Title 23 VAC — Taxation

Agency 10 Department of Taxation

Chapter 11 Public Participation Guidelines

Part I Purpose and Definitions

23VAC10-11-10 Purpose

The purpose of this chapter is to promote public involvement in the development, amendment or repeal of the regulations of the Department of Taxation. This chapter does not apply to regulations, guidelines, or other documents exempted or excluded from the provisions of the Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia).

History

• Statutory Authority: §§ 2.2-4007.02 and 58.1-203 of the Code of Virginia.
• Historical Notes: Derived from Virginia Register Volume 25, Issue 4, eff. January 10, 2009; Errata, 25:6 VA.R. 1375 November 24, 2008.

23VAC10-11-20 Definitions

The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Administrative Process Act" means Chapter 40 (§ 2.2-4000 et seq.) of Title 2.2 of the Code of Virginia.

"Agency" means the Department of Taxation, which is the unit of state government empowered by the agency's basic law to make regulations or decide cases. Actions specified in this chapter may be fulfilled by state employees as delegated by the agency.

"Basic law" means provisions in the Code of Virginia that delineate the basic authority and responsibilities of an agency.

"Commonwealth Calendar" means the electronic calendar for official government meetings open to the public as required by § 2.2-3707 C of the Freedom of Information Act.

''Negotiated rulemaking panel'' or ''NRP'' means an ad hoc advisory panel of interested parties established by an agency to consider issues that are controversial with the assistance of a facilitator or mediator, for the purpose of reaching a consensus in the development of a proposed regulatory action.

"Notification list" means a list used to notify persons pursuant to this chapter. Such a list may include an electronic list maintained through the Virginia Regulatory Town Hall or other list maintained by the agency.

"Open meeting" means any scheduled gathering of a unit of state government empowered by an agency's basic law to make regulations or decide cases, which is related to promulgating, amending or repealing a regulation.

"Person" means any individual, corporation, partnership, association, cooperative, limited liability company, trust, joint venture, government, political subdivision, or any other legal or commercial entity and any successor, representative, agent, agency, or instrumentality thereof.

"Public hearing" means a scheduled time at which members or staff of the agency will meet for the purpose of receiving public comment on a regulatory action.

"Regulation" means any statement of general application having the force of law, affecting the rights or conduct of any person, adopted by the agency in accordance with the authority conferred on it by applicable laws.

"Regulatory action" means the promulgation, amendment, or repeal of a regulation by the agency.

"Regulatory advisory panel" or "RAP" means a standing or ad hoc advisory panel of interested parties established by the agency for the purpose of assisting in regulatory actions.

"Town Hall" means the Virginia Regulatory Town Hall, the website operated by the Virginia Department of Planning and Budget at www.townhall.virginia.gov, which has online public comment forums and displays information about regulatory meetings and regulatory actions under consideration in Virginia and sends this information to registered public users.

"Virginia Register" means the Virginia Register of Regulations, the publication that provides official legal notice of new, amended and repealed regulations of state agencies, which is published under the provisions of Article 6 (§ 2.2-4031 et seq.) of the Administrative Process Act.

History

• Statutory Authority: §§ 2.2-4007.02 and 58.1-203 of the Code of Virginia.
• Historical Notes: Derived from Virginia Register Volume 25, Issue 4, eff. January 10, 2009; Errata, 25:6 VA.R. 1375 November 24, 2008.

Part II Notification of Interested Persons

23VAC10-11-30 Notification list

A. The agency shall maintain a list of persons who have requested to be notified of regulatory actions being pursued by the agency.

B. Any person may request to be placed on a notification list by registering as a public user on the Town Hall or by making a request to the agency. Any person who requests to be placed on a notification list shall elect to be notified either by electronic means or through a postal carrier.

C. The agency may maintain additional lists for persons who have requested to be informed of specific regulatory issues, proposals, or actions.

D. When electronic mail is returned as undeliverable on multiple occasions at least 24 hours apart, that person may be deleted from the list. A single undeliverable message is insufficient cause to delete the person from the list.

E. When mail delivered by a postal carrier is returned as undeliverable on multiple occasions, that person may be deleted from the list.

F. The agency may periodically request those persons on the notification list to indicate their desire to either continue to be notified electronically, receive documents through a postal carrier, or be deleted from the list.

History

• Statutory Authority: §§ 2.2-4007.02 and 58.1-203 of the Code of Virginia.
• Historical Notes: Derived from Virginia Register Volume 25, Issue 4, eff. January 10, 2009; Errata, 25:6 VA.R. 1375 November 24, 2008.

23VAC10-11-40 Information to be sent to persons on the notification list

A. To persons electing to receive electronic notification or notification through a postal carrier as described in 23VAC10-11-30, the agency shall send the following information:

1. A notice of intended regulatory action (NOIRA).

2. A notice of the comment period on a proposed, a reproposed, or a fast-track regulation and hyperlinks to, or instructions on how to obtain, a copy of the regulation and any supporting documents.

3. A notice soliciting comment on a final regulation when the regulatory process has been extended pursuant to § 2.2-4007.06 or 2.2-4013 C of the Code of Virginia.

B. The failure of any person to receive any notice or copies of any documents shall not affect the validity of any regulation or regulatory action.

History

• Statutory Authority: §§ 2.2-4007.02 and 58.1-203 of the Code of Virginia.
• Historical Notes: Derived from Virginia Register Volume 25, Issue 4, eff. January 10, 2009; Errata, 25:6 VA.R. 1375 November 24, 2008.

Part III Public Participation Procedures

23VAC10-11-50 Public comment

A. In considering any nonemergency, nonexempt regulatory action, the agency shall afford interested persons an opportunity to submit data, views, and arguments, either orally or in writing, to the agency. Such opportunity to comment shall include an online public comment forum on the Town Hall.

1. To any requesting person, the agency shall provide copies of the statement of basis, purpose, substance, and issues; the economic impact analysis of the proposed or fast-track regulatory action; and the agency's response to public comments received.

