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Tax Protestor Cases Exhibit
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P.D. 00-189

October 11, 2000

Re: Section 58.1-1821 Application: Individual Income Tax

Dear

[1] This will reply to your letters contesting Virginia individual tax, penalty and interest assessed against you for the 1994 through 1996 taxable years. I apologize for the delay in responding to your letter.

FACTS

[2] You claim you are not a resident of Virginia subject to income taxation. Rather, you assert that you are an "American National Non-immigrant natural born free Citizen," who is not a federal citizen residing is the Commonwealth of Virginia. The department has no record that you filed a 1994, 1995 or 1996 Virginia income tax return. The department has made requests that you file these returns. When appropriate responses were not received, assessments were issued. You have requested that the department abate all tax, interest and penalty or, in the alternative, provide you with the legal authority for assessing you with Virginia income tax, penalty and interest.

DETERMINATION

[3] Code of Virginia section 58.1-301 (copy enclosed) provides that terminology and references used in Title 58.1 of the Code of Virginia will have the same meanings as provided in the Internal Revenue Code ("IRC") unless a different meaning is clearly required. Virginia "conforms" to federal law because it starts the computation of Virginia taxable income with federal adjusted gross income (FAGI). Section 61(a)(1) of the IRC and the associated Treasury Regulation 1.61-2 specifically include wages and salaries in the definition of "gross income". Section 61(b) of the IRC also cross-references other income that is included in the definition of "gross income" (IRC sections 71 through 90). Consequently, wages, salaries, and other income included in federal adjusted gross income ("FAGI") are subject to taxation by Virginia.

[4] An individual's residency determines if his income is subject to Virginia taxation. Code of Virginia section 58.1-302 (copy enclosed) specifically defines a "resident" to include a person domiciled in Virginia, or a person who maintains a place of abode in Virginia for an aggregate of more than 183 days. Based on the available information, you were an actual resident of Virginia for the 1994 through 1996 taxable years. Code of Virginia section 58.1- 320, copy enclosed, provides that a tax is annually imposed on the Virginia taxable income of a resident individual.

[5] Code of Virginia section 58.1-341 (copy enclosed) provides that a Virginia resident who is required to file a federal income tax return is also required to file a Virginia income tax return, unless the resident is exempt from filing under Code of Virginia section 58.1-321 (copy enclosed). When a resident does not file a Virginia return, section 6103(d) of the IRC (copy enclosed) authorizes the department to obtain information from the Internal Revenue Service ("IRS") that will help in determining the resident's tax liability. The Agreement on Coordination of Tax Administration (the "Exchange Agreement") (copy enclosed) governs the exchange of tax information between the IRS and the department. To implement the Exchange Agreement, the IRS is authorized to periodically transmit to the department reports indicating the federal audits or examinations that have been conducted. The department obtained information from the IRS on your account in this manner.

[6] You have not provided sufficient information to prove that you are not required to file a 1994, 1995 or 1996 Virginia return. Pursuant to Code of Virginia section 58.1-111 (copy enclosed) the department has the authority to estimate tax liability when a person refuses to file a valid return. Code of Virginia section 58.1-205 (copy enclosed) provides that any assessment shall be deemed prima facie correct. Additionally, Code of Virginia section 58.1-312 (copy enclosed) provides that an assessment may be issued at any time if a taxpayer fails to file a Virginia return.

[7] Based on the information provided, the department has properly applied the provisions of Title 58.1 of the Code of Virginia to your case, and there is no basis to abate your Virginia individual income tax assessments for the 1994, 1995 and 1996 taxable years. Your claims of being a nonresident of Virginia have no basis in fact or Virginia law. A person who files income tax returns based solely on such claims has intentionally understated his income tax liability with the intent to evade tax, and would be subject to a 100% fraud penalty pursuant to Code of Virginia section 58.1-308 (copy enclosed). Furthermore, one who files an application for correction pursuant to Code of Virginia section 58.1-1821, (copy enclosed) based solely on such claims has no purpose other than to hinder and delay collection of the proper tax liability. Consequently, collection activity need not be suspended while such applications for correction are being considered.

[8] Please remit payment of tax, penalty and interest for the 1994 through 1996 taxable years, pursuant to the enclosed schedule, to * * * Office of Tax Policy, Department of Taxation, Post Office Box 1880, Richmond, Virginia 23218-1880 within 30 days to avoid the assessment of the 100% fraud penalty and the accrual of additional interest. If you have any questions, you may contact * * * at * * *.

[9] If your payment of tax, penalty and interest for the 1994 through 1996 years is not received within this period, your administrative remedies with the department will be exhausted, and collection action will resume. Your alternative would be to pursue a judicial remedy by applying to the circuit court for relief pursuant to Code of Virginia section 58.1-1825 (copy enclosed). The application, however, must be filed within three years from the date the assessment was made or one year from the date of the Tax Commissioner's determination whichever is later. Additionally, all assessments must be paid or the appropriate bond posted before the court application is deemed filed. This letter is your final determination for purposes of Code of Virginia section 58.1-1825.

Sincerely,

Danny M. Payne
Tax Commissioner

Enclosures (13)

OTP\17119B

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