Virginia: Numerous corporate tax bills Introduced in Virginia

The Virginia General Assembly convened on January 8, 2020, and there are a number of recently-introduced bills of interest to businesses.  Virginia is currently a fixed-date conformity state and each year, lawmakers must advance the state’s conformity to the Internal Revenue Code. Two bills, House Bill 48 and House Bill 734, have been introduced that would make Virginia a rolling or moving conformity state on a going forward basis.  House Bill 734 further provides that unless subsequently adopted by the General Assembly, Virginia would not conform to any amendments to the Internal Revenue Code that have an impact of $10 million or more on Virginia tax revenues in the fiscal year in which the amendment was enacted or any of the next four years. The Secretary of Finance, in consultation with others, would be responsible for determining when an amendment meets these criteria. House Bill 739, House Bill 1109, and Senate Bill 756 would adopt mandatory unitary combined reporting effective for tax years beginning on or after January 1, 2021. As introduced, these bills would mandate world-wide filing with a water’s-edge election, but would require members that are doing business in a tax haven jurisdiction to be included in the water’s edge group.  House Bill 1109 would also require corporations to report certain tax related information (e.g., the taxpayer’s gross profit, gross sales, amount of tax credits, etc.) that would be publicly available after being redacted; this provision is effective beginning in taxable year 2020.

House Bill 796 would adopt market-based sourcing rules for service and intangible receipts applicable for tax years beginning on or after January 1, 2021. Currently, Virginia is one of only a handful of states that continue to apply the income producing activity test to source receipts of other than tangible personal property.  Under HB 796, receipts from services would be apportioned to Virginia “to the extent the benefit of the service is received in the Commonwealth.” Of interest to partnerships, House Bill 1417 would amend state law to reflect certain provisions of the new federal partnership audit regime and allow a partnership to report to its owners and investors any information required under Virginia law or to report such information on behalf of its owners and investors.  Recall, back in November 2019, Virginia Democrats gained control of both houses of the Legislature for the first time since 1995. Please contact Diana Smith at 703-286-8214 with questions on these pending bills.