Virginia: Corporate Combined Reports Will Be Due on July 1, 2021

Listen to a brief overview of state tax developments this week, including Virginia, or read full Virginia development below.

Detailed Virginia Development

For the last few years, Virginia lawmakers have introduced proposals to move the Commonwealth to mandatory unitary combined reporting. While these proposals failed to pass again in 2021, lawmakers intend to study the fiscal impact of combined reporting. The Virginia budget bill requires corporations that are members of a unitary business to file a report disclosing the unitary combined net income of the combined group. The report will be based on the 2019 tax year computations and must include, at a minimum, the difference in tax owed as a result of filing a unitary combined report compared to the tax owed under the current filing requirements. The reports are required to be submitted to the Department of Taxation on or before July 1, 2021.  The penalty for noncompliance or filing a report that includes misstatements or materials omissions is $10,000. The Commissioner, however, may waive such penalty upon a determination that the reporting requirement causes an undue hardship.

In terms of computing the unitary combined group’s income, the definition of a unitary business is broad and includes language similar to other states’ definitions of a unitary business. The unitary combined group excludes entities subject to insurance premiums tax or the bank franchise tax. Foreign corporations are excluded if the average of the corporation’s property, payroll and sales factors outside the United States is eighty percent or more. If a foreign corporation is treated as a combined group member, the corporation’s treaty-protected income will be excluded in computing combined group net income. Any expenses or apportionment factors attributable to treaty income will also be excluded. The Virginia Department of Taxation recently provided a few additional details on its website. Per the Department, the report will need to include information about the unitary group’s income, apportionment computation, tax credits, and tax liability calculation. The designated member of the unitary group that files the report on behalf of the group will need to provide this information as if filing a unitary combined report under both the Joyce and Finnigan apportionment methodologies. The Department also indicated that report must include “the same tax information as it is under the current filing requirements for all the members of the group that have nexus with Virginia.” The report will be filed using the Department’s Web Upload Application.  On or before December 1, 2021, the Commissioner will submit a report on the combined reporting disclosures to various Committees in the General Assembly. Please contact Diana Smith with questions. 


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Sarah McGahan

Sarah McGahan

Managing Director, State & Local Tax, KPMG US