Virginia State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Virginia, with full citations and the original source on every page.
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Could a taxpayer overturn a Virginia assessment based only on saying it was larger than taxes owed in other years when no 2010 Virginia return had been filed?
No. Virginia's best-information assessment was presumed correct, and comparing it with other years did not prove the 2010 liability was wrong. The taxpayer had 30 days to file a 2010 Virginia return s…
Could taxpayers subtract a 2011 long-term gain from selling real property under Virginia's qualified-technology-business subtraction?
No. Virginia's subtraction required gain attributable to an investment in a qualifying Virginia technology business. The taxpayers' gain came from selling real property, and they had no qualifying wri…
Could Virginia residents subtract foreign salary, foreign investment gains, and the 2011 portion of a 2010 Roth IRA conversion from federal adjusted gross income?
No. The amounts were included in the taxpayers' 2011 federal adjusted gross income while they were Virginia residents, and Virginia law supplied no applicable modification. That included foreign earni…
Did a taxpayer remain a Virginia domiciliary in 2011 despite owning a Virginia home and maintaining family and business connections there?
No. Although the taxpayer still owned a Virginia home and had family, business, and vehicle connections there, his long-running State A home, license, vehicle registration, voter registration, nonresi…
Could a married couple avoid the $4,000-per-contract Virginia prepaid-tuition deduction limit because the nonowner spouse was over age 70?
No. Only the listed purchaser-owner could claim the prepaid-tuition deduction. Because the husband owned both contracts and was under 70, each deduction was limited to $4,000 per year despite the wife…
Could preparing a 2011 Virginia return in tax software prove it was filed when the Department had no return, confirmation number, or payment record?
No. Tax software preparation did not prove that the Virginia return was transmitted or received. With no return, confirmation number, or payment proof, Virginia could assess from the IRS transcript at…
Did a taxable lump-sum death payment qualify for Virginia's annuity death-benefit subtraction when it came from a § 403(b) retirement plan?
No. Even though an insurance company issued a taxable lump-sum death payment, the documents showed it came from an IRC § 403(b) retirement plan. Virginia's subtraction applied to qualifying annuity-co…
Did a federal filing extension preserve a Virginia refund when the original 2010 state return was not filed until September 2014?
No. A federal extension did not establish a Virginia extension, and filing the original state return after the extended due date negated the state election. The refund period reverted to the May 2, 20…
Could taxpayers carry a 2010 overpayment into 2011 when their original 2010 return was filed after Virginia's refund deadline?
No. The same three-year limitation that barred a cash refund also barred carrying the overpayment forward. Because the original 2010 return was filed in June 2014, after the May 2, 2014 deadline state…
Did returning to Virginia for about two weeks within six months of moving away prevent a taxpayer from proving a domicile change?
No. Although returning to Virginia within six months was prima facie evidence that the taxpayer had not abandoned Virginia domicile, the full record showed a genuine move from State B to State A. Virg…
Could taxpayers use Virginia's Historic Rehabilitation Tax Credit subtraction to restore a partnership-interest loss disallowed by the IRS?
No. Virginia's subtraction applied to gain or income recognized from allocating or applying Historic Rehabilitation Tax Credits, not to a loss on selling a partnership interest that the IRS disallowed…
Could taxpayers apply a January 2012 estimated payment to 2012 after it had already been credited and claimed for 2011?
No. Local and Department records showed that the January 2012 payment was applied to 2011 under the estimated-tax schedule and the taxpayers claimed it on their 2011 return. It could not also be credi…
Could Virginia excuse a refund claim filed several weeks after the three-year deadline because the taxpayer was traveling and unfamiliar with the law?
No. The original 2010 return was filed in June 2014, after the May 2, 2014 refund deadline stated in the ruling. Va. Code § 58.1-499 D gave the Department no discretion to excuse the late filing based…
Did a military spouse prove that she retained another state's domicile and qualified for relief from Virginia income tax for 2011?
No. The taxpayer did not prove that she retained the same out-of-state domicile as her military spouse. Living and working in Virginia, registering her vehicle there, and obtaining a Virginia driver's…
Could taxpayers avoid Virginia assessments based on final IRS changes merely because they were still contesting the federal audit?
No. Virginia does not look behind the IRS's final determination and could assess the unreported federal changes at any time because the taxpayers did not file amended Virginia returns. If the IRS late…
Did a federally taxable annuity death benefit qualify for Virginia's subtraction when the payment came from a retirement plan?
No. Virginia's subtraction was intended for qualifying federally taxable lump-sum death benefits from annuity contracts with insurance companies, not payments from retirement plans. The 2010 assessmen…
Could S corporation vehicle depreciation be claimed as a Virginia fixed-date-conformity subtraction instead of through federal income?
No. Ordinary depreciation under IRC § 167 had to flow through the S corporation's federal Schedule K-1 and the taxpayers' federal adjusted gross income; it was not a separate Virginia fixed-date-confo…
Did a salesperson's mileage schedule and meal receipts substantiate the unreimbursed employee expenses claimed on a 2013 Virginia return?
Yes. The mileage itinerary excluded the stated home-to-first-client commute, accounted for the employer's flat reimbursement, and documented travel between clients; the taxpayers also supplied the bus…
Did Virginia voting, driver's licenses, a vehicle, and an investment home make foreign residents Virginia domiciliaries for 2009?
No. Although the taxpayers owned a Virginia investment home, registered to vote, obtained Virginia driver's licenses, and registered a vehicle, they retained their established foreign domicile and had…
Was a Virginia refund claim timely when an overseas taxpayer filed on July 1, three years after the automatic extended due date?
Yes. Because the taxpayer was overseas on the original May 1 due date, Virginia's July 1 extension applied automatically. The return claiming a refund was filed exactly three years after that extended…
How did Virginia's 2015 guidelines treat first-time home buyer savings accounts, tax subtractions, eligible withdrawals, and penalties?
An account holder could designate qualifying financial accounts, subtract federally taxable account earnings from Virginia income, and use distributions for a qualified beneficiary's Virginia down pay…
Could nonresidents use Virginia 529 programs, deduct contributions on a Virginia return, and avoid creating Virginia domicile?
Yes. The inVEST, CollegeWealth, and CollegeAmerica programs were open nationwide, and a nonresident with Virginia-source income could deduct eligible contributions when computing Virginia taxable inco…
How much of a nonresident employee's wages from a Virginia LLC was Virginia-source income when his work-location records were doubtful?
Virginia treated 123 of 260 workdays in 2010 and 115 of 260 in 2011 as Virginia workdays. The taxpayers' claim that all services were performed from another state was not persuasive given the husband'…
Could Virginia residents keep a credit for Maryland tax on reciprocal wages after Maryland's refund deadline had expired?
No. Maryland-Virginia reciprocity made the residents' Maryland wages exempt from Maryland tax, so the Virginia credit did not apply. Virginia issued its assessment within three years of the return due…
Could taxpayers subtract gains from Virginia bonds when unrelated capital losses had already offset all of those gains in federal adjusted gross income?
No. Virginia's subtraction applied only to Virginia-obligation income included in federal adjusted gross income. Because unrelated current and carried-over capital losses had already offset all of the…
Did a merchant mariner abandon Virginia domicile by working at sea and leasing a residence in another state while retaining Virginia ties?
No. The taxpayer's out-of-state lease and maritime employment did not show a permanent abandonment of Virginia. He retained Virginia voter registration, a Virginia-resident spouse, return visits, powe…
Did an inherited Virginia home, vehicle registration, driver's license, and federal-return address make a long-term foreign resident taxable as a Virginia resident?
No. The taxpayer had lived and worked abroad since 2006, held foreign residency status, participated in professional and civic life there, and filed a foreign tax return. Virginia found that he change…
Could a Virginia part-year resident claim a credit when a neighboring state taxed all of her wages, including wages also taxed during her Virginia-resident period?
Yes. The neighboring state's return taxed the taxpayer's entire wage income, not merely wages from her pre-Virginia residency period. Because those earned wages were also subject to Virginia tax durin…
How did Virginia income-tax filing change when it began recognizing same-sex marriages in October 2014?
Virginia began recognizing same-sex marriages valid under any state's law for Virginia income-tax purposes. Legally married couples could file jointly or as married filing separately, and couples who …
Could a taxpayer carry underclaimed 2008-2009 Virginia prepaid-tuition deductions into 2010 when each year's contributions were already fully deductible?
No for the prior-year amounts, but Virginia allowed $6,000 for 2010. The taxpayer had two contracts with $3,300 and $2,700 annual contributions, both below the $4,000-per-contract limit. Because the o…
Could Virginia attribute another LLC's sales to the taxpayers' business and treat financed piano inventory as personal withdrawals?
No. Evidence showed the taxpayers' LLC and the manager's LLC were separate legal entities, so the other LLC's sales could not be attributed to the taxpayers. Third-party financing was a normal way to …
Could a California domiciliary who was an actual Virginia resident claim a Virginia credit for California tax on income earned outside both states?
No. Virginia treated the taxpayer as a California domiciliary and Virginia actual resident, and did not allow a Virginia credit for California tax on income from outside Virginia. She could amend with…
Did a military spouse remain a Virginia domiciliary in 2009 after selling her Virginia home and moving abroad with the service member's orders?
No. The spouse sold her Virginia home and vehicles, moved to the foreign duty station, established a home there, used the foreign address on her federal return, and let her Virginia driver's license e…
Was an adult whose parents moved to Virginia still a Virginia domiciliary after a permanent foreign transfer, marriage, home purchase, and residence visa?
No. The taxpayer was already an adult when her parents moved to Virginia, and by 2008 her permanent foreign job, home, marriage, and residence process established a new domicile. She had never lived, …
Could a taxpayer overturn a late-penalty assessment and IRS-based estimated assessments after missing the appeal deadline and failing to file returns or records?
Not on the existing record. The 2008 appeal was filed well after Virginia's 90-day deadline, and the 2009-2011 estimates remained presumed correct because returns and supporting records were missing. …
Could a Virginia part-year resident claim credit for New York tax on wages earned after moving to Virginia while continuing to work in New York?
Only if she could prove she was not also a New York resident while domiciled in Virginia. A Virginia part-year resident may receive the credit for tax paid to another state where she was a nonresident…
Could Virginia adjust federal itemized deductions when the taxpayer's Schedule A amounts and supporting records did not substantiate the claimed deductions?
Yes. Virginia matched the state-and-local-tax reduction to Schedule A, recalculated overstated job mileage, and disallowed unsupported property-tax and charitable deductions. The taxpayer received one…
Was a September 2013 refund claim for tax year 2009 timely when the taxpayers paid by the original due date and filed within Virginia's extension period?
Yes. Because the taxpayers paid the full estimated balance by the May 2010 due date and filed their original return before the six-month extended due date, the three-year refund period ran from that e…
What result is verifiable from the published order in Timothy S. Hunt v. Commonwealth of Virginia?
The Norfolk Circuit Court held that sovereign immunity prevented it from hearing the requested declaratory-judgment action. It sustained the Commonwealth's demurrer without leave to amend and dismisse…
Did a taxpayer living abroad remain a Virginia resident in 2009 because she kept a Virginia license and voter registration?
No. After weighing all evidence, Virginia found that the taxpayer abandoned her Virginia domicile and established domicile in another country by 2005. Selling her Virginia home and vehicle and living …
Did periodic moves to another state, without a permanent home or steady job there, establish a new domicile outside Virginia for 2009?
No. The taxpayer moved between Virginia and State A as employment required, but did not establish a permanent abode, steady employment, or significant State A ties beyond a vehicle registration. Her V…
Did a couple living in their out-of-state home for medical treatment reestablish Virginia domicile because they owned a Virginia townhouse and used its address?
No. The couple moved into their State A home in 2009 so the husband could receive nearby hospital treatment. Although they owned Virginia property, registered two children's vehicles there, and used a…
Did unsupported factual disagreements and previously requested but unproduced records justify reconsidering Virginia's 2005-2010 income-tax assessments?
No. The taxpayer did not satisfy a reconsideration ground or provide new documentation supporting nonresidency or disputing Virginia-source income. State A records contradicted his license claim, he r…
Could Virginia residents claim credit for Pennsylvania tax on an independent-contractor honorarium for teaching a university course abroad?
Only if the couple was actually liable for Pennsylvania tax. The husband appeared to be an independent contractor, so the honorarium was not employee compensation covered by reciprocity. But because h…
Could buyers of transferred Virginia Land Preservation Tax Credits protect a refund claim while litigation challenged the Department's easement valuation?
Potentially. Virginia did not reverse the Department's lower conservation-easement valuation. Because litigation was pending over that valuation, the taxpayers could consider a protective claim under …
Could a military spouse claim another state's domicile and Virginia withholding refunds when residence and intent were not established at the same time?
No. The spouse lived in State B only from July through September 2008, while vehicle registrations and voter registration occurred later. Because personal presence and intent to make State B a permane…
Did Virginia's automatic six-month extension preserve a 2008 refund when the taxpayers did not file the original return until October 2012?
No. Because the taxpayers did not file the original 2008 return by the extended due date, the extension was negated and the timely-filing date reverted to May 1, 2009. Their three-year refund period e…
Did a pending IRS reconsideration prevent Virginia from assessing 2005 tax when the taxpayer had not filed a Virginia return?
No. Virginia used the IRS information then available after finding no 2005 Virginia return on file. The return later submitted did not match the federal adjustment, and the Department would not look b…
Did an IRS reconsideration request stop Virginia from assessing tax based on the IRS's existing 2007 audit adjustment?
No. Virginia used the IRS information then available and did not look behind the federal audit determination merely because reconsideration was pending. The assessment remained payable. If the IRS lat…
Could taxpayers defeat a Virginia assessment by saying their 2006 return was e-filed when they had no confirmation number or proof of payment?
No, not on the submitted evidence. Virginia had no record of the return, and the taxpayers kept neither the e-file confirmation number nor proof of payment. The no-return rule allowed assessment at an…
Could taxpayers overturn old Virginia assessments by claiming that only government employees and seamen were subject to income tax?
No. The administrative appeals for 2006 and 2008-2012 were filed beyond 90 days, and the paid 2007 assessment's refund claim missed its separate three-year deadline. Virginia also stated that the argu…
Did survivor-annuity payments from a federal retirement plan qualify for Virginia's annuity death-benefit subtraction?
No. Virginia limited the subtraction to a federally taxable lump-sum death benefit from an annuity contract between a customer and an insurance company. The taxpayer's survivor payments came from a fe…
Was an appeal complete when a taxpayer mentioned an IRS dispute and challenged penalties and interest but identified no error, facts, or legal authority?
No. The taxpayer's letter did not identify an alleged assessment error, relevant facts, grounds for relief, or controlling authority, so it was not a complete appeal. The 2012 assessment based on tax …
Could an employee subtract his own Form W-2 wages under Virginia's federal jobs-credit or Work Opportunity Credit subtraction?
No. The subtraction was designed for an employer whose federal wage deduction was reduced because the same wages generated the federal Work Opportunity Credit. The taxpayer neither incurred employer w…
Could a taxpayer abate Virginia's 2009 assessment by producing only a State A return showing residence there for the first six months?
Not on that record. A State A return showing residence there for the first six months did not establish that Virginia domicile had been abandoned or quantify the correct liability. Because the taxpaye…
Did a federally taxable survivor benefit from a federal retirement plan qualify for Virginia's annuity death-benefit subtraction?
No. Virginia required a federally taxable lump-sum death benefit from an annuity contract between a customer and an insurance company. The wife's benefit came from a federal retirement plan, so it fai…
Did a federal employee remain domiciled in another state after settling with his family and conducting his affairs in Virginia?
No. The taxpayer's declaration of State A domicile was outweighed by his conduct: he had not lived there since 1999, documented no continuing ties, and instead maintained a family home, driver's licen…
Did a retiree who kept homes in two states become domiciled in Virginia after renewing a Virginia driver's license and maintaining vehicles there?
Yes. After weighing all evidence, Virginia found the taxpayer changed domicile to Virginia in 2007. Renewing a Virginia driver's license, relinquishing the other state's license, allowing most registr…
Could accountant error or financial hardship extend Virginia's deadline for claiming a refund on a late 2006 return?
No. The refund deadline expired May 3, 2010, but the original 2006 return was not filed until January 2013. Virginia had no discretion to extend the three-year period for accountant error or financial…
Was a Virginia appeal timely when the assessment went to the IRS-reported last known address and the taxpayer learned of it later?
No. Virginia treated the assessment as made when it was mailed to the last known address supplied through IRS information, so the March 26, 2013 appeal missed the February 5 deadline. The merits appea…
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These are official tax letter rulings and advisory opinions issued by Virginia's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.