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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Was a nonresident baseball player's signing bonus Virginia-source income when the bonus was earned by signing, not by performing services in Virginia?
No. Virginia correctly rejected the player's claimed subtraction from federal adjusted gross income, but the bonus was not Virginia-source income for the nonresident apportionment factor because it wa…
Did keeping a Virginia house and mailing address prevent former residents from proving they changed domicile to another state?
No. Despite retaining a Virginia home and receiving financial mail there, the taxpayers proved by the preponderance of the evidence that they abandoned Virginia domicile and established domicile in an…
Were Virginia income-tax assessments barred when the taxpayer appealed 1997-1999 late and had never filed a 2000 return?
No. The 1997-1999 appeal missed the former three-year administrative window. The 2000 appeal was timely, but because no 2000 return was filed Virginia could assess at any time, and the taxpayer suppli…
How should spouses file when they ended their Virginia domiciles on different dates during 2005?
They had to file an amended Virginia part-year resident return, not treat the entire year as nonresidents. Virginia taxed each spouse as a domiciliary resident through the date that spouse's Virginia …
Was an employee of Virginia's land-preservation foundation a state employee for the historical $15,000 salary subtraction?
Yes. Virginia found that the foundation performed administrative, executive, and regulatory functions for the Commonwealth, so its employee was a state employee for Va. Code § 58.1-322(C)(24). The his…
Did a nonresident owe Virginia tax on pass-through income from an S corporation doing business in Virginia?
Yes. The federal S election controlled Virginia treatment, so the corporation's Virginia-source income passed through to its nonresident shareholders. The corporation's improper C-corporation return a…
Could Virginia keep a wife's share of joint refunds for her husband's business tax liabilities from before their marriage?
No. Although Virginia did not adopt the federal innocent-spouse rule, Department policy did not hold one spouse liable for the other's tax debts from years before they filed jointly. The wife was enti…
Did a taxpayer establish a new domicile outside Virginia despite retaining a Virginia driver's license during 2004?
Yes. Her full-time out-of-state job, leased apartment and vehicle, minimal time in Virginia, and later replacement of her Virginia driver's license showed that she abandoned Virginia domicile. Virgini…
Did clarified facts overturn Virginia's treatment of a male S-corporation shareholder's lump-sum payment after he moved out of state?
No. Virginia corrected factual statements from the earlier determination but found that the clarifications did not change the tax result. The Department concluded that the December lump sum was not su…
Did clarified facts overturn Virginia's treatment of an S-corporation lump-sum payment received after the shareholder moved out of Virginia?
No. Virginia corrected factual statements from the earlier determination but found that the clarifications did not change the tax result. The Department concluded that the December lump sum was not su…
Did a taxpayer abandon Virginia domicile by taking long-term foreign jobs even though his wife, driver's license, vehicle, and voting ties remained in Virginia?
Yes. Long-term or indefinite foreign employment, established homes abroad, foreign licenses, a vehicle, and a citizenship application showed abandonment of Virginia domicile beginning in 2002. The exp…
How did Virginia's move to December 31, 2007 federal conformity affect 2007 income-tax returns?
Virginia conformed to federal tax law as of December 31, 2007 for tax years beginning in 2007, except it still disallowed specified bonus depreciation and five-year carrybacks of 2001 or 2002 net oper…
Did moving out of Virginia before an S corporation sold its assets keep the entire capital gain outside Virginia tax?
No. The couple moved in April 2004 and the S corporation sold its assets in September, but the corporation remained in operation for the entire year. Virginia required the pass-through capital gain to…
Did two-year convertible notes or the stock received on conversion qualify for Virginia's equity and subordinated-debt investment credit?
No. The notes had to convert or be redeemed within two years, so they could not satisfy the credit's three-year holding requirement for convertible subordinated debt. The common stock received on conv…
Could a Virginia resident remove IRS-reported trucking income by stating that another person owned the business?
