Tax Type
Bank Franchise Tax
Description
Branch bank; Apportionment of capital among bank branches
Topic
Rate of Tax
Date Issued
06-09-1995
June 9, 1995
Re: Request for Ruling; Bank Franchise Tax
Dear***************
This is in response to your letter requesting a ruling as to the proper apportionment of capital among branches of the ************** (the Bank) for purposes of the state and local bank franchise taxes.
FACTS
The Bank has a drive-through office which does not have customer service facilities that allow deposit accounts to be opened, consequently no accounts or records of deposits are maintained at the office. All accounts are maintained at the full service branches where the accounts are opened. A question has arisen as to whether any deposits should be attributed to the drive-through office for purposes of the local bank franchise tax, and the state credit for local bank franchise taxes. I apologize for the delay in responding.
RULING
Specifically, Code of Virginia §58.1-1212 requires banks with branch offices to "maintain a record of the deposits through each such branch as of the beginning of the tax year." However, the actual computation of the local tax is controlled by §58.1-1211, which apportions total taxable net capital by deposits as of the end of the preceding year. The words "through" an office suggest a total of all deposits made at the office throughout the year, while the words "as of the beginning of the year" and "as of the end of the preceding year" both suggest deposits on hand on a specific day, i.e., January 1 or the preceding December 31. (Since January 1 is a legal holiday, the amounts should be identical.)
It is my understanding that the universal practice of banks is to maintain records relating to account activities at, or with respect to, the branch where the account was opened, not where a particular transaction occurred. The official report of condition ("Call Report") required by federal regulators shows deposits by the branch at which the account was opened and at which the records are maintained. The Virginia bank franchise tax return and computations are very closely tied to the information on the Call Reports.
Therefore, the apportionment of taxable net capital for purposes of local taxation must be made based on the deposits on hand as of the December 31 & January 1 date used for the Call Report and the Virginia bank franchise return, not the total deposits that may have been made during a 12 month period at a location such as a drive-through window or Automatic Teller Machine. For purposes of §58.1-1211 and §58.1-1212, the branch or office at which the account records are maintained (as reported on the Call Report) shall be the branch or office to which deposits and taxable net capital shall be attributed for purposes of the local bank franchise tax. This will typically be the office at which the account was opened, but accounts may be transferred to other offices in the event of branch closing, acquisitions and mergers.
I trust that this ruling will resolve the questions raised by department personnel and local tax officials. Since copies of prior correspondence were sent to the local officials involved, I am sending a copy of this ruling to them. If you have any questions please contact***************.
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- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
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OTP/7913C
Rulings of the Tax Commissioner