Tax Type
Individual Income Tax
Description
Nonresident partnerships
Topic
Partnerships
Date Issued
02-24-1997
February 24, 1997
Re: Request for Ruling: Individual income tax
Dear***************
This will reply to your letter of January 29, 1997, in which you request permission to file a unified nonresident individual income tax return on behalf of the nonresident partners of **************(the "Company").
FACTS
The Company is a non-Virginia partnership which transacts business In Virginia and has individual partners who are nonresidents of Virginia. In order to relieve the Company's individual partners of the responsibility of filing Virginia nonresident individual income tax returns, you request the department grant permission to the Company to file one unified nonresident individual income tax return on behalf of the consenting nonresident individual partners for the year ended December 31, 1996.
DETERMINATION
Virginia Regulation (VR) 6304-391(C)(2) provides that the Tax Commissioner may grant permission to nonresident partnerships to file a statement of combined partnership income attributable to nonresident partners. The permission is also granted based upon such terms as the parties may agree. This provision of the regulations relieves the nonresident partners of the responsibility of having to file nonresident individual income tax returns.
If the partnership determines it can comply with all of the following conditions, it may file a unified return on behalf of the nonresident partners ultimately receiving a share of the partnership's income from Virginia sources.
I. A schedule must be provided containing the total income of the partnership and the amount attributable to Virginia under either the applicable state apportionment formula, as provided in Code of Virginia §§ 58.1-408 through 58.1-421, or by using an approved alternative method.
2. The unified return must reflect only the income or loss attributable to Virginia nonresident partners who have no income from Virginia sources other than income attributable to the partnership.
3. All nonresident partners without other income from Virginia sources must elect to join in the filing of such a return and a statement to such effect will be included in the return.
4. The return will include each nonresident partner's name, address, social security number and Virginia taxable income attributable to each nonresident partner.
5. The Virginia income tax will be computed at the rates specified under Code of Virginia § 58.1-320 on the partnership's income attributable to the nonresident partners without benefit of itemized deductions, standard deductions, personal exemptions, or credit for income taxes paid to states of residence.
6. The return will contain a statement indicating the responsibility of each nonresident partner for his share of the total tax and any statements made on his behalf. The statement will be signed by each nonresident partner.
7. A similar unified return will be filed and payment made for the declaration of estimated tax, if required. Payment of the estimated tax will be made in the name of the partnership and will use the partnership's identification number. Estimated income tax payments will be made using Form 760ES, Virginia Estimated Income Tax Payments for Individuals, Estates, and Trusts.
8. A copy of the letter from the Tax Commissioner authorizing the filing of a unified nonresident income tax return must be attached to the unified return when it is filed. The unified nonresident income tax return is to be filed using Form 763, Virginia Nonresident Individual Income Tax Return.
You have requested permission to file a unified return on behalf of consenting nonresident individual partners. It should be understood, however, that in accordance with the third condition mentioned above, all nonresident individual partners without other income from Virginia sources must elect to join in filing of such a return. Additionally, a statement to such effect must also be included with the unified return.
The department has granted permission for hundreds of partnerships, representing literally thousands of nonresident partners, to file unified nonresident returns. These partnerships typically consist of highly mobile individuals from nearly all 50 states. These partners tend to move frequently, often between states. The members of such partnerships also change with regularity. Tracking the nonresident returns of such individuals would clearly be complicated if they were allowed to fall in and out of a unified filing at will.
A unified return is an administrative convenience which allows nonresident partners to pay their respective Virginia tax at the entity level. The need for filing a separate Virginia return for each partner is also eliminated. It is a privilege extended by the department to taxpayers, at the taxpayer's election. The convenience to the nonresident partners usually outweighs any benefits that may be lost. Certain conditions are imposed in exchange for such convenience. The department must balance the convenience provided by unified returns to nonresident partners against the administrative burden that would be imposed if all nonresidents were not included in the return. A departure from this condition would cause the department to incur significantly more administrative burdens as a result of the convenience it would extend to unified filers.
It is always the department's duty and responsibility to uniformly collect the proper tax due from each taxpayer. As a unified return may combine the Virginia taxable income for hundreds of nonresident taxpayers, the conditions established by the department for unified return filing ensure the proper determination, administration, and collection of Virginia's tax. These conditions are uniformly required for all unified returns and are a necessary part of the department's administration of these returns. The department finds that the conditions which have been imposed for unified filing are fairly and consistently applied.
If the aforementioned conditions are acceptable, the Company may commence the unified filing under the above conditions effective for the year ended December 31, 1996. The department, however, reserves the right to withdraw or modify the forgoing authorization upon reasonable notice to the Company.
If the conditions are not acceptable, please note that each nonresident partner having taxable income for a taxable year must file a Virginia return, unless the individual meets the filing exceptions described in Code of Virginia § 58.1-321. Failure to file an individual nonresident return would subject the nonresident partner to penalty and interest which could not be mitigated by the fact that a unified filing had been made unless the unified filing was in accordance with the conditions set forth.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12139N
Rulings of the Tax Commissioner