Multistate: Multiple Fixed-Conformity States Update their Connection to the IRC

A number of fixed-date conformity states have recently updated their connection to the Internal Revenue Code.  Effective January 1, 2021, Idaho House Bill 58 adopts the Internal Revenue Code in effect on January 1, 2021, except that IRC section 461(1) applies as in effect on January 1, 2020. For tax years beginning on or after January 1, 2020, Georgia House Bill 265 updates the state’s general conformity to the Internal Revenue Code as of January 1, 2021. South Dakota Senate Bill 40 adopts the Internal Revenue Code as in effect on January 1, 2021. Both chambers of the Virginia General Assembly have passed identical bills (Senate Bill 1146, House Bill 1935) that would update the Commonwealth’s conformity to the Internal Revenue Code as it existed on December 31, 2020. Importantly for corporate taxpayers, the bills decouple Virginia from the CARES Act changes (1) suspending the 80 percent limit on NOLs and allowing NOL carrybacks; and (2) temporarily enhancing the amount of business interest that can be deducted under IRC section 163(j). For taxpayers other than corporations, the bills would also decouple from the CARES Act IRC section 461(1) changes. For corporate and individual taxpayers, for tax years beginning on and after January 1, 2020, but before January 1, 2021, the bills would allow a $100,000 deduction for expenses paid with forgiven PPP loan amounts.  Finally, West Virginia House Bill 2359 updates the state’s connection to the Code for corporate net income tax purposes. Specifically, “all amendments made to the laws of the United States after December 31, 2019, but prior to January 1, 2021, shall be given effect in determining the taxes imposed by this article to the same extent those changes are allowed for federal income tax purposes, whether the changes are retroactive or prospective.” Please stay tuned to TWIST for additional conformity updates.