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 moving, working, and leasing a home in another state end Virginia domicile when the taxpayer kept major Virginia ties?
No. The taxpayer likely established a home and indefinite employment in State A, but he did not prove abandonment of Virginia domicile. Renewing a Virginia driver's license while living away, along wi…
Could a taxpayer overturn a Virginia residency assessment without supplying the domicile information the Department requested?
Not on the record provided. The taxpayer retained a Virginia driver's license and vehicle registration, filed Virginia resident returns before and after 2013, and did not answer the domicile questionn…
Was a refund request timely when the taxpayer sent Virginia the IRS reversal within four months of the federal change?
Yes. The taxpayer had one year after the final federal change to request a Virginia refund and supplied the IRS reversal within four months. That documentation was sufficient, so Virginia ordered a re…
Was a 2008 assessment untimely because the taxpayers said they never received it and the amount was adjusted years later?
No. Department records showed that the assessment was mailed to the taxpayers' last known address within the three-year period. Mailing made the assessment timely even if the taxpayers did not receive…
Could taxpayers obtain review of a 2011 refund after the ordinary three-year period when they promptly reported a final federal change?
Yes. Although the ordinary refund period had expired, Virginia law gave the taxpayers 60 days after the final federal determination to request a refund. They supplied the IRS letter within 30 days, so…
Could a commissioned officer count all of July and taxable hazardous-duty pay in Virginia's 2013 combat-zone subtraction?
Yes. Any service in a combat zone for part of a day qualified the entire month of July. For 2013, the subtraction also included the officer's taxable hazardous-duty pay, along with the monthly basic-p…
Did working and leasing a home abroad end Virginia domicile when the taxpayer's family and major connections remained in Virginia?
No. Employment, housing, a driver's license, and an unsuccessful permanent-residency application showed an effort to establish domicile abroad. But the taxpayer did not prove abandonment of Virginia b…
Could an Arizona resident included on a Virginia unified pass-through return also claim the entity payment and an Arizona tax credit on a separate return?
No. By electing the unified return, the nonresident accepted its restrictions and gave up the separate credit for tax paid to Arizona. The entity's unified payment was not withholding tax that could b…
Did living in other states end a couple's Virginia domicile when they kept a Virginia home, business interests, licenses, and registrations?
No. Even if the couple acquired domicile in State A, they did not prove that they abandoned Virginia. They kept a Virginia residence, business interests, driver's licenses, vehicle registrations, and …
Could a couple claim a pass-through entity's unified Virginia payment and an Arizona tax credit on their separate nonresident return?
No. The husband's election to join the pass-through entity's unified return accepted its restrictions and relinquished the separate credit for tax paid to Arizona. The unified entity payment also was …
How would Virginia treat nonresident S corporation shareholders if a stock purchase uses an IRC § 338(h)(10) election?
Virginia follows an IRC § 338(h)(10) election as made federally. The Virginia S corporation is deemed to sell its Virginia assets, making the resulting gain or loss Virginia-source business income to …
Could a Virginia nonresident subtract foreign-source income before applying the nonresident apportionment formula?
No. Virginia repealed the individual foreign-source-income subtraction effective in 2003. A nonresident first computes income as if resident and then applies the Virginia-source apportionment factor, …
Could a late original return serve as a timely protective refund claim after the taxpayer paid a Virginia nonfiler assessment?
Yes. The ordinary deadline for a 2011 refund had expired, and the later appeal itself was six days too late. But the original return had been filed within three years of the paid assessment and could …
Could a taxpayer defeat Virginia nonfiler assessments by alleging that the IRS information was fraudulent without providing evidence?
No. Virginia was authorized to use IRS information to determine the resident's liability, and the taxpayer supplied no evidence that the information was fraudulent. The assessments remained due, and t…
Could taxpayers subtract the portion of IRA distributions derived from U.S. Treasury obligations on their Virginia returns?
Yes, to the extent the taxpayers could document that the IRA distributions came from U.S. Treasury bills, notes, bonds, or other exempt federal obligations. If an account mixed exempt and taxable inve…
Could a Virginia resident claim all joint deductions when filing separately from a nonresident military spouse?
