ADMINISTRATIVE NOTICE 96-20

SUBJECT: WVPIT -- Meaning of "federal adjusted gross income" as used in the West Virginia Personal Income Tax Act updated to bring it into conformity with its meaning for federal income tax purposes for taxable years beginning after December 31, 1993. Changes in federal income tax law made after December 31, 1994, but before January 1, 1996, are adopted.

On February 21, 1996, Governor Gaston Caperton signed into law Senate Bill No. 93. This bill amends the West Virginia Personal Income Tax Act by updating the meaning of "federal adjusted gross income" which is the starting point for determining West Virginia personal income tax liability.

Federal changes adopted are those made after December 31, 1994, but before January 1, 1996, which affect determination of "federal taxable income." These changes are made retroactive to taxable years beginning after December 31, 1993, to the same extent allowed for federal income tax purposes.

In April of 1995, Congress restored the deduction from federal gross income which self-employed individuals and certain other individuals were previously allowed for the cost of health insurance for themselves and their dependents. See I.R.C. § 162(l). Congress made this federal change retroactive to taxable years beginning after December 31, 1993. Because the West Virginia definition of "federal adjusted gross income" for the 1994 tax year did not recognize changes in federal income tax law that occured after December 31, 1993, this change in federal law was not allowable for West Virginia personal income tax purposes. S. B. 93 changes that result by adopting this federal change and making it retroactive to taxable years beginning on or after January 1, 1994, for West Virginia personal income tax purposes. Accordingly, individuals allowed to take this deduction on their 1994 federal income tax return may now file form IT-140X, West Virginia Amended Income Tax Return, amending their 1994 West Virginia personal income tax returns.

Changes in federal income tax law affecting the definition of "federal adjusted gross income" do not automatically become part of West Virginia personal income tax law. Therefore, any change in federal income tax law affecting the definition of "federal adjusted gross income" made after December 31, 1995, must be adopted by the West Virginia Legislature before such change is recognized for West Virginia personal income tax purposes.

ISSUED: February , 1996 James H. Paige III

Secretary/Tax Commissioner

For additional information please write or call:

W. Va. Dept. of Tax and Revenue Operator on Duty 8:30 am - 4:00 pm

Taxpayer Services Division Monday through Friday

P. O. Box 3784 Telephones: (304) 558-3333 or

Charleston, WV 25337-3784 1-800-982-8297 (within W. Va. only)

Telecopier: (304) 558-3269

TDD Service for the hearing impaired:

1-800-282-9833