Tax Type
Individual Income Tax
Description
Combat pay
Topic
Taxable Income
Date Issued
11-08-1994
November 8, 1994
Re: §58.1-1821 Application: Individual Income Tax
Dear**************
This is in reply to your letter concerning the disallowance of a subtraction claimed on the 1991 Virginia Individual Income Tax Return for wages received by *********(the "Taxpayer") for active reserve duty during Operation Desert Shield and Desert Storm.
FACTS
In 1991, the Taxpayer, a resident of Virginia and member of the Army Reserve, was assigned to ******, Maryland for active reserve duty during Operation Desert Shield/Desert Storm. Based on information received at the end of his assignment, the Taxpayer was lead to believe that members of the reserve forces who were activated by military order for Operation Desert Shield/Desert Storm could deduct their active duty wages from the Virginia taxes. Therefore, the Taxpayer claimed a subtraction on the 1991 Virginia income tax return for active duty wages. Through the department's compliance program, the subtraction was disallowed and an assessment was issued. The Taxpayer is requesting information on whether the subtraction should have been claimed. If the subtraction was properly disallowed, the Taxpayer is requesting waiver of the interest since he received incorrect information.
DETERMINATION
Emergency legislation was enacted by the 1991 General Assembly to provide
Virginia tax benefits to persons serving in Operation Desert Shield/Desert Storm.
Accordingly, Code of Virginia, §58.1-322, copy enclosed, was amended to allow
combat pay received by certain members of the Armed Forces of the United States to be excluded from Virginia taxation to the extent it was excluded from taxation by the Internal Revenue Service. In that your reserve income did not result from service in a combat zone during the operations of Desert Shield/Desert Storm, it was subject to taxation for federal and Virginia income tax purposes.
As a member of the Army Reserve called to active duty but not serving in a combat zone, Virginia law allowed the extension of time for filing the Virginia income and estimated tax returns; however, it did not provide any deductions from taxable income. A detailed explanation of these benefits is provided in the enclosed booklet issued by the department entitled Guidelines for Individuals Affected by Operations Desert Shield and Desert Storm and the Virginia Tax Bulletin 91-3 issued on April 1, 1991 entitled Operation Desert Storm.
While I can empathize with your situation and I understand that you acted in good faith despite the fact that the information conveyed to you was incorrect, there is no basis for relieving the tax that has been assessed. In addition, in that the Taxpayer has not indicated an inability to pay the assessment, the interest cannot be waived under Code of Virginia, §58.1-105. If other assistance is needed, please feel free to contact the department.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8539N
Rulings of the Tax Commissioner