Present: All the Justices 

JOSEPH J. MATHY, ET AL. 

v. Record No. 961290 OPINION BY JUSTICE BARBARA MILANO KEENAN 

 April 18, 1997 

COMMONWEALTH OF VIRGINIA 

DEPARTMENT OF TAXATION 

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 

Gerald B. Lee, Judge 

 In this appeal, we consider whether two Virginia taxpayers 

are entitled to a credit under Code § 58.1-332(A) for taxes paid 

to the District of Columbia on income received from a partnership 

conducted in the District of Columbia. 

 The facts in this case are not in dispute. The appellants, 

Joseph J. Mathy and Sarah G. Mathy, are residents of Fairfax 

County. Joseph Mathy is a general partner in The Mills Building 

Associates, a District of Columbia general partnership (the 

partnership). The partnership's sole source of income during the 

relevant years was rental income earned from the operation of an 

office building in the District of Columbia. 

 The partnership filed District of Columbia tax returns for 

1991, 1992, and 1993 and paid the taxes due on the income earned 

from the commercial office rental pursuant to D.C. Code Ann. 

§§ 47-1808.1 to -1808.6 (1990). This subchapter, labelled "[t]ax 

on unincorporated businesses,"1

 provided, for the years at issue, 

 

 1Under D.C. Code Ann. § 47-1808.1 (1990), the term 

"unincorporated business" is defined, in relevant part, as 

 any trade or business, conducted or engaged in by any 

individual, whether resident or nonresident, statutory or 

common-law trust, estate, partnership, or limited or special 

partnership . . . other than a trade or business conducted 
- 2 - 

(..continued) 

that "for the privilege of carrying on or engaging in any trade 

or business within the District and of receiving income from 

sources within the District, there is levied . . . a tax at the 

rate of 10 per centum upon the taxable income of every 

unincorporated business," plus a surtax between 2.5% and 5% of 

the taxes due. D.C. Code Ann. § 1808.3 (1990) (amended 1994) 

(the UB tax). "Taxable income" is defined as "the amount of net 

income derived from sources within the District . . . in excess 

of the exemption granted under § 47-1808.4" D.C. Code Ann. 

§ 47-1808.2(1). 

 Under the District of Columbia Code, these taxes may be 

assessed in the name of the unincorporated business, but are 

payable by the persons conducting the business. D.C. Code Ann. 

§ 47-1808.5. As a general partner, Joseph Mathy was personally 

liable for payment of these taxes.2

 The Mathys filed Virginia income tax returns for 1991, 1992, 

and 1993, and reported Joseph Mathy's share of the net income 

from the District of Columbia partnership. When the Mathys filed 

those returns, they did not claim an out-of-state tax credit 

or engaged in by any corporation and include[s] any trade or 

business which if conducted or engaged in by a corporation 

would be taxable under subchapter VII of this chapter. 

 2D.C. Code Ann. § 41-114(2) provides that "[a]ll partners 

are liable . . . [j]ointly for all other debts and obligations of 

the partnership." 
- 3 - 

against their Virginia taxes for the taxes paid pursuant to the 

UB tax. 

 In 1994, the Mathys filed amended Virginia income tax 

returns for the tax years 1991, 1992, and 1993, claiming an outof-state tax credit pursuant to Code § 58.1-332(A) and requesting 

refunds from Virginia for each of the tax years in issue. Code 

§ 58.1-332(A) provides: 

 Whenever a Virginia resident has become liable to 

another state for income tax on any earned or business 

income for the taxable year, derived from sources 

outside the Commonwealth and subject to taxation under 

this chapter, the amount of such tax payable by him 

shall, upon proof of such payment, be credited on the 

taxpayer's return with the income tax so paid to the 

other state. 

 However, no franchise tax, license tax, excise 

tax, unincorporated business tax, occupation tax or any 

tax characterized as such by the taxing jurisdiction, 

although applied to earned or business income, shall 

qualify for a credit under this section, nor shall any 

tax which, if characterized as an income tax or a 

commuter tax, would be illegal and unauthorized under 

such other state's controlling or enabling legislation 

qualify for a credit under this section. 

 The Virginia Department of Taxation (the Department) 

determined that the Mathys were not entitled to the tax credit 

under Code § 58.1-332(A). The Mathys then filed in the trial 

court this application for relief from erroneous assessments of 

Virginia income taxes. 

 The trial court granted the Department's motion for summary 

judgment, holding that the Mathys were not entitled to a credit 

against their Virginia taxes for payment of the UB tax. The 

court stated that a plain reading of D.C. Code Ann. § 47-1808.3 
- 4 - 

indicates that the tax imposed is not an income tax subject to 

credit under Code § 58.1-332(A), but is an unincorporated 

business tax on income imposed for the privilege of conducting 

business in the District of Columbia. Thus, the court held that 

Code § 58.1-332(A) does not provide a credit for payment of this 

tax. 

 On appeal, the Mathys argue that the trial court's ruling 

conflicts with the decisions of this Court in King v. Forst, 239 

Va. 557, 391 S.E.2d 60 (1990), and the District of Columbia Court 

of Appeals in Bishop v. District of Columbia, 401 A.2d 955 (D.C. 

1979), aff'd en banc, 411 A.2d 997 (1980). The Mathys contend 

that both cases held that the UB tax is an income tax, and not an 

unincorporated business tax, franchise tax, or privilege tax. 

 In response, the Department contends that the UB tax is an 

unincorporated business tax within the meaning of Code 

§ 58.1-332(A), and is characterized as such by the District of 

Columbia. In the alternative, the Department argues that even if 

this tax is characterized as an income tax, it is illegal under 

the District of Columbia Self-Government and Governmental 

Reorganization Act (the Home Rule Act), Pub. L. No. 93-198, 87 

Stat. 774 (1973) (codified in part in Title I, D.C. Code Ann. 

(1992)), and, thus, the Mathys are not entitled to a credit under 

Code § 58.1-332(A). 

 The District of Columbia Court of Appeals, the highest court 

of that jurisdiction, examined the UB tax in Bishop v. District 
- 5 - 

of Columbia, 401 A.2d at 958-61. The court held that the tax is 

an income tax, explaining that "a tax on gross receipts is not an 

income tax; a tax on net income is so, regardless of its 

nomenclature." Id. at 960. 

 In reaching this conclusion, the court emphasized that a tax 

must be characterized based on its nature and effect, rather than 

on any label or title affixed to its provisions. Id. at 958. 

The court noted that, by its terms, the UB tax is a net income 

tax because it is levied on taxable income, which is defined as 

that amount of net income in excess of the exemption granted by 

D.C. Code Ann. § 47-1808.4. Id. at 960. 

 Under principles of comity, we applied the rule of Bishop in 

King v. Forst. There, we explained: 

 [T]he decisions of the highest court of a jurisdiction, 

interpreting the law of that jurisdiction, are 

controlling authority in the courts of all other States 

as well as in the Federal courts. This principle 

applies even where the construction given by the 

foreign court to its law is directly opposite to the 

construction the domestic court gives to its own law. 

239 Va. at 561, 391 S.E.2d at 62 (citations omitted). 

 Applying the construction given D.C. Code Ann. § 47-1808.3 

by the District of Columbia Court of Appeals, we held that the UB 

tax is an income tax. King, 239 Va. at 561, 391 S.E.2d at 62. 

Thus, we concluded that the Virginia taxpayer, a sole proprietor 

of an unincorporated printing business located in the District of 

Columbia, was entitled to a credit under former Va. Code § 58.1-

332 for payment of the UB tax. Id.
- 6 - 

 Our decision in King is dispositive of the issue whether the 

UB tax is an income tax. We find no merit in the Department's 

argument that the second paragraph of Code § 58.1-332(A), added 

by the General Assembly in 1991, effectively overrules King. The 

"taxing jurisdiction," as the term is used in that paragraph, is 

the District of Columbia, which has characterized the tax as an 

income tax, irrespective of its title, "[t]ax on unincorporated 

businesses." Bishop, 401 A.2d at 960. Thus, the second 

paragraph of Code § 58.1-332(A) does not affect our ruling in 

King that the UB tax is an income tax. 

