the laws of another state, under which the income in question is subject to tax assessment, provide a credit to such resident individual substantially similar to that granted by subsection 9 of this section.
While we appreciate the taxpayer's circumstances, absent specific statutory authority to do so, the department cannot permit an out-of-state tax credit for anything other than an income tax liability incurred on non-Virginia source income.
Therefore, based upon all of the foregoing, I find no basis for a correction of the assessment, which is now due and payable in full.
If you have any further questions regarding this matter, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner