Did a District of Columbia resident who commuted to a Virginia job and earned only wages owe Virginia income tax for 2013?

Subject

D.C. daily commuter qualified for Virginia filing exclusion

Plain-English summary

Virginia abated the D.C. resident's 2013 assessment under the daily-commuter exclusion. Virginia did not have a reciprocal income-tax agreement with the District of Columbia, so reciprocity was not the basis for relief.

A separate statute excused a nonresident from filing and paying Virginia tax when the person maintained no Virginia abode, commuted daily from an out-of-state residence, earned only salaries and wages from Virginia, and met the related home-state conditions.

The taxpayer lived in D.C., worked exclusively in Virginia, reported only wages from Virginia sources, and supplied a D.C. return showing the treatment of those wages.

Result: the taxpayer did not have to file a 2013 Virginia return, and the assessment was abated.

What this means for you

• Do not confuse a reciprocal agreement with Virginia's separate daily-commuter exclusion.
• Confirm that you maintained no place of abode in Virginia during the year.
• The exclusion requires daily commuting and only salary or wage income from Virginia.
• Retain the residence-state return and proof satisfying every statutory condition.

Common questions

Q: Did Virginia have a reciprocal agreement with D.C.?

A: No. The ruling expressly said it did not.

Q: Why was the assessment still abated?

A: The taxpayer satisfied the separate statutory exclusion for qualifying daily commuters.

Q: Would Virginia business or partnership income qualify?

A: Not under the condition applied here, which required only salaries and wages from Virginia.

Citations and references

• Va. Code §§ 58.1-342(A), 58.1-342(B), and 58.1-332.
• D.C. Code § 47-1806.01; 23 VAC 10-110-250.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 15-208

Original ruling text

October 27, 2015

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will respond to your letter in which you seek correction of the individual income tax assessment issued to * (the "Taxpayer") for the taxable year ended December 31, 2013.

FACTS

The Taxpayer moved to the District of Columbia in October 2013 but was employed in Virginia. He filed a Virginia nonresident individual income tax return for the 2013 taxable year and claimed a credit for income tax paid to the District of Columbia. Under review, the Department denied the credit because the Taxpayer failed to substantiate the tax paid. The Taxpayer appealed, contending that he was exempt from Virginia individual income tax under Virginia's reciprocal income tax agreement with the District of Columbia.

DETERMINATION

Virginia Code § 58.1-342 specifies special cases in which a nonresident is not required to file a Virginia individual income tax return. Virginia Code § 58.1-342 B grants the Department the authority to enter into reciprocal agreements with other states to exempt nonresidents from the Virginia income tax when they earn salaries and wages from working in Virginia if such other states similarly exempt Virginia residents. In addition, employers are not required to withhold Virginia income tax from residents of these states. Virginia currently has this type of agreement with Maryland, West Virginia, and Pennsylvania. Virginia does not have such an agreement with the District of Columbia.

Under Va. Code § 58.1-342 A, a nonresident who did not maintain a place of abode in Virginia at any time during the taxable year and who commuted on a daily basis to employment in Virginia from the nonresident's residence outside this state is not required to file a Virginia income tax return and is not liable for the payment of tax to Virginia provided certain conditions were met:

1. His only income from Virginia sources was from salaries and wages;

2. Such salaries and wages were subject to income taxation by the state of his residence under an income tax law substantially similar to Virginia's, i.e. , a net income tax;

3. The laws of such other state allow a credit against the tax liability of a Virginia resident to such state which is substantially similar to that accorded by Virginia under Va. Code § 58.1-332; and

4. The laws of such other state accord Virginia residents commuting to work in such state on a daily basis the same relief from filing a return as provided herein for nonresidents of Virginia.

Nonresidents of the District of Columbia are not generally subject to the District of Columbia's income tax, although they may be subject to the Unincorporated Business Franchise Tax on income from a trade or business conducted there. See D.C. Code § 47-1806.01. As such, Virginia residents commuting to work in the District of Columbia and earning only salaries and wages are not subject to tax in the District of Columbia on such income and are not required to file a District of Columbia income tax return. As a result, residents of the District of Columbia may also qualify for a filing exclusion under the provisions of Va. Code § 58.1-342 A. See also Title 23 of the Virginia Administrative Code (VAC) 10-110-250.

The Taxpayer resided in the District of Columbia and worked exclusively in Virginia during the 2013 taxable year, reporting salaries and wages as his only income from Virginia sources. The Taxpayer has also provided a copy of his District of Columbia return showing that such wages were subject to tax there. Accordingly, the Taxpayer was not required to file a Virginia return for the 2013 taxable year and the assessment has been abated.

The Code of Virginia sections and regulation cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns
Tax Commissioner

AR/1-5983538826.M