Tax Type
Corporation Income Tax
Description
Financial corporations; Loan processing services
Topic
Allocation and Apportionment
Date Issued
06-21-1999
June 21, 1999
Re: Request for a Ruling: Corporation Income Tax
Dear***
This will reply to your letter in which you request a ruling on behalf of your client (the "Taxpayer') as to whether it would be considered a financial corporation for Virginia income tax purposes.
FACTS
The Taxpayer provides an entire range of loan processing services for its customers. Customers can also choose limited services in the areas of loan origination, servicing and/or conversion. The Taxpayer's income primarily consists of fees for providing these loan processing services. You believe the Taxpayer is a financial corporation within the meaning of Code of Virginia Sec. 58.1-418 and would apportion income to Virginia based on the single financial formula. You are requesting a ruling to confirm that the Taxpayer is a financial services corporation for Virginia income tax purposes.
RULING
Code of Virginia Sec. 58.1-418 defines "financial corporation' as any corporation not exempted from the imposition of corporate income tax which derives more than 70% of its gross income from:
1) Fees, commissions, or the compensation for financial services rendered
2) Gross profits from trading in stocks, bonds or other securities
3) Interest; and dividends received to the extent included in Virginia taxable income
This section also provides that a financial corporation is required to apportion its income in the ratio that the business within Virginia is to the total business of the corporation.
In Public Document ("P.D.') 81-57 (10/23/81), copy enclosed, the department ruled that a mortgage broker whose income consisted of service fees for acting as a collection agent, origination and other fees connected with the making of loans was a financial corporation. The fees that the Taxpayer collects for loan origination, loan conversion and loan servicing are the same or similar to the fees that the mortgage broker collected in P.D. 81-57. Thus, as long as the Taxpayer's loan processing fees exceed 70% of its gross income, the Taxpayer would be a financial services corporation.
I hope that this ruling answers your questions. If you have any further questions, you may contact * * * * * at * * * * *.
Re: Request for a Ruling: Corporation Income Tax
Dear***
This will reply to your letter in which you request a ruling on behalf of your client (the "Taxpayer') as to whether it would be considered a financial corporation for Virginia income tax purposes.
FACTS
The Taxpayer provides an entire range of loan processing services for its customers. Customers can also choose limited services in the areas of loan origination, servicing and/or conversion. The Taxpayer's income primarily consists of fees for providing these loan processing services. You believe the Taxpayer is a financial corporation within the meaning of Code of Virginia Sec. 58.1-418 and would apportion income to Virginia based on the single financial formula. You are requesting a ruling to confirm that the Taxpayer is a financial services corporation for Virginia income tax purposes.
RULING
Code of Virginia Sec. 58.1-418 defines "financial corporation' as any corporation not exempted from the imposition of corporate income tax which derives more than 70% of its gross income from:
1) Fees, commissions, or the compensation for financial services rendered
2) Gross profits from trading in stocks, bonds or other securities
3) Interest; and dividends received to the extent included in Virginia taxable income
This section also provides that a financial corporation is required to apportion its income in the ratio that the business within Virginia is to the total business of the corporation.
In Public Document ("P.D.') 81-57 (10/23/81), copy enclosed, the department ruled that a mortgage broker whose income consisted of service fees for acting as a collection agent, origination and other fees connected with the making of loans was a financial corporation. The fees that the Taxpayer collects for loan origination, loan conversion and loan servicing are the same or similar to the fees that the mortgage broker collected in P.D. 81-57. Thus, as long as the Taxpayer's loan processing fees exceed 70% of its gross income, the Taxpayer would be a financial services corporation.
I hope that this ruling answers your questions. If you have any further questions, you may contact * * * * * at * * * * *.
Rulings of the Tax Commissioner