No. The taxpayer said her involvement with the other person's trucking business ended in 2001, but she did not prove that the 2003 IRS information or Virginia assessment was wrong. Because Virginia be…
Did Virginia properly assess additional tax when taxpayers failed to report final IRS changes to their federal income?
Yes. Virginia law required the taxpayers to report final IRS changes within one year. When they did not file amended Virginia returns or otherwise report the changes, the Department could assess from …
Could a Virginia resident avoid filing by claiming the Department unlawfully received insufficient IRS income information?
No. The Tax Commissioner-signed IRS exchange agreement satisfied the federal written-request requirement, and IRS data showing federal adjusted gross income supplied a factual basis for the assessment…
Did a nonresident owe Virginia tax on dividends and bond interest reported to a Virginia mailing address?
No. The taxpayer lived in another state, and her stock dividends and bond interest were not from intangibles used in a Virginia business. Her rental property was outside Virginia, and Social Security …
How did Virginia coordinate its long-term care insurance credit and deduction with the federal medical-expense deduction under 2006 law?
Virginia allowed taxpayers to allocate premium dollars among the federal deduction, Virginia credit, and Virginia deduction, but not to use the same dollars twice. Only premiums actually absorbed by t…
Could a Virginia partner claim resident credits for Arizona and California tax paid through unified nonresident partnership returns?
Yes. Arizona and California generally offered reciprocal individual credits, but their unified nonresident returns did not give the partnership or partners a credit for tax paid elsewhere. The Virgini…
Could a partnership compute a Virginia combined nonresident return separately for each partner instead of on aggregated income?
No. Filing a combined nonresident return was an elective administrative privilege subject to the Tax Commissioner's terms. Those terms required applying Virginia's graduated individual rates to the pa…
Did checks paid to another state's revenue department prove that a taxpayer was not a Virginia resident?
No. Checks sent to another state's revenue department could reflect nonresident tax and did not establish domicile. Virginia asked for evidence bearing on residence, employment, spouse, property, vehi…
Did merchant-seaman protections exempt a nonresident NOAA survey technician from Virginia tax on ship-related work?
No. Virginia found that a scientific survey technician on an oceanographic research vessel was not a seaman covered by 46 U.S.C. § 11108. Because she planned surveys, maintained and calibrated equipme…
Did a merchant mariner who separated from his spouse and established ties to a U.S. territory remain a Virginia domiciliary resident?
No. Considering all the circumstances, Virginia found that the merchant mariner abandoned his Virginia domicile and established a domicile outside Virginia. His assessments for 2003 and 2004 were abat…
Was an out-of-state domiciliary an actual Virginia resident when she owned a Virginia home but spent fewer than 184 days in the state?
No. The taxpayer's daily log, receipts, and other evidence sufficiently showed she spent fewer than 184 days in Virginia in both 2004 and 2005. She was not an actual resident, so Virginia abated the p…
Was a 2003 Virginia nonfiler's statement that he moved abroad enough to overturn the residency assessment?
No. The taxpayer said he changed domicile to another country in September 2003, but he did not answer repeated requests for supporting information. Because he failed to prove both abandonment of Virgi…
Did a nonresident owe Virginia tax because his employer was in Virginia when he performed all work in another state?
No. Wages from the Virginia employer were not Virginia-source income because the nonresident performed every workday in another state. His other S corporation also lacked Virginia nexus and Virginia-s…
Could a Virginia resident overturn a 1998 assessment by claiming the Department illegally obtained erroneous IRS information?
No. Virginia was authorized to receive IRS information, and the taxpayer did not dispute receiving the additional income or show that the tax computation was wrong. The challenged data fields did not …
Could Virginia residents defeat an assessment based on IRS adjustments by arguing the federal assessment was not lawful?
No. Virginia lawfully used IRS information to adjust the residents' federal adjusted gross income starting point, and the taxpayers did not prove that the federal information or Virginia assessment wa…
Could legally separated spouses file a joint Virginia nonresident return when the husband lived elsewhere but the wife remained a Virginia resident?
No. The husband proved he was domiciled outside Virginia in 2004, but the wife remained a Virginia resident. A resident and nonresident spouse could not file a joint nonresident return; the husband's …
Could a retired physician claim Virginia's Neighborhood Assistance credit for donated clinic services when the clinic lacked DSS approval for 2005?
No. The physician's donated services appeared substantively eligible, but the clinic or county was not approved by DSS to allocate credits for 2005. Virginia denied that portion, then ordered a separa…
Could a Virginia resident claim credit for California tax paid through a partnership's unified nonresident return when California gave no credit there?
Yes. Although California generally offered a reciprocal credit, it did not allow that credit on the partnership's unified nonresident return. The taxpayer documented his share of California income and…
How did Virginia require nonresident owners to correct pass-through entity returns and report Virginia-source income for 2003-2005?
The entities had to correct their Virginia apportionment and issue amended K-1s, while the spouses had to file nonresident—not part-year—returns reporting their shares of Virginia-source income. ASC h…
Did a taxpayer abandon Virginia domicile during 2002 by leasing a home from his daughter in another state after his Virginia employer entered bankruptcy?
No. His temporary return to another state did not show abandonment of Virginia domicile, especially because he kept Virginia ties, sought Virginia work, used a Virginia address for unemployment, and r…
Did additional information overturn Virginia assessments when the taxpayer spent over 200 days in Virginia and still lacked support for claimed losses?
No. Virginia found the taxpayer was an actual resident in 2000-2001 based on more than 200 days of presence and upheld 2002-2003 assessments because he did not provide partnership returns or other req…
Was an administrative appeal timely when its letter was dated before the 90-day deadline but the delivery service received it afterward?
No. The delivery service's receipt date controlled the filing date. Although the appeal letter was dated January 10, 2007, the carrier date was February 7, after the January 16 deadline. Virginia ther…
After an S corporation's sole owner moved away, would Virginia tax the owner's share of corporate income and salary tied to continued Virginia sales work?
Yes, to the Virginia-source portions. Regular in-state sales and administration services gave the S corporation nexus and required apportionment. The nonresident owner had to report the apportioned pa…
Did a filed federal return transcript prove that Virginia wage income was not taxable and require cancellation of an estimated 2003 assessment?
No. The transcript showed only that a federal return was filed, not that the IRS determined the Virginia wage income was nontaxable. Without documents disproving the IRS information or Virginia assess…
How did the Richmond Circuit Court resolve the consolidated DiBelardino and Dutton tax-assessment cases?
The court reached opposite results. It upheld the Department's assessment against Ezio and Stephanie DiBelardino because their Virginia property interests supplied minimum contacts sufficient for due …
Could a taxpayer challenge 2001 and 2002 Virginia residency assessments by filing an administrative appeal in April 2006?
No. Va. Code § 58.1-1821 required an appeal within 90 days of each assessment. The April 2006 filing came after the April 2004 and April 2005 deadlines, so the Tax Commissioner dismissed it as time-ba…
How did Virginia apportion a nonresident broker's commissions from finding Virginia real estate?
Virginia treated the commissions as Virginia-source business income because the broker located and helped acquire Virginia real property and performed more than protected solicitation. For a sole prop…
When did a Virginia shareholder change domicile, and how were a lump-sum payment and S corporation income taxed?
The taxpayer changed domicile on December 1, 2003, when the out-of-state lease became effective—not September 30. Virginia found the December related-party lump sum was not an arm's-length prepayment …
Was Virginia's 2006 assessment recovering an incorrect 2003 out-of-state tax credit issued too late?
No. The refund date was when Virginia applied the amount to the taxpayer's 2004 estimated payments, not when he signed the 2003 return. The incorrect California credit came from information listed by …
Were payments to a nonresident member from Virginia franchise LLCs treated as Virginia-source income?
Yes, on the available record. The taxpayer signed a loan agreement as an LLC member, and the return information and agreement indicated payments tied to the Virginia partnerships' income or net sales …
When did a Virginia shareholder change domicile, and how were a lump-sum payment and S corporation income taxed?
