Was an employee of Virginia's land-preservation foundation a state employee for the historical $15,000 salary subtraction?

Subject

individual income tax subtraction for state and federal employees

Plain-English summary

Virginia ruled that the foundation was a state agency, so its employee counted as a state employee for the historical salary subtraction. The foundation had been created by the General Assembly to promote open-space preservation, could hold easements under the Open-Space Land Act, could promulgate regulations, and would transfer its property and contractual obligations to the Commonwealth if dissolved.

Those features showed that it carried out administrative, executive, and regulatory functions for Virginia. Its employee therefore met the state-employee classification in Va. Code § 58.1-322(C)(24).

The ruling did not remove the provision's separate income ceiling. Under the quoted 2008 rule, the subtraction covered the first $15,000 of salary only when the employee's total annual salary from all employment was $15,000 or less.

What this means for you

• An entity's statutory functions and relationship to the Commonwealth can determine whether its workers are state employees for a tax provision.
• State-employee classification alone did not guarantee the subtraction; the total-salary condition also had to be met.
• This ruling describes historical law and should not be used without checking the current subtraction.

Citations and references

• Va. Code §§ 58.1-322(C)(24), 10.1-1800, and 10.1-1801.
• Va. Code § 2.2-4000 et seq.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 08-47

Original ruling text

April 17, 2008

Re: Request for Ruling: Individual Income Tax

Dear *:

This will reply to your correspondence in which you request a ruling regarding the individual income tax subtraction for state and federal employees.

FACTS

The Taxpayer is a part-time employee of the * (the "Foundation"). A ruling is requested as to whether the Foundation is a state agency for purposes of the subtraction granted to state and federal employees under Virginia Code § 58.1-322 C 24.

RULING

Virginia Code § 58.1-322 states, "The Virginia taxable income of a resident individual means his federal adjusted gross income for the taxable year, which excludes combat pay for certain member, of the Armed Forces of the United States as provided in § 112 of the Internal Revenue Code, as amended, and with the modifications specified in this section." Subsection C 24, states, to the extent included in federal adjusted gross income, there shall be subtracted.

Effective for all taxable years beginning on and after January 1, 2000, the first $15,000 of salary for each federal and state employee whose total annual salary from all employment for the taxable year is $15,000 or less.

The Foundation was established by the General Assembly in 1966 for the purpose of promoting open space land preservation and to encourage private gifts to preserve the natural, scenic, historic, scientific, open-space and recreational areas of Virginia. See Va. Code § 10.1-1800. In conjunction with its purpose, the Foundation holds easements under the Open-Space Land Act of 1966. Only public entities, such as the Foundation, are authorized to hold easements under the Open-Space Land Act.

Under Va. Code § 10.1-1801, all real and personal property owned by the Foundation, as well as contractual obligations, pass to the Commonwealth in the event the Foundation is dissolved. Further, the Foundation may promulgate regulations under the Administrative Process Act, Va. Code § 2.2-4000 et seq . The Foundation is also prohibited from engaging in business that is not consistent with the furtherance of its objectives.

Based on these facts and the cited statutes, the Foundation is charged with carrying out administrative, executive and regulatory functions on behalf of the Commonwealth. Accordingly, the Foundation is a Virginia state agency. An employee of the Foundation, therefore, is a state employee for purposes of the subtraction set forth under Va. Code § 58.1-322 C 24.

If you have any questions regarding this ruling, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-2167677950E