2. The agency may begin crafting a regulatory action prior to or during any opportunities it provides to the public to submit comments.

B. The agency shall accept public comments in writing after the publication of a regulatory action in the Virginia Register as follows:

1. For a minimum of 30 calendar days following the publication of the notice of intended regulatory action (NOIRA).

2. For a minimum of 60 calendar days following the publication of a proposed regulation.

3. For a minimum of 60 calendar days following the publication of a reproposed regulation.

4. For a minimum of 30 calendar days following the publication of a final adopted regulation.

5. For a minimum of 60 calendar days following the publication of a fast-track regulation.

6. For a minimum of 21 calendar days following the publication of a notice of periodic review.

7. Not later than 21 calendar days following the publication of a petition for rulemaking.

C. The agency may determine if any of the comment periods listed in subsection B of this section shall be extended.

D. If the Governor finds that one or more changes with substantial impact have been made to a proposed regulation, he may require the agency to provide an additional 30 calendar days to solicit additional public comment on the changes in accordance with § 2.2-4013 C of the Code of Virginia.

E. The agency shall send a draft of the agency's summary description of public comment to all public commenters on the proposed regulation at least five days before final adoption of the regulation pursuant to § 2.2-4012 E of the Code of Virginia.

History

• Statutory Authority: §§ 2.2-4007.02 and 58.1-203 of the Code of Virginia.
• Historical Notes: Derived from Virginia Register Volume 25, Issue 4, eff. January 10, 2009; Errata, 25:6 VA.R. 1375 November 24, 2008.

23VAC10-11-60 Petition for rulemaking

A. As provided in § 2.2-4007 of the Code of Virginia, any person may petition the agency to consider a regulatory action.

B. A petition shall include but is not limited to the following information:

1. The petitioner's name and contact information;

2. The substance and purpose of the rulemaking that is requested, including reference to any applicable Virginia Administrative Code sections; and

3. Reference to the legal authority of the agency to take the action requested.

C. The agency shall receive, consider and respond to a petition pursuant to § 2.2-4007 and shall have the sole authority to dispose of the petition.

D. The petition shall be posted on the Town Hall and published in the Virginia Register.

E. Nothing in this chapter shall prohibit the agency from receiving information or from proceeding on its own motion for rulemaking.

History

• Statutory Authority: §§ 2.2-4007.02 and 58.1-203 of the Code of Virginia.
• Historical Notes: Derived from Virginia Register Volume 25, Issue 4, eff. January 10, 2009; Errata, 25:6 VA.R. 1375 November 24, 2008.

23VAC10-11-70 Appointment of regulatory advisory panel

A. The agency may appoint a regulatory advisory panel (RAP) to provide professional specialization or technical assistance when the agency determines that such expertise is necessary to address a specific regulatory issue or action or when individuals indicate an interest in working with the agency on a specific regulatory issue or action.

B. Any person may request the appointment of a RAP and request to participate in its activities. The agency shall determine when a RAP shall be appointed and the composition of the RAP.

C. A RAP may be dissolved by the agency if:

1. The proposed text of the regulation is posted on the Town Hall, published in the Virginia Register, or such other time as the agency determines is appropriate; or

2. The agency determines that the regulatory action is either exempt or excluded from the requirements of the Administrative Process Act.

History

• Statutory Authority: §§ 2.2-4007.02 and 58.1-203 of the Code of Virginia.
• Historical Notes: Derived from Virginia Register Volume 25, Issue 4, eff. January 10, 2009; Errata, 25:6 VA.R. 1375 November 24, 2008.

23VAC10-11-80 Appointment of negotiated rulemaking panel

A. The agency may appoint a negotiated rulemaking panel (NRP) if a regulatory action is expected to be controversial.

B. An NRP that has been appointed by the agency may be dissolved by the agency when:

1. There is no longer controversy associated with the development of the regulation;

2. The agency determines that the regulatory action is either exempt or excluded from the requirements of the Administrative Process Act; or

3. The agency determines that resolution of a controversy is unlikely.

History

• Statutory Authority: §§ 2.2-4007.02 and 58.1-203 of the Code of Virginia.
• Historical Notes: Derived from Virginia Register Volume 25, Issue 4, eff. January 10, 2009; Errata, 25:6 VA.R. 1375 November 24, 2008.

23VAC10-11-90 Meetings

Notice of any open meeting, including meetings of a RAP or NRP, shall be posted on the Virginia Regulatory Town Hall and Commonwealth Calendar at least seven working days prior to the date of the meeting. The exception to this requirement is any meeting held in accordance with § 2.2-3707 D of the Code of Virginia allowing for contemporaneous notice to be provided to participants and the public.

History

• Statutory Authority: §§ 2.2-4007.02 and 58.1-203 of the Code of Virginia.
• Historical Notes: Derived from Virginia Register Volume 25, Issue 4, eff. January 10, 2009; Errata, 25:6 VA.R. 1375 November 24, 2008.

23VAC10-11-100 Public hearings on regulations

A. The agency shall indicate in its notice of intended regulatory action whether it plans to hold a public hearing following the publication of the proposed stage of the regulatory action.

B. The agency may conduct one or more public hearings during the comment period following the publication of a proposed regulatory action.

C. An agency is required to hold a public hearing following the publication of the proposed regulatory action when:

1. The agency's basic law requires the agency to hold a public hearing;

2. The Governor directs the agency to hold a public hearing; or

3. The agency receives requests for a public hearing from at least 25 persons during the public comment period following the publication of the notice of intended regulatory action.

D. Notice of any public hearing shall be posted on the Town Hall and Commonwealth Calendar at least seven working daysprior to the date of the hearing. The agency shall also notify those persons who requested a hearing under subdivision C 3 of this section.

History

• Statutory Authority: §§ 2.2-4007.02 and 58.1-203 of the Code of Virginia.
• Historical Notes: Derived from Virginia Register Volume 25, Issue 4, eff. January 10, 2009; Errata, 25:6 VA.R. 1375 November 24, 2008.

23VAC10-11-110 Periodic review of regulations

A. The agency shall conduct a periodic review of its regulations consistent with:

1. An executive order issued by the Governor pursuant to § 2.2-4017 of the Administrative Process Act to receive comment on all existing regulations as to their effectiveness, efficiency, necessity, clarity, and cost of compliance; and

2. The requirements in § 2.2-4007.1 of the Administrative Process Act regarding regulatory flexibility for small businesses.

B. A periodic review may be conducted separately or in conjunction with other regulatory actions.

C. Notice of a periodic review shall be posted on the Town Hall and published in the Virginia Register.

History

• Statutory Authority: §§ 2.2-4007.02 and 58.1-203 of the Code of Virginia.
• Historical Notes: Derived from Virginia Register Volume 25, Issue 4, eff. January 10, 2009; Errata, 25:6 VA.R. 1375 November 24, 2008.

Chapter 115 Fiduciary Income Tax

Part I Fiduciary Income Tax

23VAC10-115-10 (Repealed.)

History

• Historical Notes: Derived from VR630-5-302, eff. January 1, 1985; repealed, Virginia Register Volume 40, Issue 24, eff. September 28, 2024.

23VAC10-115-20 Transitional modifications to Virginia income

A. Generally. For taxable years beginning on or after January 1, 1972, Virginia is in conformity with federal income tax laws. For taxable years beginning before January 1, 1972, a trust beneficiary was taxed on his distributive share, whether distributed or not, of the net income of a trust for the taxable year. To avoid double taxation of income because of the difference in treatment of accumulation distribution between the old and new law, a trust beneficiary may subtract from his Virginia taxable income that portion of an accumulation distribution allocable to the undistributed net income accumulated by the trust under the old law.

B. Subtraction allowed. That portion of any accumulation distribution which is allocable, under the laws of the United States relating to federal income taxes, to undistributed net income of a trust for any taxable year beginning on or before December 31, 1971, shall be subtracted from Virginia taxable income. The rules prescribed by such laws of the United States with reference to any such accumulation distribution shall be applied, mutatis mutandis.

C. Limitation on credit allowable. The credit provided by § 58.1-370 of the Code of Virginia in the case of accumulation distributions shall in no instance encompass any part of any tax paid for a taxable year beginning on or before December 31, 1971.

D. Example. A trust which reports on a calendar-year basis had undistributed net income of $7,460 at the end of calendar year 1971. In calendar year 1972 the trust makes an accumulation distribution to the beneficiary of $5,000 which, for federal income tax purposes, would be thrown back and allocated to the 1971 undistributed net income of $7,460. The modification permits the beneficiary to subtract $5,000 (the 1972 accumulation distribution allocable to the 1971 undistributed net income) from his 1972 Virginia taxable income.

History

• Statutory Authority: §§ 58.1-203 and 58.1-315 of the Code of Virginia.
• Historical Notes: Derived from VR630-5-315, eff. January 1, 1985.

23VAC10-115-30 (Repealed.)

Historical Notes

Derived from VR630-5-360, eff. January 1, 1985; repealed, Virginia Register Volume 23, Issue 6, eff. February 10, 2007.

23VAC10-115-40 (Repealed.)

History

• Historical Notes: Derived from VR630-5-361, eff. January 1, 1985; repealed, Virginia Register Volume 40, Issue 24, eff. September 28, 2024.

23VAC10-115-50 (Repealed.)

History

• Historical Notes: Derived from VR630-5-362, eff. January 1, 1985; repealed, Virginia Register Volume 40, Issue 24, eff. September 28, 2024.

23VAC10-115-60 Share of a nonresident estate, trust or beneficiary in income from Virginia sources

A. The share of a nonresident estate or trust under 23VAC10-115-50 and the share of a nonresident beneficiary of any estate or trust under provisions otherwise applicable to nonresident individuals in estate or trust income or loss attributable to Virginia sources is determined as follows:

1. Determine the items of income, gain, loss and deduction derived from Virginia sources, which enter into the computation of distributable net income of the estate or trust for the taxable year (including such items from another estate or trust of which the first estate or trust is a beneficiary). In the absence of special provisions, "overhead" items such as interest, taxes, charitable deduction, fiduciary fees, attorney, accountant, and return preparer fees, and other deductions shall be apportioned to income within and without Virginia in the same ratio as gross income from within and without Virginia.

2. Add or subtract (as the case may be) the modifications described in § 58.1-322 of the Code of Virginia, and regulations promulgated thereunder, to the extent relating to items of income, gain, loss and deduction derived from Virginia sources which enter into the computation of distributable net income (including all such items from another estate or trust of which the first estate or trust is a beneficiary). No modification can be made under this subsection which has the effect of duplicating an item already reflected in the computation of distributable net income. For example, no modification would be made for interest which is exempt for federal purposes but taxable in Virginia to the extent the interest is already included in federal distributable net income.

3. The amounts determined under paragraphs 1 and 2 are allocated among the estate or trust and its beneficiaries (including solely for the purposes of this allocation, resident beneficiaries) in proportion to their respective shares of distributable net income. The amounts so allocated have the same character under this article as under the laws of the United States relating to federal income taxes. Where an item entering into the computation of such amounts is not characterized by such laws, it has the same character as if realized directly from the source from which realized by the estate or trust, or incurred in the same manner as incurred by the estate or trust.

Example 1: The Estate of Willie Smith (a nonresident estate) owns rental property in Virginia which produced rent in calendar year 1983 in the amount of $10,000. Such amount is the only Virginia source income for the year. Deductions for repair and maintenance amounted to $2,500, and depreciation expense was $6,000. There is one beneficiary, who received 25% of the distributable net income in calendar 1983. The shares of the Estate and beneficiary in Virginia source income are computed as follows:

B. If the estate or trust had no distributable net income for the taxable year, the share of each beneficiary (including, solely for the purpose of such allocation, resident beneficiaries) in the net amount determined under paragraphs 1 and 2 of subsection A is in proportion to his share of the estate or trust income for such year, under local law or the governing instrument, which is required to be distributed currently and any other amounts of such income distributed in such year. Any balance of such net amount is allocated to the estate or trust.

Example 2: Assume the same facts as in Example 1 except that the Estate has no distributable net income (for federal income tax purposes) because it suffered losses on property located in other states. All income is required to be distributed currently to the sole beneficiary. Accordingly, the sole beneficiary's share of the Virginia source income is 100% or $3,300.

History

• Statutory Authority: §§ 58.1-203 and 58.1-363 of the Code of Virginia.
• Historical Notes: Derived from VR630-5-363, eff. January 1, 1985.

23VAC10-115-70 Credit to trust beneficiary receiving accumulation distribution

A. A beneficiary of a trust whose Virginia taxable income includes all or part of an accumulation distributed by such trust is allowed a credit against the tax otherwise due under these regulations for all or a proportionate part of any tax paid by the trust under these regulations which would not have been payable if the trust had in fact made distributions to its beneficiaries at the times and in the amounts specified in the laws of the United States relating to federal income taxes. The proportion of Virginia income tax paid by the trust which is attributable to the accumulation distribution is deemed to be the same as the proportion of federal income tax paid which is attributable to the accumulation distribution.

B. The credit under this section shall not reduce the tax otherwise due from the beneficiary to an amount less than would have been due if the accumulation distribution or his part thereof were excluded from his Virginia taxable income.

Example: Trust T accumulates income in the amount of $10,000 for each of the years 1978 through 1981 for which it pays an aggregate Virginia income tax of $1,480 ($370 for each of 1978 through 1981). In 1982 it distributes the accumulated income of $38,520 ($40,000 less $1,480) to the sole beneficiary who has no other income. The sole beneficiary owes a tax of $1,845, but receives a credit of $1,480, for a net tax liability of $365. If the amount of the credit had exceeded the sole beneficiary's tax liability, he would not have been entitled to a refund.

History

• Statutory Authority: §§ 58.1-203 and 58.1-370 of the Code of Virginia.
• Historical Notes: Derived from VR630-5-370, eff. January 1, 1985.

23VAC10-115-80 Credits for taxes paid other states

The provisions of § 58.1-332 of Code of Virginia will apply mutatis mutandis to trusts and estates. See Individual Income Tax Regulations, 23VAC10-110-220 through 23VAC10-110-222. The credit is available only to the entity which paid the tax, that is, a credit to a beneficiary for a tax paid by the beneficiary to another state, or a credit to the trust for tax paid by the trust to another state.

History

• Statutory Authority: §§ 58.1-203 and 58.1-371 of the Code of Virginia.
• Historical Notes: Derived from VR630-5-371, eff. January 1, 1985.

23VAC10-115-90 (Repealed.)

History

• Historical Notes: Derived from VR630-5-371.1, eff. January 1, 1985; repealed, Virginia Register Volume 40, Issue 24, eff. September 28, 2024.

23VAC10-115-100 Accounting

A. An estate or trust's taxable year under these regulations shall be the same as its taxable year for federal income tax purposes.

B. If a taxpayer's taxable year is changed for federal income tax purposes, its taxable year for purposes of these regulations shall be similarly changed. If a taxpayer's first or last taxable year is less than 12 months, there shall be no proration. If a taxable year of less than twelve months results from a change of taxable year, the Virginia taxable income shall be prorated as follows:

1. a. For a resident estate or trust, federal taxable income for the short taxable year (as computed before annualizing income for federal purposes) shall be adjusted by the Virginia fiduciary adjustment attributable to the short taxable year. The result will be Virginia taxable income calculated as for a normal taxable year.

b. For a nonresident estate or trust, Virginia taxable income for the short taxable year shall be computed in accordance with 23VAC10-115-50 and 23VAC10-115-60.

2. A tentative tax shall then be calculated based upon the annualized Virginia taxable income.

3. The actual tax shall be the tentative tax calculated pursuant to subdivision 2 above multiplied by the ratio of months in the short taxable year to 12 months.

The following examples illustrate computation of the tax:

Example 1: Trust A, a resident trust, has federal taxable income for short taxable year 1983 of $20,000. Trust A also has $1,000 in interest income from obligations of the State of New Jersey which are exempt from federal but not Virginia tax, and $2,000 in interest on U.S. Treasury obligations. The Trust changed its taxable year to a 10-month period ending October 31, 1983. Its Virginia tax for the short taxable year is computed as follows:

Example 2: Trust B, a nonresident trust, has Virginia taxable income for short taxable year 1982 (a 7-month period) of $14,000. Its Virginia tax for the short taxable year is computed as follows:

C. A taxpayer's method of accounting under these regulations shall be the same as its method of accounting for federal income tax purposes. In the absence of any method of accounting for federal income tax purposes, Virginia taxable income shall be computed under such method as in the opinion of the Tax Commissioner clearly reflects income.

D. If a taxpayer's method of accounting is changed for federal income tax purposes, its method of accounting for Virginia tax purposes must be similarly changed.

E. Any accounting adjustments for federal purposes for any taxable year shall also apply to the computation of Virginia taxable income.

History

• Statutory Authority: §§ 58.1-203 and 58.1-380 of the Code of Virginia.
• Historical Notes: Derived from VR630-5-380, eff. January 1, 1985.

23VAC10-115-110 Returns of estates and trusts

A. Every resident estate or trust that either is required to file a federal income tax return for the taxable year or that has any Virginia taxable income for the taxable year must file an income tax return. If the return is for a fractional part of a year, the due date shall be determined as if the return were for a full 12-month period, that is, it shall be due by the 15th day of the fourth month after the close of the taxable year.

B. Every nonresident estate or trust having Virginia taxable income for the taxable year determined under 23VAC10-115-50 must file an income tax return.

C. The return must be accompanied by a copy of any federal fiduciary tax return filed for such taxable year.

History

• Statutory Authority: § 58.1-203 of the Code of Virginia.
• Historical Notes: Derived from VR630-5-381, eff. January 1, 1985; amended, Virginia Register Volume 33, Issue 6, eff. February 1, 2017.

23VAC10-115-120 (Repealed.)

Historical Notes

Derived from VR630-5-382 and VR630-5-383, eff. January 1, 1985; repealed, Virginia Register Volume 23, Issue 6, eff. February 10, 2007.

Part II Fiduciary Estimated Tax

23VAC10-115-140 Definitions; declaration

The following words and terms, when used in 23VAC10-115-140 and 23VAC10-115-145, shall have the following meanings unless the context clearly indicates otherwise:

"Estimated tax" means the amount which the fiduciary reasonably estimates to be the income tax due for the taxable year, less the amount estimated to be the sum of any credits allowable against the income tax. For this purpose, the refund of an overpayment of income tax which the fiduciary directs to be applied toward the estimated tax for the succeeding taxable year shall be considered an installment payment of estimated tax and not a credit against the income tax.

"Fiduciary" means the person who is required to file federal and Virginia income tax returns for the estate or trust, including the trustee of a trust and the executor or personal representative of an estate.

"Taxable year" means the taxable year of the estate or trust for federal income tax tax purposes.

History

• Statutory Authority: §§ 58.1-203 and 58.1-490 of the Code of Virginia.
• Historical Notes: Derived from VR630-5-490 § 1, eff. February 2, 1989.

23VAC10-115-145 Declarations of estimated tax

A. Requirement.

1. If the estimated tax is greater than $150, the fiduciary shall make a declaration of estimated tax for (i) any taxable year of an estate which ends two or more years after the date of death of the decedent; and (ii) every taxable year of a trust.

2. Examples.

a. Decedent A died on September 1, 1986. For the taxable year 1988 the executor of A's estate expects to receive $10,000 income which will not be used to meet administrative expenses or distributed to the beneficiaries. The executor must file a declaration because the fiduciary income tax due on $10,000 will exceed $150 and the end of the taxable year, December 31, 1988, is more than two years after the date of death of the decedent.

b. The ABC trust expects to receive $10,000 income in 1988 but under the terms of the trust instrument the trustee is required to distribute all income to the beneficiaries. No declaration is required because the trustee's fiduciary income tax liability will be zero.

c. Same facts as in example b except that the beneficiaries are minors. The trustee may accumulate income during the minority of the beneficiaries, and anticipates doing so. The trustee must file a declaration because the trustee's fiduciary income tax on $10,000 will exceed $150.

B. Contents. The declaration shall state the amount which the fiduciary reasonably estimates is the income tax for which the estate or trust will be liable for the taxable year.

C. Time for filing.

1. If the requirements of subsection A are met on or before April 15, then the fiduciary shall file the declaration on or before May 1 of the taxable year.

2. If the requirements of subsection A are met for the first time after April 15 and before June 2, then the fiduciary shall file the declaration on or before June 15 of the taxable year.

3. If the requirements of subsection A are met for the first time after June 1 and before September 2, then the fiduciary shall file the declaration on or before September 15 of the taxable year.

4. If the requirements of subsection A are met for the first time after September 1 of the taxable year, then the fiduciary shall file the declaration on or before January 15 of the succeeding year.

5. If the estate or trust has a taxable year other than a calendar year then the declaration shall be due on the fifteenth day of the fourth, sixth, or ninth month of the taxable year or on the fifteenth day of the first month of the succeeding taxable year, as appropriate.

6. Examples.

a. On April 15, 1988, the fiduciary of the ABC trust expects to receive $25,000 income in 1988. Under the terms of the trust instrument the fiduciary is required to distribute all income to adult beneficiaries, but may accumulate the income of a minor beneficiary. There are two adult beneficiaries and no minor beneficiaries. No declaration is required because the trust's estimated tax liability is zero.

b. Same facts as in example a except that as a result of the death of one of the beneficiaries on August 1, 1988, a minor has become a beneficiary and the fiduciary anticipates accumulating the income of the minor. The minor's share of income for the remaining five months of the taxable year will be ½ of 5/12 of $25,000 or $5,208. The trust's estimated tax on $5,208 is more than $150, therefore, a declaration must be filed on or before September 15, 1988.

D. Amendments. A fiduciary may amend a declaration at any time throughout the year by increasing or decreasing the amount of any installment payment of estimated tax and reporting the changed amount on the payment-voucher form accompanying the installment payment.

E. Return as declaration or payment.

1. If on or before March 1 of the succeeding taxable year a fiduciary files the return for the estate or trust for the taxable year for which a declaration is required under subsection A, and pays the full amount of the tax shown to be due on the return:

a. Such return shall be considered as the declaration if no declaration was required to be filed during the taxable year, but is otherwise required to be filed on or before January 15; and

b. Such return and payment shall be considered as the last installment payment of estimated tax which would otherwise have been payable on or before January 15.

2. Filing a return on or before March 1 of the succeeding taxable year or filing a declaration or payment of the last installment on January 15 will not relieve a taxpayer of liability for additions to tax for underpayment of any of the installments of estimated tax that were due on May 1, June 15, or September 15 of the taxable year.

F. Short taxable year.

1. A declaration must be filed if a return is required for a period of less than 12 months, unless the short period is less than four months or if the requirements of subsection A are first met after the first day of the last month in the short taxable period.

2. For the purpose of determining whether the estimated tax exceeds $150, the estimated tax for the short taxable period shall be placed on an annual basis by multiplying the estimated tax for the short taxable period by 12 and dividing the result by the number of months in the short taxable period.

History

• Statutory Authority: §§ 58.1-203 and 58.1-490 of the Code of Virginia.
• Historical Notes: Derived from VR630-5-490 § 2; adopted February 14, 1988, eff. February 2, 1989.

