Tax Type
Individual Income Tax
Description
Residency
Topic
Taxpayers
Date Issued
04-15-1999
April 15, 1999
Re: Request for Ruling: Individual Income Tax
Dear******************
This will reply to your request on behalf of your client, ***** (the "Taxpayer') for permission to file a unified nonresident individual income tax return on behalf of its nonresident shareholders.
FACTS
As of January 1, 1998, the Taxpayer elected to be taxed as a qualified S-Corporation subsidiary for federal income tax purposes pursuant to Internal Revenue Code §1362(a). The Taxpayer has a total of eight shareholders, all of which are currently nonresidents of the Commonwealth of Virginia. You are requesting permission for the Taxpayer to file a unified nonresident individual income tax return on behalf of all its nonresident shareholders with respect to its income apportioned to Virginia for the taxable year ended December 31, 1998 and all future years the Taxpayer is qualified to do so.
RULING
Title 23 of the Virginia Administrative Code (VAC) 10-130-20 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. This provision of the regulations relieves the nonresident partners of the responsibility of having to file nonresident individual income tax returns. Similarly, the department has granted permission to nonresident S corporations to file unified nonresident individual income tax returns. See P.D. 84-260 (12/28/84), copy enclosed. As such, the department will allow the Taxpayer to file a unified individual income tax return on behalf of the nonresident shareholders under the following conditions:
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- 1. A schedule must be provided containing the total income of the Taxpayer 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 shareholders who have no income from Virginia sources other than income attributable to the Taxpayer.
3. All nonresident shareholders 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 shareholder's name, address, social security number and Virginia taxable income attributable to each nonresident shareholder.
5. The Virginia income tax will be computed at the rates specified under Code of Virginia § 58.1-320 on the Taxpayer's income attributable to the nonresident shareholders 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 shareholder for his share of the total tax and any statements made on his behalf. The statement will be signed by each nonresident shareholder.
7. A similar unified return will be filed and payment made for the declaration of estimated tax, if required.
- 1. A schedule must be provided containing the total income of the Taxpayer 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.
In your request, you have indicated that the above conditions are acceptable to the Taxpayer. Therefore, the Taxpayer may commence the unified filing under the above conditions effective for taxable year ending December 31, 1998. However, we reserve the right to withdraw or modify the foregoing authorization upon reasonable notice to you.
If the above conditions become unacceptable to the Taxpayer, please note that each nonresident shareholder 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 shareholder 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 above.
Please attach a copy of this letter to the unified nonresident individual income tax return. Contact ***** at *****, if you have additional questions or if we may be of further assistance.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/21736G
Rulings of the Tax Commissioner