HB 971 — Commonwealth's taxation system; conformity with the Internal Revenue Code, Rebuild Va. grants, etc.

The amount subject to recapture shall be a portion of the amount withdrawn in the taxable year that was used for other than the payment of eligible costs, computed by multiplying the amount of 12 withdrawn and used for other than the payment of eligible costs by the ratio of the aggregate earnings in the account at the time of the withdrawal to the total balance in the account at such time.

of 13 § 856, that has been certified by the Department as a Virginia real estate investment trust.

In order to be certified as a Virginia real estate investment trust, the trustee shall register the trust withEthewith the Department prior to December 31, 2024, indicating that it intends to invest at least 90 percent of trust funds in Virginia and at least 40 percent of trust funds in real estate in localities that are distressed or double distressed.

If the Department determines that the trust satisfies the preceding criteria, the DRpartmentDepartment shall certify the trust as a Virginia real estate investment trust at such time as the trust actually invests localitiesat thatleast are90 distressedpercent orof doubletrust distressed.tfunds in Virginia and at least 40 percent of trust funds in real eOtateestate in 29.localities that are distressed or double distressed.

29.

For taxable years beginning on and after January 1, 2020, but before January 1, 2021, up to of 12 $100,000 of all grant funds received by the taxpayer under the Rebuild Virginia program establiEhedestablished by the Governor and administered by the Department of Small Business and Supplier Diversity.

D In computing Virginia taxable income pursuant to § 58.1-322, there shall be deducted from Virginia adjusted gross income as defined in § 58.1-321:

taxpayer1. has elected for the taxable year to itemize deductions on his federal return, but reduced by the amount of income taxes imposed by the Commonwealth or any other taxing jurisdiction and deducted on such federal return and increased by an amount that, when added to the amount deducted under § 170 of the Internal Revenue Code for mileage, results in a mileage deduction at the state levHl for such purposes at a rate of 18 cents per mile;

ora. B b.

ProvidedThe thatamount allowable for itemized deductions for federal income tax purposes where the taxpayer has notelected itemized deductions for the taxable year to itemize deductions on his federa7federal return, but reduced by the amount of income taxtaxes return:imposed by the Commonwealth or any other taxing jurisdiction and deducted on such federal return and increased by an amount that, when added to the amount deducted under § 170 of the Internal Revenue Code for mileage, results in a mileage deduction at the state level for such purposes at a rate of 18 cents per mile;

(i)or forb. taxable years beginning before January 1, 2019, and on and after January 1,E2026, $3,000 for single individuals and $6,000 for married persons (one-half of such amounts in the case of a married individual filing a separate return) and (ii) for taxable years beginning on and after January 1, 2019, but before January 1, 2026, $4,500 for single individuals and $9,000 for married persons (one-half section, any person who may be claimed as a dependent on another taxpayer's return for the taxable year may compute the deduction only with respect to earned income.

Provided that the taxpayer has not itemized deductions for the taxable year on his federal income tax return:

(i) for taxable years beginning before January 1, 2019, and on and after January 1, 2026, $3,000 for single individuals and $6,000 for married persons (one-half of such amounts in the case of a married individual filing a separate return) and (ii) for taxable years beginning on and after January 1, 2019, but before January 1, 2026, $4,500 for single individuals and $9,000 for married persons (one-half of such amounts in the case of a married individual filing a separate return).

For purposes of this section, any person who may be claimed as a dependent on another taxpayer's return for the taxable year may compute the deduction only with respect to earned income.

based3. under § 21 of the Internal Revenue Code for expenses for household and dependent care servicess necessary for gainful employment.

A deduction equal to the amount of employment-related expenses upon which the federal credit is based under § 21 of the Internal Revenue Code for expenses for household and dependent care services necessary for gainful employment.

combinedFor adjustedmarried federaltaxpayers adjustedfiling grossseparately, incomethe ofdeduction bothshall spousesbe exceedsreduced $75,000.rby $1 for every $1 that the total Forcombined the purposes of this subdivision, "adjusted federal adjusted gross income" means federal adjusted gross income minus any benefits received under Title II of theboth Socialspouses Securityexceeds Act$75,000. and other benefits subject to federal income taxation solely pursuant to § 86 of the Internal Revenue Code, as amended.