23VAC10-115-150 Installment payments; due dates and amounts

The estimated tax shown on the declaration shall be paid in equal installments as follows:

1. If the declaration is filed on or before May 1 of the taxable year, the estimated tax shall be paid in four equal installments. The first installment shall be paid at the time the declaration is filed and the second, third and fourth installments shall be paid on the following June 15, September 15, and January 15, respectively.

2. If the declaration is not required to be filed on or before May 1 of the taxable year, and is filed after May 1 but on or before June 15 of the taxable year, the estimated tax shall be paid in three equal installments. The first installment shall be paid at the time the declaration is filed and the second and third installments shall be paid on the following September 15 and January 15, respectively.

3. If the declaration is not required to be filed on or before June 15 of the taxable year, and is filed after June 15 but on or before September 15 of the taxable year, the estimated tax shall be paid in two equal installments. The first installment shall be paid at the time the declaration is filed and the second installment shall be paid on the following January 15.

4. If the declaration is not required to be filed on or before September 15 of the taxable year, and is filed after September 15, the estimated tax shall be paid in full at the time the declaration is filed.

5. If the declaration is filed after the due date, including cases where an extension of time has been granted, subdivisions 2, 3 and 4 of this section shall not apply. All installments of estimated tax which would have been due if the declaration had been timely filed shall be paid at or before the time of filing. The remaining installments shall be paid when, and in the amounts which, they would have been payable if the declaration had been filed when due.

6. Examples.

a. On April 15, 1988, the fiduciary of the ABC trust expects to receive $50,000 income in 1988. Under the terms of the trust instrument the fiduciary is required to distribute all income to adult beneficiaries, but may accumulate the income of a minor beneficiary. There are two beneficiaries, both of whom are adults. No declaration or payment is required on May 1, 1988, because the trust's estimated tax liability is zero. However, as a result of the death of one of the beneficiaries on August 1, 1988, a minor has become a beneficiary and the fiduciary anticipates accumulating the income of the minor. The minor's share of income for the remaining five months of the taxable year will be ½ of 5/12 of $50,000 or $10,417.

The trust's estimated tax on $10,417 is $391 for the taxable year which must be paid in installments, one-half on or before September 15, 1988, and the remaining half on or before January 15, 1989.

b. On April 15, 1988, the fiduciary of Trust DEF expected its estimated tax for 1988 to be $500. Therefore, a declaration and an installment payment of $125 were due on May 1, 1988, but were not made. The omission is discovered on September 1, 1988. The first three installments totaling $375 are due on or before September 15, 1988. The remaining installment of $125 is due on or before January 15, 1989.

c. Same facts as in example b except that due to a change in circumstances the fiduciary discovers on August 31 that the estimated tax for 1988 should be $2,000 instead of $500. The first three installments totaling $1,500 are due on or before September 15, 1988, and the remaining installment of $500 is due on or before January 15, 1989.

History

• Statutory Authority: §§ 58.1-203 and 58.1-491 of the Code of Virginia.
• Historical Notes: Derived from VR630-5-491 § 1, eff. February 2, 1989.

23VAC10-115-151 (Repealed.)

History

• Historical Notes: Derived from VR630-5-491 § 2, eff. February 2, 1989; repealed, Virginia Register Volume 40, Issue 24, eff. September 28, 2024.

23VAC10-115-152 Application to short taxable year

A. In the case of a short taxable year of an estate or trust for which a declaration is required to be filed the estimated tax shall be paid in equal installments, one at the time of filing the declaration, one on the 15th day of the sixth month of the taxable year and another on the 15th day of the ninth month of such year unless the short taxable year closed during or prior to such sixth or ninth month, and one on the 15th day of the first month of the succeeding taxable year.

B. The provisions of subdivision 5 of 23VAC10-115-150 relating to payment of estimated tax in any case in which the declaration is filed after the due date, shall also apply to the payment of the estimated tax for short taxable years.

C. For example, if the short taxable year is the period of 10 months from March 1, 1988, to December 31, 1988, and the declaration is required to be filed on or before June 15, 1988 (the fifteenth day of the fourth month), the estimated tax is payable in four equal installments on June 15 with the declaration, August 15, 1988, November 15, 1988, and January 15, 1989.

History

• Statutory Authority: §§ 58.1-203 and 58.1-491 of the Code of Virginia.
• Historical Notes: Derived from VR630-5-491 § 3, eff. February 2, 1989.

23VAC10-115-153 (Repealed.)

History

• Historical Notes: Derived from VR630-5-491 §§ 4, 5, eff. February 2, 1989; repealed, Virginia Register Volume 40, Issue 24, eff. September 28, 2024.

23VAC10-115-154 Application of payments

A. All payments of estimated tax shall be applied toward the income tax liability of the estate or trust for the taxable year. Payments of estimated tax may not be applied toward any other tax or taxable year unless and until an income tax return is filed claiming a refund. In extraordinary circumstances where the fiduciary is not required to file a Virginia income tax return the fiduciary may request a refund of estimated tax.

B. Payments of estimated tax may not be applied toward the income or estimated tax liability of a beneficiary of an estate or trust even if the fiduciary distributes all or a portion of the distributable net income to the beneficiary after making installment payments of estimated tax.

C. Example: For the calendar year 1988 the trustee anticipates earning $50,000 income after expenses. The terms of the trust require the trustee to pay $10,000 annually to the beneficiary and accumulate the balance of the income; however, the trustee is permitted to pay additional sums to the beneficiary if required for the beneficiary's support. Initially, the trustee anticipates that 1988 taxable income will be $40,000 after the distribution deduction and makes installment payments of estimated tax in the amount of $407 on May 1, 1988, June 15, 1988, and September 15, 1988. In December the trustee finds it necessary to distribute an additional $25,000 for the beneficiary's support. The trustee makes no installment payment on January 15, 1989.

1. The trust will have taxable income of $15,000 after the distribution deduction on which a tax of $620 will be due. Since the estimated tax payments total $1,221, the trust will be entitled to a refund of $601.

2. No part of the trust's estimated tax payments may be transferred to the account of the beneficiary even though $25,000 of income was distributed to the beneficiary after the trustee had paid estimated tax on it.

History

• Statutory Authority: §§ 58.1-203 and 58.1-491 of the Code of Virginia.
• Historical Notes: Derived from VR630-5-491 § 6, eff. February 2, 1989.

23VAC10-115-155 Credit against estimated tax liability

If the annual income tax return shows that the estate or trust is entitled to a refund of income tax by reason of overestimating and overpaying estimated tax the fiduciary may elect to have all or a portion of such refund applied to the payment of estimated tax liability for the following taxable year.

History

• Statutory Authority: §§ 58.1-203 and 58.1-491 of the Code of Virginia.
• Historical Notes: Derived from VR630-5-491 § 7, eff. February 2, 1989.

23VAC10-115-160 Additions to the tax

A. In the case of an underpayment of any installment of estimated tax by an estate or trust, except as provided in 23VAC10-115-163, there shall be added to the income tax for the taxable year an amount determined at the underpayment rate established for interest under § 58.1-15 of the Code of Virginia, upon the amount of the underpayment (determined under 23VAC10-115-161), for the period of the underpayment (determined under 23VAC10-115-162). The amount of such addition to the tax shall be reported and paid at the time of filing the fiduciary income tax return for the taxable year.

B. For the purpose of computing the addition with respect to an underpayment of the final installment, the underpayment rate which applies to the third month following the end of the taxable year shall apply until the due date of the income tax return. For example, in the case of an estate or trust on a calendar year reporting for 1988, the underpayment rate in effect for the month of March, 1989, will apply through May 1, 1989, in computing the addition to the tax.

History

• Statutory Authority: §§ 58.1-203 and 58.1-492 of the Code of Virginia.
• Historical Notes: Derived from VR630-5-492 § 1, eff. February 2, 1989.

23VAC10-115-161 Amount of underpayment

For the purpose of 23VAC10-115-160, the amount of the underpayment shall be the excess of:

1. The amount of the installment which would be required to be paid if the estimated tax were equal to 90% of the income tax, whether or not the fiduciary filed a return for such taxable year, over

2. The amount, if any, of the installment paid on or before the last date prescribed for such payment.

History

• Statutory Authority: §§ 58.1-203 and 58.1-492 of the Code of Virginia.
• Historical Notes: Derived from VR630-5-492 § 2, eff. February 2, 1989.

23VAC10-115-162 Period of underpayment

The period of the underpayment shall run from the date the installment was required to be paid to the earlier of the following dates:

1. May 1, if a calendar year, or the 15th day of the fourth month following the close of the taxable year, if a fiscal year, or

2. With respect to any portion of the underpayment, the date on which such portion is paid. For purposes of this subdivision, a payment of estimated tax on any installment date shall be considered a payment of any previous underpayment only to the extent such payment exceeds the amount of the installment determined under subdivision 1 of 23VAC10-115-161 for such installment date.

3. Example: The principles of 23VAC10-115-160, 23VAC10-115-161, and 23VAC10-115-162 may be illustrated by the following: On or before May 1, 1988, the trustee of The Jones Trust could reasonably expect the fiduciary's Virginia tax liability for calendar year 1988 to exceed $150. Therefore, the trustee timely makes four installment payments: $1,500 on May 1, 1988, and June 15, 1988, and $2,000 on September 15, 1988, and January 15, 1989. When the fiduciary income tax return is filed on May 1, 1989, the tax liability is $10,000. The total paid ($7,000) is less than 90% of the tax ($9,000). Therefore, an addition to the tax in the amount of $174.56 is due, computed as follows:

INSTALLMENT 1st 2nd 3rd 4th

AMOUNT OF UNDERPAYMENT

90% of the tax / 4 2,250.00 2,250.00 2,250.00 2,250.00

Actual Payment 1,500.00 1,500.00 2,000.00 2,000.00

Underpayment 750.00 750.00 250.00 250.00

PERIOD OF UNDERPAYMENT

Date due 5/1/88 6/15/88 9/15/88 1/15/89

Date Paid 5/1/89 5/1/89 5/1/89 5/1/89

No. of days (total) 365 320 228 106

No. of days underpayment is

subject to each rate

4/1/88 - 6/30/88 at 10% 60 15 0 0

7/1/88 - 9/30/88 at 10% 92 92 15 0

10/1/88 - 12/31/88 at 11% 92 92 92 0

1/1/89 - 5/1/89 at 11% 121 121 121 106

ADDITION TO THE TAX

4/1/88 - 6/30/88 at 10% 12.33 3.08 0.00 0.00

7/1/88 - 9/30/88 at 10% 18.90 18.90 1.03 0.00

10/1/88 - 12/31/88 at 11% 20.79 20.79 6.93 0.00

1/1/89 - 5/1/89 at 11% 27.35 27.35 9.12 7.99

Total addition = 174.56 79.37 70.12 17.08 7.99

History

• Statutory Authority: §§ 58.1-203 and 58.1-492 of the Code of Virginia.
• Historical Notes: Derived from VR630-5-492 § 3, eff. February 2, 1989.

23VAC10-115-163 Additions to the tax; exceptions

A. Notwithstanding the provisions of 23VAC10-115-160 through 23VAC10-115-162, the addition to the tax shall not be imposed if the income tax for the taxable year is less than $150.

B. Notwithstanding the provisions of 23VAC10-115-160 through 23VAC10-115-162, the addition to the tax with respect to an underpayment of any installment shall not be imposed if the total payments of estimated tax made on or before the last date prescribed for the payment of such installment equals or exceeds the amount which would have been required to be paid on or before such date if the estimated tax were any of the following:

1. The tax shown on the return of the estate or trust for the preceding taxable year, if a return showing a liability for tax was filed for the preceding taxable year and such preceding year was a taxable year of 12 months.

2. An amount equal to the tax computed, at the rates applicable to the taxable year, on the basis of the facts shown on the return for, and the law applicable to, the preceding taxable year.

3. An amount equal to 90% of the tax for the taxable year computed by placing on an annualized basis the taxable income for the months in the taxable year ending before the month in which the installment is required to be paid. Credits shall not be taken into account when computing the tax on annualized income. For purposes of this subdivision the taxable income shall be placed on an annualized basis by:

a. Multiplying by 12 (or, in the case of a taxable year of less than 12 months, the number of months in the taxable year) the taxable income for the months in the taxable year ending before the month in which the installment is required to be paid, and

b. Dividing the resulting amount by the number of months in the taxable year ending before the month in which such installment date falls.

4. An amount equal to 90% of the tax computed, at the rates applicable to the taxable year, on the basis of the actual taxable income for the months in the taxable year ending before the month in which the installment is required to be paid. The periods involved, for a calendar year taxpayer, are January 1 to April 30, January 1 to May 31, and January 1 to August 31. Virginia taxable income for the applicable period is computed in accordance with § 58.1-361 of the Code of Virginia for the four, five or eight month period, as applicable. Credits shall not be taken into account when computing the tax under this subdivision.

C. If a fiduciary has any discretion in distributing or accumulating distributable net income, then for the purposes of the computations under subdivisions B 3 (tax on annualized income) and B 4 (tax on 4, 5, and 8 month period) of this section, the income of the trust as of any date shall be reduced by distributions to a beneficiary actually made on or before such date which the fiduciary reasonably expects to be treated as made from distributable net income.

D. If an estate or trust was required to change its taxable year during 1987 to a taxable year ending on December 31, then the estate or trust may qualify for the "prior year alternative" exception in subdivision B 1 of this section under the following conditions:

1. The preceding taxable year was a short taxable year in 1987; and

2. The short taxable year was preceded by a taxable year of 12 months; and

3. The tax shown on the return for the preceding short taxable year is annualized by dividing it by the number of months in the short taxable year and multiplying the result by 12.

E. Examples. On or before May 1, 1988, the trustee of The Jones Trust could reasonably expect the fiduciary's Virginia tax liability for calendar year 1988 to exceed $150. Therefore the trustee timely made four installment payments: $1,500 on May 1, 1988, and June 15, 1988, and $2,000 on September 15, 1988, and January 15, 1989. When the fiduciary income tax return was filed on May 1, 1989, the tax liability was $10,000. Although the $7,000 estimated tax paid is less than 90% of the income tax, an addition to the tax is not required because the trust qualifies for one or more of the exceptions for each installment.

1. The tax for the prior year was $6,670. The trust would qualify for the first exception (prior year's tax) with respect to the fourth installment as follows:

INSTALLMENT 1st 2nd 3rd 4th

DUE DATE 5/1/88 6/15/88 9/15/88 1/15/89

Payment 1,500.00 1,500.00 2,000.00 2,000.00

Total paid through each

installment date 1,500.00 3,000.00 5,000.00 7,000.00

Prior year's tax applicable

to each installment 1,667.50 3,335.00 5,002.50 6,670.00

Qualifies for exception? NO NO NO YES

2. The $6,670 tax for 1987 was based on taxable income of $120,085. The tax on $120,085 at 1988 rates would be $6,662. The trust would qualify for the second exception (prior year's income at current rates) with respect to the third and fourth installments as follows:

INSTALLMENT 1st 2nd 3rd 4th

DUE DATE 5/1/88 6/15/88 9/15/88 1/15/89

Payment 1,500.00 1,500.00 2,000.00 2,000.00

Total paid through each

installment date 1,500.00 3,000.00 5,000.00 7,000.00

Applicable tax on prior year's

income at current rates 1,665.50 3,331.00 4,996.50 6,662.00

Qualifies for exception? NO NO YES YES

3. The 1988 tax of $10,000 is based on taxable income of $178,130. After reviewing the records of income, expenses and distributions, the trustee determines that the taxable income is $40,000 as of April 30, 1988, $55,000 as of May 31, 1988, and $115,000 as of August 31, 1988. The trust qualifies for the third exception (annualized income) with respect to the first installment. (Note that this exception cannot be used to avoid the addition for the fourth installment.)

INSTALLMENT 1st 2nd 3rd

DUE DATE 5/1/88 6/15/88 9/15/88

Payment 1,500.00 1,500.00 2,000.00

Applicable dates 4/30/88 5/31/88 8/31/88

Income through date 40,000.00 55,000.00 115,000.00

Annualization factor 3 (12 / 4) 2.4 (12 / 5) 1.5 (12 /8)

Annualized income 120,000.00 132,000.00 172,500.00

Tax on annualized income 6,657.50 7,345.50 9,676.25

Installment percentage 25% 50% 75%

90% of installment percentage 22.5% 45% 67.5%

Amount required through due date 1,497.94 3,306.38 6,531.47

Actual payments through due date 1,500.00 3,000.00 5,000.00

Qualifies for exception? YES NO NO

4. The trust qualifies for the fourth exception (tax on income over a 4, 5, and 8 month period) with respect to the second installment. (Note that this exception cannot be used to avoid the addition for the fourth installment.)

INSTALLMENT 1st 2nd 3rd

DUE DATE 5/1/88 6/15/88 9/15/88

Payment 1,500.00 1,500.00 2,000.00

Applicable dates 4/30/88 5/31/88 8/31/88

Income through date $40,000.00 55,000.00 115,000.00

Tax on income for period 2,057.50 2,920.00 6,370.00

Amount required through due date 2,057.50 2,920.00 6,370.00

Actual payments through due date 1,500.00 3,000.00 5,000.00

Qualifies for exception? NO YES NO

History

• Statutory Authority: §§ 58.1-203 and 58.1-492 of the Code of Virginia.
• Historical Notes: Derived from VR630-5-492 § 4, eff. February 2, 1989.