Virginia Advances Fixed Date Conformity with the Internal Revenue Code

02.23.2015

On February 19, the Virginia Department of Taxation issued Tax Bulletin 15-1, announcing that Virginia’s fixed-date conformity to the terms of the Internal Revenue Code of 1986 (the Code), has been advanced to December 31, 2014.

What does this mean?

The advancement means that taxpayers who file a Virginia income tax return for 2014 can do so in conformity with federal tax legislation passed in 2014.  Among the tax provisions affected are those included in the federal Tax Increase Prevention Act of 2014 that extended a number of expiring tax provisions including:

• The above-the-line deduction for certain expenses of elementary and secondary school teachers
• The deduction for state and local sales tax
• The exclusion from gross income for IRA distributions for charitable purposes
• The increased deduction for certain types of depreciable business assets

What has not changed?

Virginia, however, continues to disallow the following:

• The five-year carry back of net operating losses allowed for NOLs generated in 2008 and 2009
• Any bonus depreciation for certain specified assets under Section 168 of the Code
• The income tax deduction related to applicable certain high yield discount obligations
• The income tax exclusions related to cancellation of debt income in connection with a reacquisition of a business debt at a discount in 2009 and 2010

For guidance on how the Virginia fixed date conformity applies to your particular tax situation and whether you should add back income related to the carry back of NOLs, bonus depreciation, applicable high yield discount obligations, or cancellation of debt income for Virginia income tax purposes, please contact James W.C. (Jamie) Canup, 804.771.9581 or jcanup@hf-law.com.