For the purposes of this subdivision, "adjusted federal adjusted gross income" means federal adjusted gross income minus any benefits received under Title II of the Social Security Act and other benefits subject to federal income taxation solely pursuant to § 86 of the Internal Revenue Code, as amended.

Except as provided in subdivision b, the amount deducted on any individual income tax return in any taxable year shall be limited to $4,000 per prepaid tuition contract or college savings trust account.

No deduction shall be allowed pursuant to this subdivision 7 if such payments or contributions are deducted on the of 13 purchaser's or contributor's federal income tax return.

of 12 b.

The lesser of $5,000 or the amount actually paid by a living donor of an organ or other living tissue for unreimbursed out-of-pocket expenses directly related to the donation that arose within 12 months of such donation, provided that the donor has not taken a medical deduction in accordance with of 13 the provisions of § 213 of the Internal Revenue Code for such expenses.

The deduction may be taken in the taxable year in which the donation is made or the taxable year in which the 12-month periodEperiod expires.

For taxable years beginning on and after January 1, 2013, the amount an individual age 66 or older with earned income of at least $20,000 for the year and federal adjusted gross income notRinnot in excess of $30,000 for the year pays annually in premiums for (i) a prepaid funeral insurance policy covering the individual or (ii) medical or dental insurance for any person for whom individual tax filers may claim a deduction for such premiums under federal income tax laws.

As used in this subdivision,filerssubdivision, "earned income" means the same as that term is defined in § 32(c) of the Internal Revenue Code.

The deduction shall not be allowed for any portion of such premiums paid for which the individual has (a) been reimbursed, (b) claimed a deduction for federal income tax purposes, (c) claimed a deduction or subtraction under another provision of this section, or (d) claimed a federal income tax creditEorcredit or any income tax credit pursuant to this chapter.

For purposes of this subdivision, "business interest" means the same as that term is defined under § 163(j) of the Internal Rev16.Revenue Code.

of 12 16.

H 17.

For taxable years beginning on and after January 1, 2020, but before January 1, 2021, up to $100,000 of the amount that is not deductible when computing federal adjusted gross income sole7ysolely on account of the portion of subdivision B 10 of § 58.1-301 related to Paycheck Protection ProgramEloans.Program loans.

R A.

For purposes of this article, Virginia taxable income for a taxable year means the federal taxable income and any other income taxable to the corporation under federal law for such year of a corporation adjFor a regulated investment company and a real estate investment trust, such term means the "investment company taxable income" and "real estate investment trust taxable income," respectively, to which shall be added in each case any amount of capital gains and any other income taxable to the corporation under federal law which shall be further adjusted as provided in subsections B, C, D, E, G, and H.

For a regulated investment company and a real estate investment trust, such term means the "investment company taxable income" and "real estate investment trust taxable income," respectively, to which shall be added in each case any amount of capital gains and any other income taxable to the corporation under federal law which shall be further adjusted as provided in subsections B, C, D, E, G, and H.

taxable2. income, on obligations or securities of any authority, commission or instrumentality of thel United States, which the laws of the United States exempt from federal income tax but not from state income taxes;

Interest or dividends, less related expenses to the extent not deducted in determining federal taxable income, on obligations or securities of any authority, commission or instrumentality of the United States, which the laws of the United States exempt from federal income tax but not from state income taxes;

[Repealed.] accumulation7. distribution pursuant to § 667 of the Internal Revenue Code;puting the partial tax on an 8.

The amount required to be included in income for the purpose of computing the partial tax on an accumulation distribution pursuant to § 667 of the Internal Revenue Code;

8.

(2) The related member derives at least one-third of its gross revenues from the licensing of intangible property to parties who are not related members, and the transaction giving rise to the expenses and costs between the corporation and the related member was made at rates and terms of 13 comparable to the rates and terms of agreements that the related member has entered into with parties who are not related members for the licensing of intangible property;

If the corporation can demonstrate to the Tax Commissioner's sole satisfaction, by clear and convincing evidence, that the transaction or transactions between the corporation and a related member or members resulting in such increase in taxable income pursuant to subdivision a had a valid business purpose other than the avoidance or reduction of the tax due under this chapter, the Tax Commissioner of 12 shall permit the corporation to file an amended return.

of 13 (ii) Payments arise pursuant to a pre-existing contract entered into when the parties were not related members provided the payments continue to be made at arm's length rates and terms;

E (iii) The related member engages in transactions with parties other than related members that generate revenue in excess of $2 million annually;

or N (iv) The transaction giving rise to the interest payments between the corporation and a relaRedrelated member was done at arm's length rates and terms and meets any of the following:

(a) the related member uses funds that are borrowed from a party other than a related member or that are paid, incurred or passed-through to a person who is not a related member;

or (d) restructuriEgrestructuring the debt of related members, or the pass-through of acquisition-related indebtedness to related members.

A corporation required to add to its federal taxable income interest expenses and costs pursuant to subdivision a may petition the Tax Commissioner, after filing the related income tax return for the taxable year and remitting to the Tax Commissioner all taxes, penalties, and interest due under this article for such taxable year including tax upon any amount of interest expenses and costs required to be added to federal taxable income pursuant to subdivision a, to consider evidence relating to theiredthe to be transaction or transactions between the corporation and a related member or members that resulted in the corporation's taxable income being increased, as required under subdivision a, for such interest expenses and costs.

H If the corporation can demonstrate to the Tax Commissioner's sole satisfaction, by clear andBand convincing evidence, that the transaction or transactions between the corporation and a related7memberrelated member of 12 or members resulting in such increase in taxable income pursuant to subdivision a had a valid bEsinessbusiness purpose other than the avoidance or reduction of the tax due under this chapter and that the related payments between the parties were made at arm's length rates and terms, the Tax Commissioner shall permit the corporation to file an amended return.

For purposes of such amended return, the requirements of subdivision a shall not apply to any transaction for which the Tax Commissioner is satisfied (and has identified) that the transaction had a valid business purpose other than the avoidance or reduction of the tax due under this chapter and that the related payments between the parties were made at arm's length rates and terms.

In addition, for such transactions identified by the Tax Commissioner herein by which he has been satisfied by clear and convincing evidence, the Tax Commissioner may permit the corporation in filing income tax returns for subsequent taxable years to deduct the related interest expenses and costs without making the adjustment under subdivision a.

§c. 58.1-446.ng in subdivision B 9 shall be construed to limit or negate the Department's authority under d.

Nothing in subdivision B 9 shall be construed to limit or negate the Department's authority under § 58.1-446.

d.

"Valid business purpose" means one or more business purposes that alone or in combination constitute the motivation for some business activity or transaction, which activity or transaction improves, apart from tax effects, the economic position of the taxpayer, as further defined by regulation.

For taxable years beginning on and after January 1, 2009, the amount of dividends deductible of 13 under §§ 561 and 857 of the Internal Revenue Code by a Captive Real Estate Investment Trust (REIT).

"Listed Australian Property Trust" means an Australian unit trust registered as a Management Investment Scheme, pursuant to the Australian Corporations Act, in which the principal class of units is listed on a recognized stock exchange in Australia and is regularly traded on an established securities of 12 market.

Dividends upon stock in any domestic international sales corporation, as defined by § 992 of the Internal Revenue Code, 50 percent or more of the income of which was assessable for the preceding year, or the last year in which such corporation has income, under the provisions of the income tax laws of 13 of the Commonwealth.

The amount of any refund or credit for overpayment of income taxes imposed by this E Commonwealth or any other taxing jurisdiction.

R 6.

