Tax Type
Individual Income Tax
Description
Nonresident Credit Granted by Other States
Topic
Credits
Date Issued
03-17-1992
March 17, 1992
Re: Request for Ruling: Individual Income Tax
Dear***************
This will reply to your letter of May 14, 1990, regarding the taxation of income earned by your clients from oil and gas property located in New Mexico. I apologize for the delay in responding to your letter.
FACTS
Your clients are residents of Virginia and enjoyed income from oil and gas property located in New Mexico and Texas. For taxable year 1988, your clients filed a Virginia return claiming credit for taxes paid to New Mexico on the oil and gas property income. This credit subsequently was disallowed and you seek a ruling on the validity of this action by the department.
RULING
Virginia Code §58. 1-332 (A) provides a credit against the individual income tax:
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- Whenever a Virginia resident has become liable to another state for income tax on any earned or business income for the taxable year, derived from sources outside the Commonwealth and subject to taxation under this chapter ...
- Whenever a Virginia resident has become liable to another state for income tax on any earned or business income for the taxable year, derived from sources outside the Commonwealth and subject to taxation under this chapter ...
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- The credit ... 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 B of this section.
Subsection B of Virginia Code §58.1-332 provides a credit to nonresidents on income from Virginia sources when their home state provides a substantially similar credit to Virginia residents.
A review of New Mexico law in effect for taxable year 1988 reveals that a substantially similar credit was in fact allowed to nonresidents. As such, the Virginia credit is not allowable for taxable year 1988 under the clear language of Virginia Code §58.1-332 (A). The application of the credit in the case of taxes paid to New Mexico was also clearly set out in the 1988 Virginia income tax filing instructions and Virginia Regulation 630-2-332 (B) (4) (b).
The New Mexico credit for nonresidents was repealed effective for taxable year 1990 and future taxable years. Accordingly, your clients may be eligible for the credit under Virginia Code §58.1-332 (A) to the extent that taxes are paid to New Mexico in the future.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner