Ezel / Tax Rulings / VA
VA P.D. 08-161 Individual Income Tax 2008-08-29

Did missionaries living and working abroad owe Virginia nonresident tax because Virginia churches issued their Forms 1099-MISC?

Short answer: No. The married taxpayers lived and performed their missionary work outside Virginia, so payments reported by Virginia church organizations were not Virginia-source income. They were not required to file a 2004 Virginia return, and the assessment was abated.

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This page answers the general question as of 2008. Ezel answers yours, under current Virginia tax law, with citations.

Currency note: this ruling is from 2008
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official published Ruling of the Virginia Tax Commissioner (Virginia Department of Taxation), issued as a redacted public document. It is based on the specific facts the taxpayer presented and the law in effect when issued; different facts or later changes in the law can change the result, and another taxpayer should not assume it applies to their situation. Virginia's retail sales and use tax is administered by the Department, but many Virginia local taxes, including the business license (BPOL) tax, business tangible personal property tax, and machinery and tools tax, are administered by local commissioners of the revenue. This summary is informational only and is not legal or tax advice. Consult a licensed Virginia tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
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Subject

No Virginia income and were not required to file a Virginia income tax return for 2004.

Plain-English summary

The married taxpayers did not have Virginia-source income and were not required to file a 2004 Virginia income-tax return. They had moved abroad in 2001 for the husband's work as a pastor and performed no missionary services in Virginia during 2004.

Several Virginia church organizations supported their mission work and issued Forms 1099-MISC. The Department initially treated all of those payments as Virginia-source income, but the Commissioner focused on where the taxpayers carried on the work. Because the missionary work was performed outside Virginia, the income was not attributable to a business, trade, profession, or occupation carried on in Virginia.

The assessment was abated, and the Department said it would refund the 2004 tax the taxpayers had paid, with interest.

What this means for you

  • A payer's Virginia location does not by itself make compensation Virginia-source income for a nonresident.
  • For income from a business, trade, profession, or occupation, where the work is carried on is central to source.
  • Nonresidents without Virginia-source income generally do not have a Virginia nonresident filing requirement under the analysis in this ruling.

Common questions

Q: Did the Virginia churches' Forms 1099-MISC create Virginia-source income?
A: No. The taxpayers performed the missionary work abroad and did not perform services in Virginia during 2004.

Q: Were the taxpayers Virginia residents?
A: The ruling treated them as neither domiciliary nor actual Virginia residents for the year at issue.

Q: What happened to the tax already paid?
A: The Department said it would issue a refund with interest after abating the assessment.

Citations and references

  • Va. Code § 58.1-325.
  • Va. Code § 58.1-302.

Source

Original ruling text

August 29, 2008

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek correction of the individual income tax assessment issued to * (the "Taxpayers") for the 2004 taxable year.

FACTS

The Taxpayers, a husband and wife, moved from Virginia to * ("Country A") in July 2001 when the husband took a position as a pastor in a church. The Taxpayers received support for their missions work from several church organizations located in Virginia. The organizations issued federal miscellaneous income information returns (Form 1099-MISC) for the taxable year at issue.

After being contacted by the Department, the Taxpayers filed a 2004 nonresident Virginia individual income tax return and paid Virginia tax. The Department adjusted the return after determining that all of the income reported by the church organizations was Virginia source income. The Taxpayers appeal the assessment resulting from the adjustment and contend they did not spend any time in Virginia or perform any services in Virginia during 2004. The Taxpayers believe they are not even required to file a Virginia nonresident income tax return.

DETERMINATION

Individuals who are neither domiciliary nor actual residents of Virginia and have income from Virginia sources are taxed as nonresidents. The Virginia taxable income of a nonresident is defined under Va. Code § 58.1-325 as "an amount bearing the same proportion to his Virginia taxable income, computed as though he were a resident, as the net amount of his income, gain, loss and deductions from Virginia sources bears to the net amount of his income, gain, loss and deductions from all sources."

Virginia Code § 58.1-302 defines income and deductions from Virginia sources to include items of income, gain, loss and deduction attributable to a business, trade, profession or occupation carried on in Virginia. In 2004, the Taxpayers did not perform their missionary work in Virginia. As such, they had no Virginia source income and were not required to file a Virginia income tax return for 2004. Accordingly, the assessment for the 2004 taxable year has been abated. A refund of the income tax paid for 2004, with interest, will be issued to the Taxpayers.

The Code of Virginia sections, along with other reference documents, are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-2039284280.B

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