The taxpayer changed domicile on December 1, 2003, when the out-of-state lease became effective—not September 30. Virginia found the December related-party lump sum was not an arm's-length prepayment …
Could a State A resident amend 2001 and 2002 Virginia returns as a nonresident and claim credit after State A's tax-court decision?
Yes. Virginia found that the taxpayer never abandoned her State A domicile and was not an actual Virginia resident, so only Virginia-source income was taxable. Because State A offered a substantially …
Did working overseas for all of 2004 end Virginia domicile when the taxpayer kept an unleased Virginia home and driver's license?
No. Living and working overseas for the entire year did not by itself change domicile. The taxpayer kept an unleased Virginia home and driver's license, later registered another Virginia vehicle, and …
When could Virginia residents claim an other-state tax credit for income passed through from a limited partnership or LLC?
It depended on the entity and activity. General partners were treated as conducting the business; a limited partner's facts could fail the resident credit's continuous, regular, profit-motivated busin…
Did a couple become Virginia domiciliaries merely by living there temporarily and listing Virginia as their permanent passport address?
No. Their State A ties, lack of a Virginia home or family ties, and conduct showed no acquisition of Virginia domicile; the passport address was used for expediency. But domicile was separate from act…
Did an active-duty servicemember become taxable as a Virginia resident merely because military orders transferred him to Virginia?
No. The servicemember documented that he retained his State A domicile and entered Virginia under military orders. Because he did not establish Virginia domicile and his only income was active-duty mi…
Could Virginia refund an overpayment claimed on a 2002 individual income tax return filed after the three-year refund deadline?
No. The 2002 return was due May 1, 2003, so the refund claim had to reach the Department by May 1, 2006. Because the couple filed in June 2006, Va. Code § 58.1-499 D barred the refund, and the Tax Com…
How did Virginia calculate a resident couple's credit when some other-state tax was paid through a partnership's unified nonresident returns?
Virginia recognized the wife's share of tax paid through the partnership's unified returns, but each state's credit had to be calculated separately and was limited to the lesser of tax paid or Virgini…
Could a Maryland commuter recover Virginia tax withheld in error for 1997 through 2000 when the refund claims were not filed until April 2006?
No. Maryland reciprocity meant the commuter's wages were not subject to Virginia withholding, but he had not given his employer the required exemption certificate. More importantly, his April 2006 ref…
Could Virginia residents claim the credit for taxes paid to another state for Canadian federal income tax on wages?
No. Virginia's credit applied to qualifying income tax paid to another U.S. state, not to Canada or a Canadian province. The U.S.-Canada treaty provision cited governed specified federal taxes and did…
Did the daily-commuter exception eliminate Virginia filing when a worker moved into Virginia and established an abode during the same year?
No. The taxpayer qualified as an out-of-state commuter only before she established a Virginia abode. Her November 1 move and continued residence showed Virginia domicile for the rest of 2003, so she c…
How did Virginia's 2007 guidance allocate its earned income tax credit when spouses filed separate Virginia returns?
Each spouse could claim only a proportional share of the Virginia EITC, based on that spouse's share of the earned income used to qualify for the federal credit. The combined Virginia credit was 20% o…
How did Virginia's move to December 31, 2006 federal conformity affect 2006 income-tax returns?
Virginia conformed to federal tax law as of December 31, 2006 for tax years beginning in 2006, except it still disallowed specified bonus depreciation and five-year carrybacks of 2001 or 2002 net oper…
Could Virginia refund 2000 and 2001 tax paid in error after the statutory refund deadline expired?
No. Even though the Maryland resident's wages were described as exempt from Virginia tax and her preparer had filed incorrectly, the 2000 and 2001 refund claims were outside Va. Code § 58.1-1823. The …
What did Virginia's 2006 reciprocal income-tax agreement with Maryland cover and exclude?
Virginia residents working in Maryland were exempt from Maryland tax on compensation, and Maryland residents working in Virginia received the matching Virginia exemption. The agreement treated a perso…
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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.