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Multistate Tax Alert: Virginia Internal Revenue Code Conformity Updated


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Overview

In this Tax Alert we summarize a recent Virginia law change that updates Virginia’s conformity to the Internal Revenue Code (“IRC”), as revised by the American Taxpayer Relief Act of 2012, which was enacted on January 2, 2013.

Conformity to Internal Revenue Code updated

On February 15, 2013, Virginia Governor McDonnell signed House Bill 2150 (the “Bill”),1 which updates Virginia’s federal tax conformity to the IRC as revised on January 2, 2013.2 Under the Bill, Virginia also conforms to a 2010 federal law that temporarily increased the federal earned income tax credit for taxable year 2012. The Bill contains an emergency clause and is effective from the date of enactment.Note that Virginia law continues to decouple from:

  • Certain IRC bonus depreciation provisions (IRC §§ 168(k), 168(l), 168(m), 1400L, and 1400N);
  • The five-year net operating loss carryback provisions under IRC § 172(b)(1)(H);
  • The Original Issue Discount on applicable high yield discount obligations under IRC § 163(e)(5)(F);
  • The deferral of certain income under IRC § 108(i);
  • The amount of the deduction allowed for domestic production activities pursuant to IRC § 199 for taxable years beginning on or after January 1, 2010, and before December 31, 2012 (for taxable years beginning on and after January 1, 2013, the entire amount of the deduction pursuant to IRC § 199 may be taken for Virginia income tax purposes); and
  • For taxable years beginning on or after January 1, 2013, the provisions of IRC § 32(b)(3) relating to the earned income tax credit.

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