Not automatically. Deductions paid separately could be assigned to the paying spouse, but untraced joint deductions had to be allocated between the resident and nonresident spouses. The 2006 reconside…
Should Virginia compute an Arizona resident's reciprocal credit using Arizona tax before or after credits for tax paid to other states?
Before those other-state credits. Virginia law required applying the Virginia-to-Arizona income ratio to the taxpayers' entire Arizona tax. The Department had incorrectly reduced Arizona tax first by …
Could a taxpayer receive a 2012 Virginia income tax refund when the original return was filed in December 2016?
No. The 2012 return had to be filed by May 2, 2016 to claim the overpayment, but the taxpayer filed it in December 2016. Virginia's three-year refund statute gave the Department no discretion to pay t…
Did wages earned and taxed in another country escape Virginia income tax for a Virginia resident in 2013?
No. A Virginia resident is taxed on foreign wages included in federal adjusted gross income. The former foreign-income subtraction had been repealed, the other-state credit does not cover foreign coun…
Could a taxpayer use historic rehabilitation credits that accompanied an LLC partnership interest assigned by the prior owner?
Yes. Virginia generally does not allow a historic rehabilitation credit to be transferred by itself, but the taxpayer received the prior owner's LLC partnership interest. Under IRC § 704 and Virginia …
Could a taxpayer use historic rehabilitation credits that accompanied an LLC partnership interest assigned by the prior owner?
Yes. Virginia generally does not allow a historic rehabilitation credit to be transferred by itself, but the taxpayer received the prior owner's LLC partnership interest. Under IRC § 704 and Virginia …
Could a beneficiary use historic rehabilitation credits allocated to trusts that had matured before the credit distribution?
Yes. Because the taxpayer had reached the trusts' maturity ages before the credit distribution, IRC § 678(a) treated him as owner and the trusts as disregarded grantor trusts. He could use their histo…
Could alleged oral advice that a taxpayer had five years to file preserve a late 2012 Virginia refund claim?
No. The original 2012 return was filed in December 2016, after the May 2, 2016 refund deadline. The alleged five-year advice was not documented in writing, and Va. Code § 58.1-1835 applies to assessme…
Does a pending challenge to an IRS audit cancel Virginia's assessment based on the current federal adjustment?
No. Virginia treated the current IRS adjustment as controlling and kept the assessment due. If the IRS later changed its findings, the taxpayers could file an amended Virginia return within one year o…
Did a worker change domicile after moving from Virginia for a permanent out-of-state job, making Virginia wage withholding refundable?
Yes. The worker accepted permanent employment, obtained housing and a driver's license, registered a car, and took steps to sell Virginia property. Although his wife and some assets remained in Virgin…
Did medical disability extend Virginia's deadline to claim a 2012 income tax overpayment credit?
No. Virginia law did not suspend the three-year refund period for mental or physical disability, so a January 2017 return was too late to claim or carry forward the 2012 overpayment.
Did a taxpayer who moved abroad establish that he was no longer domiciled in Virginia for 2013?
Yes. After weighing all facts, Virginia found the taxpayer was not domiciled in the Commonwealth during 2013 and abated the assessment. His foreign residence, spouse's citizenship and property abroad …
May restaurants subtract payroll deductions lost because they claimed the federal tip-credit when computing Virginia taxable income?
No. Virginia law provides no subtraction for payroll expense deductions reduced by the federal IRC § 45B tip-credit, whether the restaurant reports on an individual or corporate return.
Did a former Virginia resident change domicile while attending school and later working in other states during 2013?
Partly. She remained a Virginia domiciliary while in graduate school, but changed domicile when she moved for indefinite employment in June 2013. Her pre-move capital gains were Virginia income, yet f…
Could a taxpayer challenge old Virginia income tax assessments and overturn later estimates without filing returns or records?
No for 2007-2010: the appeal was years late, so Virginia lacked jurisdiction. For 2011-2014, the timely appeal failed because the taxpayer supplied no returns or evidence, though he received 30 days t…
Could a possible Virginia domiciliary resident claim credit for New York tax paid on 2013 wages?
