99-47 | Virginia Tax

Tax Type

Individual Income Tax

Description

Taxes Paid by Residents to Other States

Topic

Credits

Date Issued

04-02-1999

April 2, 1999

Re: § 58.1-1821 Application: Individual Income Tax

Dear****************

This will respond to your letter in which you protest the disallowance of an out-of-state tax credit claimed on the 1996 Virginia individual income tax return filed by you and your wife (the "Taxpayers').

FACTS

The Taxpayers, while residents of Virginia, received a distribution of lottery winnings from another state. On the Taxpayers' 1996 Virginia individual income tax return, the Taxpayers claimed an out-of-state tax credit for tax paid on lottery winnings which was disallowed by the department and additional tax was assessed. The Taxpayers protest the assessment and request relief from the department.

DETERMINATION

Code of Virginia § 58.1-322 A. provides individuals a credit for income tax paid to another state:

- Whenever a Virginia resident has become liable to another state for income tax on any earned or business income for the taxable year...(Emphasis added).

The basis for disallowing the credit claimed by the Taxpayers for taxes paid to another state is that gambling winnings do not constitute earned or business income. The department has previously ruled on this issue. See Public Document (P.D.) 95-152 (6-12-95), copy enclosed. The issue of out-of-state tax credit is identical to that addressed in the prior ruling. In P.D. 95-152 the credit was denied on the basis that gambling winnings were neither earned or business income.

Although I am sympathetic to your situation, the department has no authority to grant your request for relief. The assessment should be paid within 30 days to avoid accrual of additional interest. Should you have in questions regarding this determination, please contact *****, of the Office of Tax Policy at *****.

Sincerely,

Danny M. Payne
Tax Commissioner
OTP/18514P

Rulings of the Tax Commissioner