Court Opinion

ID: 9847086
Source: CourtListenerOpinion
Date Created: 2023-09-24 03:53:35.784567+00
Date Added: 2024-06-11T09:17:00.747835
License: Public Domain

*562JUSTICE LACY,
with whom CHIEF JUSTICE CARRICO and JUSTICE COMPTON join, dissenting.
The Virginia General Assembly has authorized Virginia taxpayers to receive credit for taxes paid to other jurisdictions under certain circumstances. Code § 58-151.015 limits the credit, as pertinent to this case, to circumstances in which a Virginia resident
has become liable for income tax to another state, on earned income or business income, or any part thereof, . . . derived from sources without the Commonwealth and subject to taxation under this chapter. . . .
Once the taxpayer submits proof of payment, his Virginia income tax liability is credited with “the income tax so paid by him to such other state,” according to the formula set out within the statute. Id. Thus, to qualify for the credit, the tax paid must be both an income tax and a tax on earned income or business income. A franchise tax, license tax, excise tax, or any other type of tax, although applied to earned or business income, does not qualify for a credit under this section.
The issue in this case is whether King’s tax payments to the District of Columbia meet the criteria set out in § 58-151.015 and, therefore, qualify for the Virginia tax credit. The majority, however, holds that this Court is not allowed to apply the Virginia criteria to the UB tax because the courts of the District of Columbia have already determined that the UB tax is an income tax and therefore the UB tax qualifies for a credit under Virginia law. I disagree.
The majority’s position is flawed in two respects. The principles cited by the majority are grounded in notions of comity and full faith and credit. But those principles do not prohibit this Court from interpreting the laws of this Commonwealth.
The history and application of the full faith and credit clause show that it was not intended to be an unrestricted and inexorable mandate to be used to subordinate or set at naught one state’s sovereign powers to those of another. Its purpose is to integrate and harmonize the administration of justice under the independent legal systems of the several *563states, and its office is to insure certainty and order where conflict and chaos might otherwise obtain.
The policies of a state that involve its public acts, records, judicial proceedings, fundamental laws or like sovereign rights and interests do not fall within the spirit or intended purpose of the clause, and thus may not be controlled by the judicial proceedings of another state.
Wallihan v. Hughes, 196 Va. 117, 129, 82 S.E.2d 553, 561 (1954) (emphasis added). Here, we are required to interpret our own public act. Whether the UB tax is a franchise tax or an income tax for purposes of the law of the District of Columbia has little relevance to whether it meets Virginia criteria for a tax credit. The majority abdicates this Court’s prerogative and responsibility to interpret and apply the laws of this Commonwealth.
The majority’s position is further flawed in that it imposes upon the Virginia statute an interpretation of the UB tax found in Bishop v. District of Columbia, 401 A.2d 955 (D.C. 1979), aff'd en banc, 411 A.2d 997 (D.C. 1980), a case in which the issue before the court was neither identical, nor even similar, to the issue at hand. The Bishop court identified the central issue before it as whether the ordinance passed by the City Council violated “the limitation imposed on the legislative authority of the Council,” which limitation prohibited the Council from imposing “any tax on the whole or any portion of the personal income, either directly or at the source thereof, of any individual not a resident of the District.” Id. at 956 (citation omitted).
The Bishop court had to determine whether the UB tax on professionals was any tax on any portion of the personal income of a nonresident and, therefore, whether the tax violated the Home Rule Act. To resolve the issue, the Bishop court decided that it had to examine the incidents of the tax:
The District of Columbia Code calls this tax an unincorporated business franchise tax. Even if we were to find that in form and substance the unincorporated business tax is a franchise tax, however, our inquiry would not stop there. Franchise taxes can be considered property taxes, excise taxes, gross income taxes, and most importantly income taxes, depending on the incidents of taxation.
*564Id. at 959 (footnote omitted). In their analysis, the Bishop court determined that the UB tax was a tax on net income which “tax burdens the taxpayer personally.” Id. at 961. As a result of this analysis, the Bishop court held that “the professional tax here at issue is an invalid exercise of the City Council’s legislative authority under the Home Rule Act.” Id. at 961. The Bishop analysis and holding do not answer the question whether the UB tax paid by King, a nonprofessional, is an income tax on earned or business income under Virginia law.
By erroneously concluding that Bishop is determinative and must be applied in this case, the majority has deprived this Court of the ability to engage in an analysis of what constitutes an “income tax ... on earned or business income” for purposes of the Virginia tax credit. We are precluded from considering whether, as used in § 58-151.015, “income tax” means a tax on net income, gross income, or some combination thereof. If the Virginia tax laws identified the expense elements which would be allowed as deductions from gross income to arrive at net income, the majority’s reasoning would preclude us from examining the UB tax to determine if that tax would be a tax on net income as defined by the Virginia Code. The majority’s rationale ignores the fact that, since 1959, our Department of Taxation has denied a credit for the UB tax under Code § 58-151.015.
More importantly, we are precluded from considering Virginia precedent holding that the label given a taxing statute is very important and is entitled to considerable weight when analyzing the tax. Department of Taxation v. Smith, 232 Va. 407, 411, 350 S.E.2d 645, 647 (1986); Commonwealth v. Shell Oil Co., 210 Va. 163, 166, 169 S.E.2d 434, 436 (1969).1 Likewise, we cannot review previous cases holding that taxes labeled franchise, license, or occupation taxes by the taxing authority are not income taxes or taxes on income, “notwithstanding the fact that the amount of tax payable by an individual may be measured by the amount of business which he transacts or his earnings therefrom.” Commonwealth v. Werth, 116 Va. 604, 609, 82 S.E. 695, 696 (1914) (citations omitted). See also Langston v. City of Danville, 189 Va. *565603, 607, 54 S.E.2d 101, 104 (1949); Hunton v. Commonwealth, 166 Va. 229, 244, 183 S.E. 873, 879 (1936).2
In short, the majority precludes this Court from the type of analysis engaged in by the Bishop court to determine what constitutes an income tax on earned or business income under the laws of this Commonwealth. We are required to adopt the principles and analyses chosen by the District of Columbia court when it determined whether an act of the City Council violated its legislative authority. In my opinion, whether King is entitled to a credit against his Virginia tax liability under § 58-151.015 based on UB tax payments made to the District of Columbia is a matter of Virginia law which should be decided by this Court, not by the District of Columbia Court of Appeals.
Based on the legislative classification placed on the UB tax by Congress, the consistent interpretation of the Virginia statute by the Tax Commissioner, and the previously cited Virginia precedent, I would affirm the decision of the trial court.

 In enacting the UB tax, Congress labeled it a franchise tax, and stated that it was levied “for the privilege of carrying on or engaging in any trade or business within the District.” D.C. Code Ann. § 47-1808.1, -1808.3 (1981). This language has remained constant since the original enactment in 1947.

 Although the Bishop court would limit these holdings to cases where the tax is measured by gross income, rather than net income, our cases are not so limited.