 Our conclusion is not altered by the fact that Bishop was 

based on a challenge to the UB tax as applied to professionals 

and personal services businesses, rather than to other types of 

unincorporated businesses such as the one in which Joseph Mathy 

is a general partner. The court's holding in Bishop was based on 

the inherent nature of the UB tax, rather than on the type of 

unincorporated business income at issue. 

 In addition, in King, we applied the rule of Bishop to 

income derived from a printing business conducted in the District 

of Columbia, which did not involve professional or personal 

services. Our holding was based on the structure and effect of 

the tax, as characterized by the District of Columbia Court of 

Appeals, rather than on the type of unincorporated business 

conducted by the taxpayer. See King, 239 Va. at 560, 391 S.E.2d 

at 62. 
- 7 - 

 Since the UB tax is an income tax, the Mathys are entitled 

to a credit under Code § 58.1-332(A) unless the tax "would be 

illegal and unauthorized under such other state's controlling or 

enabling legislation." Code § 58.1-332(A). Therefore, in the 

present case, we must determine whether the UB tax would be 

illegal and unauthorized under the District of Columbia's Home 

Rule Act. 

 In the Home Rule Act, the United States Congress gave the 

District of Columbia Council legislative authority over most 

matters involving the District. See D.C. Code Ann. §§ 1-201 to 

- 229.7. However, the Home Rule Act expressly prohibits the 

Council from imposing a "commuter tax," defined as "any tax on 

the whole or any portion of the personal income . . . of any 

individual not a resident of the District . . . ." D.C. Code 

Ann. § 1-233(a)(5); see Bishop, 401 A.2d at 957-58. Neither the 

Home Rule Act nor any other portion of the District of Columbia 

Code defines the term "personal income." 

 The Department argues that if D.C. Code Ann. § 47-1808.3 is 

an income tax, it violates this restriction in the Home Rule Act 

as a tax on the personal income of a nonresident of the District. 

 In response, the Mathys argue that the tax does not violate the 

Home Rule Act, but "is a perfectly legal income tax which does 

not tax personal income, the only kind of income protected by 

[the above] section of the Home Rule Act." The Mathys further 

contend that the tax is imposed on their District of Columbia 
- 8 - 

rental business income, not on their personal income. We 

disagree with the Mathys. 

 The rationale advanced by the Mathys was directly addressed 

and rejected in Bishop. The court concluded that "[t]he tax is 

levied upon personal income. If we dealt here with a corporate 

franchise tax, the result would be different." Id. at 961. The 

court noted that the scheme of the tax illustrates its nature as 

a personal net income tax, and that since the tax is imposed on 

unincorporated businesses, it is "in reality a tax on the 

associates or partners who run the business." Id. at 961 n.18. 

 In District of Columbia v. Califano, 647 A.2d 761, 763 (D.C. 

1994), the District of Columbia Court of Appeals again recognized 

that the UB tax is a personal income tax. The court explained, 

"in the language of Bishop," that this tax personally burdens the 

individuals who comprise the unincorporated business and operates 

as an income tax on them individually. Califano, 647 A.2d at 

763-64. Since both Bishop and Califano instruct that the UB tax 

imposes a tax on personal income, we must conclude that the tax 

imposed on the Mathys is illegal and unauthorized under the Home 

Rule Act for purposes of qualifying for a credit under Code 

§ 58.1-332(A), because the Home Rule Act prohibits the imposition 

of "any tax on the whole or any portion of the personal income 

. . . of any individual not a resident of the District . . ." 

D.C. Code Ann. § 1-233(a)(5). Thus, the Mathys are not entitled 

to a credit under Code § 58.1-332(A), based on the plain language 
- 9 - 

of the second paragraph of that statute. 

 This is a case in which the trial court has reached the 

correct result but has given the wrong reason. We will sustain 

the result on the grounds assigned above. Doswell Ltd. 

Partnership v. Virginia Elec. & Power Co., 251 Va. 215, 225, 468 

S.E.2d 84, 90 (1996); Richmond, Fredericksburg & Potomac R.R. v. 

Metropolitan Washington Airports Auth., 251 Va. 201, 214, 468 

S.E.2d 90, 98 (1996); Robbins v. Grimes, 211 Va. 97, 100, 175 

S.E.2d 246, 248 (1970). 

 For these reasons, we will affirm the trial court's 

judgment. 

Affirmed.