Tax Type
Individual Income Tax
Description
Taxation of nonresident; Professional football player
Topic
Taxpayers' Remedies
Date Issued
02-05-1993
February 5, 1993
Re: Request for Ruling: Individual Income Tax
Dear********:
This will reply to your letter of October 22, 1992 in which you request a ruling on behalf of your client (the "Taxpayer'), regarding the applicability of the Virginia individual income tax to a nonresident. In a letter dated January 26, 1993, you request that your original request be bifurcated to delay ruling on an issue which you intend to provide supplementary information. This ruling will only address those issues that you have not asked for additional time to provide such information.
FACTS
The Taxpayer is a professional football player who signed a contract with the * * * (the "Team') that will be in effect from 1992 through 1995. The Taxpayer asserts that he will not be present in Virginia for more than 183 days during any taxable year, although he will maintain a place of abode in Virginia during the time the contract is in effect.
The Taxpayer asserts that he is a resident of another state ("State X') where he maintains his permanent place of abode, votes, possesses a driver's license, registers his cars, is a member of various organizations, and attends graduate school. At the end of each season and upon completion of his contract with the Team, the Taxpayer intends to return to State X. The Taxpayer received a bonus upon signing the contract with the Team.
The Taxpayer has requested that the department rule on the following issues:
- Whether the Taxpayer will be considered a nonresident of Virginia for taxable years 1992 through 1995?
- Whether the signing bonus is included in the base amount upon which Virginia source income is determined?
- Whether the Taxpayer can obtain special permission to increase his number of allowances to avoid substantial overpayment of his Virginia income tax liability?
RULING
Residency
An individual is considered a resident of Virginia if he is either domiciled in Virginia or resides in Virginia for more than 183 days during a taxable year and maintains a place of abode in Virginia.
The Taxpayer asserts that his state of domicile is State X. The facts indicate that he has made State X his permanent residence and he expects to return there upon completion of his employment with the Team. If the facts as described herein do not change, the Taxpayer will not be considered a domiciliary resident of Virginia for the years in question.
Although the Taxpayer will maintain a place of abode in Virginia during the period 1992 through 1995, he does not expect to be physically present in Virginia for more than 183 days during any taxable year. If the Taxpayer is not present in Virginia (whether or not he is actually working) for not more than 183 days of each of the taxable years in question, he will not be considered an actual resident of Virginia. If, however, the Taxpayer is in Virginia for more than 183 days during any particular taxable year he will be considered a Virginia resident for such year.
Signing Bonus
Upon signing the employment contract with the Team, the Taxpayer received a signing bonus. P.D. 88-302 (October 31, 1988, copy enclosed) states that a signing bonus will not be considered Virginia source income if the bonus was not predicated upon the performance of service in Virginia. In order to substantiate the fact that payment of the signing bonus was not based upon the Taxpayer's future performance both in Virginia and elsewhere, the Taxpayer must produce evidence that attests to this fact.
Such evidence would include the contract between the Taxpayer and the Team if it specifically stated that the Taxpayer would not be obligated to pay back the signing bonus in the event that he did not satisfactorily perform under said contract. Unless the Taxpayer can produce such evidence the signing bonus is required to be included in the basis upon which Virginia source income is determined. This amount is to be multiplied by the number of working days the taxpayer spends in Virginia as compared to the number of working days he spends elsewhere to determine the amount of income that will be treated as Virginia source income.
Special Withholding
Pursuant to VR 630-6-470(A), the Taxpayer requested that he be allowed to claim additional allowances so that the amount of taxes withheld from his salary would not result in a substantial overpayment situation. The Department does not grant special withholding allowances unless the department is able to review prior year withholding amounts to determine whether the granting of such permission is warranted. It is, therefore, necessary that the Taxpayer's identity is disclosed. Unless the Taxpayer is willing to identify himself, I cannot grant such permission. If the Taxpayer does identify himself, we should be able to reach a mutually agreeable withholding arrangement despite the fact that there is no historical data.
If you have any further questions, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner