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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Did Virginia violate a transferee's taxpayer rights or miss the assessment deadline when it reduced a transferred Land Preservation Tax Credit?
No. Virginia upheld the assessment. The credit-award letter warned that the conservation-easement value remained subject to audit and adjustment, the Department gave notice and appeal opportunities, a…
Could a Virginia domiciliary avoid Virginia tax on another state's pension because he lived there more than 183 days and filed returns there?
No. The taxpayer remained domiciled in Virginia, so Virginia could tax all of his retirement income even though he spent more than 183 days and filed resident returns in another state. A credit might …
Did a military spouse qualify for Virginia nonresident withholding relief by sharing the service member's domicile in another state?
Yes. The preponderance of evidence showed that the taxpayer and active-duty spouse had established and maintained domicile in the same other state. Their legal-residence certificate, vehicle registrat…
Could Virginia residents avoid a 2008 assessment based on an IRS income adjustment by arguing they had not pledged income or contracted with the Department?
No. Virginia starts with federal adjusted gross income, and the IRS reported that the couple had underreported it. They supplied no objective evidence that the federal information was wrong, and argum…
Did a military spouse prove she shared the service member's out-of-state domicile and qualified for Virginia withholding refunds?
Not on the record submitted. The spouse bought a Virginia home, obtained a Virginia driver's license, registered vehicles in Virginia, used a Virginia address on federal returns, and produced no evide…
Was a lump-sum nonqualified pension payment taxable by Virginia when a part-year resident received it after moving into the state?
Yes. For a part-year resident, Virginia attributed income to the state when it was received during the Virginia-resident portion of the year. The husband's earlier out-of-state employment did not chan…
Did taxpayers receive refunds after paying assessments caused by a reduced transferred Land Preservation Tax Credit?
No. Virginia treated the protective refund claim as an appeal on the merits and denied it. A separate Department determination had already upheld the lower conservation-easement valuation, so the resu…
Did Virginia cancel a 2008 assessment caused by reducing a transferred Land Preservation Tax Credit?
No. A separate Department determination had already upheld the lower conservation-easement valuation as the most accurate appraisal. Because the taxpayers' transferred credit depended on that valuatio…
Did taxpayers receive a 2008 refund after paying an assessment caused by a reduced transferred Land Preservation Tax Credit?
No. Virginia treated the protective refund claim as an appeal on the merits and denied it. A separate Department determination had already upheld the lower conservation-easement valuation, so the resu…
Did housing, subsistence, and other military compensation count when phasing out Virginia's subtraction for basic military pay?
No. Virginia's subtraction and its $15,000-to-$30,000 phaseout used only statutory military basic pay. Housing and subsistence allowances and other compensation shown on a W-2 were not basic pay. The …
Could a Virginia resident claim an other-state tax credit for West Virginia tax paid on slot-machine winnings?
Generally no. Slot-machine winnings were not compensation for services and therefore were not earned income. They qualified as business income only if the taxpayer proved that gambling was pursued ful…
How should someone who moved from Maryland to Virginia in November 2009 file, and could he claim credit for Maryland wage tax?
He should file 2009 Form 760PY and report only income received during the Virginia-resident period, with prorated exemptions and standard deduction. Because Virginia-Maryland reciprocity exempted a Vi…
Did low-wage service work disqualify a disabled federal retiree from Virginia's disability-income subtraction?
No. After reconsidering the federal-annuity rules and additional evidence, Virginia found that the taxpayer's minimum-wage service work was not comparable to his prior federal-government work. He ther…
Could a taxpayer challenge a 2000 Virginia assessment in 2012 by demanding that the Department first prove it was correct?
No. The assessment was issued June 6, 2003, but the taxpayer did not appeal until November 2012, long after Virginia's 90-day deadline. Department records also showed earlier notices to the same addre…
Could a nonresident carry forward Virginia pass-through losses when no corresponding federal net-operating-loss deduction remained?
No. Virginia allowed a net-operating-loss deduction only to the extent a corresponding deduction was available federally. Because the prior losses had been absorbed by other federal income and no fede…
Was a husband who owned a Virginia home, license, vehicles, and voter registration still a nonresident when his permanent ties remained elsewhere?
Yes, he remained a nonresident for 2009. Although he owned a Virginia home and held a Virginia driver's license, voter registration, and vehicles, he spent fewer than 183 days in Virginia and had not …
Did a merchant mariner abandon Virginia domicile by taking an indefinite out-of-state job and using motels or a training center between voyages?
No. Although the mariner had indefinite employment and a post-office box in another state, he never established a permanent abode there and retained major Virginia ties: his wife, voter registration, …
Were LLC members liable for their shares of unreported partnership income even if another member controlled the books and they received no benefit?
Yes. Because the LLC was taxed as a partnership, each member was responsible for tax on the member's distributive share of increased income, regardless of who controlled bookkeeping or whether the mem…
How should Virginia taxpayers report a 2008 NOL that was used under the federal five-year carryback but remained available under Virginia's shorter rule?
They could not subtract the NOL directly from 2010 federal adjusted gross income or make FAGI negative. The Virginia-available carryover had to be claimed as a fixed-date conformity subtraction, limit…
Could a Virginia resident avoid a 2010 income-tax assessment by claiming wages were exempt and IRS information lacked federal paperwork approval?
No. Employment income was taxable, the resident's income exceeded Virginia's filing threshold, and the Department could use IRS information to estimate liability when she did not provide adequate reco…
Could buyers of a transferred land-preservation credit avoid interest because Virginia later reduced the easement value or the seller promised indemnity?
No. Virginia timely assessed the couple after the donor and Department agreed to a lower easement value, and statutory interest on the resulting underpayment was mandatory. The donor's private indemni…
Were LLC members liable for underreported partnership income when another member kept the books and employees were paid cash?
Yes. Partnership treatment made each LLC member responsible for the member's distributive share of increased income, despite another member's bookkeeping control or the absence of an economic benefit.…
Did tax software's automatic annuity death-benefit subtraction prove that a Virginia taxpayer qualified for the refund?
No. Virginia's approval of tax-preparation software meant the program met processing requirements, not that every tax calculation was correct. The annuity subtraction required a qualifying insurance-c…
Would out-of-state employees who commuted to Virginia and rented an apartment become Virginia residents?
No, based on the proposed facts. They would retain their out-of-state homes, families, licenses, registrations, banking ties, and intent to return, and would spend no more than 183 days in Virginia. B…
Did leasing homes outside Virginia establish a new domicile when the taxpayer retained Virginia property, licensing, and registration ties?
No. Even if the taxpayer began abandoning Virginia in 2009, she did not establish a new permanent or indefinite domicile in either state where she temporarily leased housing during 2010. She retained …
Did Virginia's 2% Land Preservation Tax Credit transfer fee apply to a sale by individual owners, and could alleged telephone advice excuse it?
Yes. The 2% fee applied to any transfer arising from a sale of Land Preservation Tax Credits by any taxpayer, not only to pass-through-entity transactions. Form LPC-2 said the same. Virginia would not…
Did moving to a foreign country establish a new domicile when the taxpayer retained an available Virginia home, voter registration, and driver's license?
No. Although the taxpayer and her husband established a home and employment in another country, their Virginia residence remained available, and she obtained Virginia voter registration and renewed a …
Could a part-year resident receive Virginia's standard deduction after failing to substantiate the larger itemized deductions claimed on her federal return?
Yes. Virginia disallowed the unsupported itemized deductions, but the substantiated amount was below both the federal and Virginia standard deductions. Following the IRS approach used when reviewing f…
Did returning to a foreign home and job end Virginia domicile when the taxpayer kept a Virginia home, license, vehicles, voting ties, and family connections?
No. Although the taxpayer returned to a permanent home and full-time work in Country A, he kept his Virginia residence, renewed his Virginia driver's license, maintained vehicle and voting ties, and l…
Does an employer's failure to withhold enough Virginia tax excuse an employee from filing a resident return and paying the remaining tax?
No. An employer's insufficient withholding did not reduce the employee's duty to report income, file the Virginia return, and pay the full tax. Because the assessment used the best information availab…
Could Virginia residents claim Virginia's other-state tax credit for capital-gains tax paid to India on the sale of Indian real estate?
No. Virginia's credit applied only to income tax paid to another U.S. state, not to a foreign country. The U.S.-India income tax treaty covered specified federal and Indian national taxes and did not …
Did annuity income received from insurance companies in both 2010 and 2011 qualify for Virginia's death-benefit subtraction?
No. Virginia required a federally taxable death benefit from an insurance-company annuity contract that was awarded to the beneficiary in a lump sum. Although the taxpayer's payments came from insuran…
Could an Office of Personnel Management survivor annuity qualify for Virginia's death-benefit subtraction if the beneficiary chose a lump sum?
No. The payment came from a federal retirement plan rather than an annuity contract between a customer and an insurance company. Virginia said that source disqualified the benefit even if the taxpayer…
Did a Form 1099's annuity label make periodic federal retirement survivor payments eligible for Virginia's death-benefit subtraction?
No. The payments came from a federal retirement plan, not an annuity contract between a customer and an insurance company, and they were not paid as a lump-sum death benefit. The Form 1099's annuity l…
Did monthly federal retirement survivor payments qualify for Virginia's annuity death-benefit subtraction when they were not paid as a lump sum?
No. Virginia required the qualifying death benefit to come from an annuity contract, be awarded to the beneficiary in a lump sum, and be federally taxable. The wife received continuing monthly payment…
Did Virginia's mistaken allowance of a federal retirement survivor subtraction for 2007 require the same subtraction for 2008-2010?
No. The periodic federal retirement survivor payments did not meet the annuity-contract and lump-sum requirements. Virginia also found that the earlier 2007 review did not supply binding written advic…
Which Virginia military-pay subtractions applied when extended-duty combat pay was excluded federally but later National Guard pay was taxable?
The basic-pay and combat-pay subtractions did not apply. Pay earned during extended active duty was already excluded federally as combat pay, while the taxable pay earned later was not extended-duty o…
Did a servicemember who lived in Virginia owe Virginia income tax for 2009 and 2011?
Not under the assessments as issued. Virginia treated the servicemember as a nonresident in 2009, so her military pay was protected and her nonmilitary work performed outside Virginia was not Virginia…
Could a Virginia widow subtract monthly FERS survivor-annuity death benefits from taxable income?
No. The Virginia subtraction required federally taxable death benefits from an annuity contract between a customer and an insurance company, awarded as a lump sum. The widow's 36 monthly FERS survivor…
How did Virginia tax mortgage-fraud-related deposits when the taxpayer documented some payments to a business partner?
Virginia removed from taxable income the deposits the taxpayer documented as later paid to her husband's business partner, but treated the undistributed balance as her income. Dismissal of criminal ch…
Did dismissal of criminal tax charges require Virginia to erase the related income-tax assessment and refund garnished amounts?
No. Dismissal of the criminal charges did not by itself invalidate the civil income-tax assessment. Because the taxpayer supplied no documentation showing how the mortgage-fraud-related bank deposits …
Could a nonresident alien claim Virginia's standard deduction without claiming federal itemized deductions?
Generally no. Virginia continued its policy that a nonresident alien cannot claim the Virginia standard deduction even when no federal itemized-deduction amount is reported, because federal law requir…
Could Virginia residents claim an out-of-state tax credit for New York's Metropolitan Commuter Transportation Mobility Tax?
No. New York's MCTMT applied only to payroll or self-employment earnings connected with the metropolitan commuter district and funded that district's transportation authority. Virginia found it was no…
Did a military spouse and servicemember remain domiciled outside Virginia for 2010 income-tax purposes?
No. The spouse established Virginia domicile after moving in 2007: she worked full time, obtained a Virginia license and vehicle registration, voted in Virginia, and bought a home with the servicememb…
Did a husband who worked and lived in another state remain a Virginia resident for 2010 and 2011?
No. The husband took an indefinite out-of-state job, established a home there, obtained that state's driver's license, registered a vehicle there, and spent no more than 183 days in Virginia in either…
Was a taxpayer who moved for work in 2009 still a Virginia resident required to file for 2010?
No. The taxpayer moved for an indefinite job, established a home in the other state, surrendered his Virginia driver's license, obtained the other state's license, and registered to vote and registere…
Did the Paynes obtain relief for an amended 2004 Virginia tax return filed after the limitations period?
No. The Isle of Wight County Circuit Court found that Virginia properly denied Michael and Rhonda Payne's amended 2004 tax return because it was filed beyond the statute of limitations. The court ente…
Did the Servicemembers Civil Relief Act preserve a husband's out-of-state domicile for Virginia tax in 2009 and 2011?
No. Military orders alone did not preserve the husband's former domicile after his conduct showed a Virginia change: he filed resident returns, obtained and renewed a Virginia driver's license, regist…
Did Maryland-Virginia reciprocity exempt a Maryland resident's Virginia wages when she also had Virginia S-corporation income?
Yes. Maryland-Virginia reciprocity kept the taxpayer's Virginia wages exempt even though she also had Virginia-source S-corporation income. She could not claim a Virginia credit for Maryland tax, but …
Could a beneficiary subtract monthly survivor-annuity payments as Virginia annuity death benefits for 2007-2009?
No. Virginia limited the historical subtraction to federally taxable death benefits paid in a lump sum under an annuity contract between a customer and an insurance company. The beneficiary received m…
Could an individual challenge Virginia's 2008-2009 estimated income-tax assessments after the 90-day appeal deadlines?
No. The taxpayer appealed the 2008 assessment more than a year after its April 4, 2012 deadline and appealed the 2009 assessment after its November 27, 2012 deadline, so both applications were barred.…
Could a Virginia resident avoid 2008-2009 income tax by claiming income earned outside a federal enclave was not taxable?
No. A Virginia resident's federal adjusted gross income was the starting point for Virginia taxable income, subject to statutory modifications, and a state may tax its residents' income even when earn…
Was a nonresident retiree entitled to interest after Virginia refunded tax that his former employer had wrongly withheld from retirement pay?
No. Virginia refunded all wrongly withheld tax, but the withholding was legally deemed paid only when the retiree filed each return. The Department issued the 2007-2010 paper-return refunds within 60 …
Could a California domiciliary who became a Virginia actual resident for part of 2010 claim a Virginia credit for California tax or other states' tax?
She could not claim a Virginia credit for tax paid to California, her domiciliary state, on the 2010 part-year return. Virginia's policy expected California to grant the resident credit for Virginia t…
Were a husband and wife Virginia domiciliaries in 2009 because the husband retained and renewed a Virginia driver's license?
No. The wife was continuously domiciled in State A. The husband had abandoned Virginia and established State A domicile in 2005 through indefinite employment, a permanent home, and resident returns. A…
Did taxpayers substantiate disallowed 2011 deductions for medical expenses, charitable gifts, and employee business expenses?
Not yet. Even after some additional medical proof, the revised expenses did not exceed the 2011 threshold of 7.5% of federal adjusted gross income. Charitable claims lacked required records, duplicate…
Did a trial court's reduced restitution order prevent Virginia from collecting the remaining tax, interest, and 100% fraud penalty?
No. Criminal restitution was part of sentencing and did not replace Virginia's separate civil authority to assess all unpaid tax, interest, and the statutory 100% fraud penalty. The taxpayers entered …
Did a taxpayer disprove Virginia's 2005-2010 estimated assessments by claiming another-state residence and denying Virginia rental income?
No. The taxpayer showed an abode and vehicle in another state, but he kept a Virginia post-office box, renewed a Virginia driver's license in 2010, and was linked to multiple Virginia properties. He d…
Did a service member's statement that the military treated another state as home prove her 2009 military pay was exempt from Virginia tax?
Not by itself. The Servicemembers Civil Relief Act protected an existing domicile from changing solely because of military orders, but the taxpayer had filed a Virginia resident return, reported civil…
Did a multi-year work assignment and resident return in another state end a worker's Virginia domicile?
No. Although he lived and filed as a resident in the work state, the assignment appeared temporary and he kept a Virginia home available for his use, voted in Virginia, renewed a Virginia driver's lic…
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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.