Tax Type
Individual Income Tax
Description
Taxes paid to another state; Delaware
Topic
Credits
Date Issued
08-21-1996
August 21, 1996
Re: § 58.1-1821 Application: Individual Income Tax
Dear***********
This will reply to your letter of September 27, 1995, in which you (the "Taxpayer") protest the reduction of a credit for income tax paid to Delaware as claimed on your Virginia return for taxable year 1992. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is a Virginia resident who had income from Delaware sources during 1992. He filed a Delaware return and paid income tax to that state as a nonresident. Because his Delaware source income was of the type that qualifies for a credit against Virginia income tax liability under Code of Virginia § 58.1-332(A), the Taxpayer computed and claimed an out-of-state tax credit for 1992.
The Taxpayer's return was subject to an office audit, and the credit for Delaware taxes paid was adjusted, resulting in an assessment. The Taxpayer believes the 1992 Virginia return was correct as filed and hereby requests relief.
DETERMINATION
For taxable years beginning on or after January 1, 1992, Delaware changed the method for taxing a nonresident individual. The new law requires nonresidents to compute both Delaware taxable income and income tax as if the nonresident were in fact a resident. The tax is converted to a "nonresident tax" by applying a fraction, the numerator of which is a "modified" adjusted gross income from Delaware sources, and the denominator of which is a "modified" federal adjusted gross income.
The department has previously ruled concerning the proper method for computing a credit for tax paid to Delaware. In these rulings, the department distinguishes between the income of a nonresident that is actually subject to tax by Delaware versus how Delaware determines the rates at which a nonresident's income will be taxed. See Public Documents 95-151 (6/12/95) and 95-96 (5/01/95), copies enclosed. The adjustment to the out-of-state tax credit on your 1992 return was made in accordance with the department's written policy as described in the aforementioned rulings.
Accordingly, your request for relief must be denied. A review of your account shows your 1992 assessment was previously paid in full. Should you have any questions regarding this matter, please contact ********at ******** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10486M
Rulings of the Tax Commissioner