Tax Type
Corporation Income Tax
Description
Filing requirements; Non-profit charitable organization
Topic
Exemptions
Date Issued
09-30-1994
September 30, 1994
Re: Ruling Request:
Dear***************
This will reply to your letter dated August 11, 1994 in which you request a ruling as to whether **********(the "Taxpayer") qualifies for exemption from the Virginia income tax.
FACTS
The Taxpayer is a private foundation within the meaning of Internal Revenue Code ("I.R.C.") §509(a), and qualifies as an exempt organization pursuant to I.R.C. §501(c)(3). The Taxpayer was created and is funded pursuant to an Agreement of Trust. A trustee holds the investments used to fund the various charitable operations of the Taxpayer. The Taxpayer contributes primarily to medical institutions and universities.
The Taxpayer has never been incorporated in any state or other jurisdiction. You aver that under the application of U.S. Treasury Regulation §301.7701, the Taxpayer would be considered a trust for federal income tax purposes.
You have requested the department to affirm that the Taxpayer is exempt from the income tax imposed on corporations pursuant to Code of Virginia §58.1-400 and the income tax imposed on estates and trusts pursuant to Code of Virginia §58.1-360.
RULING
Taxation of Corporations
Code of Virginia §58.1401 (5) and Virginia Regulation (VR) 630-3401(F) provide that corporations which are exempt from federal income tax under I.R.C. §501(c) are exempt from Virginia's corporate income tax.
Thus, if a corporation qualifies for exemption from federal income tax under I.R.C. §501(c), the corporation would also qualify for exemption from the Virginia corporate income tax. However, if such corporation has unrelated business taxable income as defined in I.R.C. § 512, it is subject to Virginia corporate income tax on such income.
Taxation of Trusts
In 1981, the Virginia General Assembly passed a House Joint Resolution directing the Virginia Code Commission to review the organization of Virginia's tax statutes contained in Title 58. This review resulted in the 1984 General Assembly passing legislation that recodified Title 58 into the form of a new Title 58.1.
As a result of the recodification, the levy imposed on the annual taxable income of trusts was repositioned from Code of Virginia § 58.151.03 to new Code of Virginia § 58.1-360.
Prior to recodification, Code of Virginia § 58-151.03(a)(i), copy attached, exempted nonprofit organizations from the income tax imposed on trusts. This exemption provides the following:
-
- Notwithstanding any other provision of this subsection, no tax is imposed, nor any return required to be filed by, (i) any organization which by reason of its purposes or activities is exempt from income tax under the laws of the United States (except organizations which have unrelated business income under such laws)
- Notwithstanding any other provision of this subsection, no tax is imposed, nor any return required to be filed by, (i) any organization which by reason of its purposes or activities is exempt from income tax under the laws of the United States (except organizations which have unrelated business income under such laws)
Based on the above, to the extent that the Taxpayer's income qualifies for exemption from federal income tax under I.R.C. §501(c), the Taxpayer would also qualify for exemption from the Virginia income tax regardless of whether the Taxpayer is considered to be taxable as a corporation or as a trust.
I trust this will answer the questions posed in your letter; however, please contact ********* if you have additional questions or if we may be of any further assistance.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8364L
Rulings of the Tax Commissioner