Yes. If she was a Virginia domiciliary and a New York actual resident, Virginia allowed a credit for New York tax on New York-source wages, subject to the statutory cap. She had to file a Virginia ret…
Does an allegedly incorrect W-2 or an employer's withholding failure eliminate an employee's Virginia income tax liability?
No. An employee still must report and pay tax on income received even if the employer failed to withhold or issued a disputed W-2. The taxpayer did not disprove the IRS-based assessment or show full p…
Did living and working in another state prove that a taxpayer had abandoned her Virginia domicile for 2013?
No. Out-of-state employment and withholding did not prove a permanent domicile change where she retained a Virginia address, license, and vehicle registration and gave incomplete residence and voting …
How did Virginia's ABLE account contribution deduction work, including limits, carryforwards, and recapture?
For tax years beginning in 2016, an individual could deduct contributions to a Virginia529 ABLE account, generally up to $2,000 per account each year with unlimited carryforward. Contributors age 70 o…
Did a Virginia domiciliary stop being a resident while working abroad when he kept his Virginia home, driver's license, vehicles, and returned to that home?
No. The taxpayer did not prove that he abandoned Virginia and established a new permanent or indefinite domicile abroad. He kept his Virginia home available, retained his driver's license and two vehi…
Could Virginia residents claim a Virginia credit for California tax when their California return did not actually impose alternative minimum tax?
No. California imposed no alternative minimum tax because the couple's tentative minimum tax was below regular tax. California also allowed their credit for Virginia tax to reduce liability below the …
Could an estate transfer unused Virginia Land Preservation Tax Credits that remained when the original credit holder died?
No. The decedent could use the credit on his final return, but any remaining carryover was extinguished at death. Virginia treated tax credits as legislative privileges rather than personal property, …
Could a pass-through LLC file one 2015 Virginia unified return for selected nonresident individual and grantor-trust owners?
Yes. Virginia allowed the LLC to submit a 2015 unified return if it followed the Department's conditions: include only consenting qualified nonresident owners, provide Schedule VK-1, use the highest i…
Did a North Carolina beneficiary owe Virginia tax on trust income derived from rental property located in Virginia?
Yes. The trust reported that the distribution came from rental income on Virginia real property, making it Virginia-source income to the North Carolina beneficiary. He filed a Virginia nonresident ret…
Did a new IRS bill justify reconsidering Virginia's 2010 income-tax determination when the federal transcript showed no new adjustment?
No. The updated 2010 federal transcript still showed no new IRS adjustment affecting Virginia taxable income, and the later IRS bill likely concerned another year. The taxpayer identified no factual e…
Could Virginia assess 2013 income tax from final IRS audit information when the taxpayer failed to file an amended Virginia return?
Yes. Virginia required the taxpayer to report the final federal change within one year. Because he did not file an amended Virginia return, the Department could assess from the IRS information and wou…
Were a service member and spouse both exempt from Virginia resident tax merely because they claimed the same out-of-state military domicile?
No. Virginia accepted that the husband remained domiciled in State A, though his Virginia farm could require a nonresident return. The wife did not prove she had ever been physically present or domici…
Could Virginia residents subtract an entire IRA distribution because contributions may have been taxed by another state?
Not without documentation. The subtraction covered only the prorated portion tied to federally deductible contributions that another state actually taxed. The couple did not prove the prior taxation o…
Could a Virginia resident receive credits for tax paid through composite nonresident returns, and was Virginia's assessment timely?
Yes, with state-by-state documentation. Virginia found the taxpayer entitled to credits for tax paid through composite returns in Hawaii, Mississippi, and Montana. The April 21, 2017 assessment was st…
Did keeping a Virginia driver's license and using a Virginia tax-return address prevent a worker from changing domicile to another state?
No. The worker leased a home near his State A job, moved his belongings, had State A withholding, and did not vote or renew his license in Virginia while away. Considering all the evidence, Virginia f…
Would Virginia reconsider an IRS audit adjustment or waive interest while the taxpayer disputed the federal result?
No. Virginia does not look behind the IRS's final adjustment and upheld the 2013 assessment after the taxpayer failed to file an amended Virginia return. Interest was mandatory and could not be waived…
Could a taxpayer obtain review of a late refund claim after fully paying a Virginia assessment?
Yes. Although the ordinary refund period for the late 2010 return had expired, the taxpayer had fully paid the March 19, 2014 assessment and pursued the claim within three years. Virginia treated the …
Could federal income tax withheld from an IRA distribution reduce the Virginia tax due after an IRS audit adjustment?
No. The IRA distribution was included in federal adjusted gross income and no Virginia tax had been withheld. Virginia provides no deduction for federal income tax withheld from retirement income, so …
Could taxpayers dispute IRS changes to federal adjusted gross income through a Virginia tax appeal, and was the resulting assessment timely?
No. Virginia matched the taxpayers' federal adjusted gross income to the IRS record and would not reconsider the federal audit. The January 2017 assessment was timely before the May 1, 2017 general de…
Could a Virginia resident claim a Virginia credit for Maryland tax withheld from wages earned while commuting to work in Maryland?
No. The Virginia-Maryland reciprocal agreement exempted a Virginia resident's Maryland wages from Maryland income tax when the taxpayer was not a Maryland resident. The taxpayer had to request a Maryl…
Could Virginia residents claim a credit for Pennsylvania tax paid on wages when the two states have a reciprocal agreement?
Not on the existing record. If the husband was only a Virginia resident commuting to Pennsylvania, reciprocity made the wages exempt there and the remedy was a Pennsylvania refund, not a Virginia cred…
Could a retiree use Virginia's simplified pension method without records proving that prior contributions were taxed by another state?
No. The simplified method could calculate the qualifying portion only after the taxpayer proved that federally deductible contributions had actually been taxed by another state. A Form 1099-R and the …
Did a couple living abroad avoid all Virginia filing duties after proving they changed domicile but continued to own Virginia rental property?
No. Virginia accepted that the couple had established domicile abroad and were not Virginia residents in 2013. But their Virginia rental properties produced Virginia-source income, so they still had t…
Could a divorced spouse make Virginia collect a joint-return assessment only from the former spouse after he paid the related federal debt?
No. Filing a joint Virginia return made each spouse individually liable for the entire state tax debt as well as jointly liable together. Their later divorce and the husband's payment of the federal d…
Could a Virginia resident working abroad for a U.S. government contractor use the federal foreign earned income exclusion and fall below Virginia's filing threshold?
Yes. The husband worked in the foreign country for all of 2012 as an employee of a U.S.-based government contractor, not as a federal employee. Virginia accepted the IRC § 911 exclusion; after it redu…
Did foreign tax withholding statements prove that a payment was pension income eligible for Virginia's foreign retirement-income tax credit?
No. Virginia's credit required pension or retirement income from past foreign employment that was included in federal adjusted gross income and taxed by both jurisdictions. The couple's spreadsheet an…
Does Virginia's three-year refund deadline also prevent a taxpayer from applying an old income-tax overpayment as a credit to a later year?
Yes. The court held that receiving an overpayment by check and applying it as a credit are functionally the same recovery. Because the taxpayer claimed his 2011 overpayment more than three years after…
Did a taxpayer prove he was only a part-year Virginia resident when his return and records showed substantial Virginia ties?
No. His part-year return listed Virginia residence for the entire year while assigning all income outside Virginia, and he failed to document the claimed State A domicile. A Virginia address, driver's…
Did the Servicemembers Civil Relief Act exempt a military spouse who formed extensive Virginia ties and stayed after the service member retired?
No. The Act protected a spouse present solely because of military orders, but did not prevent the spouse from voluntarily acquiring Virginia domicile. Her Virginia voter registration, home purchase, s…
Would sending documents to the IRS overturn Virginia assessments based on the IRS's current audit adjustments?
No. Virginia would not look behind the IRS's current final adjustments, and merely submitting rebuttal documents to the IRS did not show the Virginia assessments were wrong. If the IRS later changed t…
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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.