The amount of wages or salaries eligible for the federal Targeted Jobs Credit which was not ded7.deducted for federal purposes on account of the provisions of § 280C(a) of the Internal Revenue Code.

Any7. amount included therein by the operation of § 951 of the Internal Revenue Code (subpart Fe.

Any amount included therein by the operation of § 951 of the Internal Revenue Code (subpart F income) or, for taxable years beginning on and after January 1, 2018, § 951A of the Internal Revenue Code (Global Intangible Low-Taxed Income).

L 9.

[Repealed.] E 10.

D 11.

[Expired.] expenses"14. or "basic research expenses" eligible for deduction for federal purposes, but which were not deducted, on account of the provisions of § 280C(c) of the Internal Revenue Code.

For taxable years beginning on or after January 1, 1995, the amount for "qualified research expenses" or "basic research expenses" eligible for deduction for federal purposes, but which were not deducted, on account of the provisions of § 280C(c) of the Internal Revenue Code.

For taxable years beginning on or after January 1, 2000, the total amount actually contributed in funds to the Virginia Public School Construction Grants Program and Fund established in ChapterH11.1Chapter 11.1 (§ 22.1-175.1 et seq.) of Title 22.1.

B 16.

For taxable years beginning on or after January 1, 2000, but before January 1, 2015, the7gainthe gain derived from the sale or exchange of real property or the sale or exchange of an easement to reElreal property which results in the real property or the easement thereto being devoted to open-space use, as that term is defined in § 58.1-3230, for a period of time not less than 30 years.

To the extent a subtraction is taken in accordance with this subdivision, no tax credit under this chapter for donating taken.orland for its preservation shall be allowed for three years following the year in which the subtraction is 17.taken.

of 12 17.

[Repealed.] costs21. or interest expenses and costs added to the federal taxable income of a corporation pursuant tod subdivision B 8 or B 9 shall be subtracted from the federal taxable income of the related member that received such amount if such related member is subject to Virginia income tax on the same amount.

For taxable years beginning on and after January 1, 2004, any amount of intangible expenses and costs or interest expenses and costs added to the federal taxable income of a corporation pursuant to subdivision B 8 or B 9 shall be subtracted from the federal taxable income of the related member that received such amount if such related member is subject to Virginia income tax on the same amount.

For taxable years beginning on and after January 1, 2009, any gain recognized as a result of Commercialresupply Orbitalservices Transportationcontracts Servicesfor divisiondelivering ofpayload, the National Aeronautics and Spacered into with the Administration or other space flight entity, as defined in §49 8.01-227.8,U.S.C. and launched from an airport or spaceport in Virginia.

§ 70102, entered into with the Commercial Orbital Transportation Services division of the National Aeronautics and Space Administration or other space flight entity, as defined in § 8.01-227.8, and launched from an airport or spaceport in Virginia.

To qualify for a subtraction under this subdivision, such income must be attributable to an investment in a "qualified business," as defined in § 58.1-339.4, or in any other technology business approved by the Secretary of Administration, provided the business has its principal office or facility in the Commonwealth and less than $3 million in annual revenues in the fiscal year prior to the theinvestment. dates of April 1, 2010, and June 30, 2020.

NoTo taxpayerqualify who has claimed a tax credit for anetween investment in a "qualifiedsubtraction business" under §this 58.1-339.4subdivision, shallthe investment must be eligiblemade forbetween the subtractiondates under this of 13April subdivision1, for2010, anand investmentJune in30, the2020. same business.

No taxpayer who has claimed a tax credit for an investment in a "qualified business" under § 58.1-339.4 shall be eligible for the subtraction under this subdivision for an investment in the same business.

No subtraction shall be allowed under this subdivision for a taxpayer who has of 12 claimed a subtraction under subdivision C 24 or 25 for the same investment.

of 13 E.

E F.

Notwithstanding any other provision of law, the income from any disposition of real property which is held by the taxpayer for sale to customers in the ordinary course of the taxpayer's trade or business, as defined in § 453(l)(1)(B) of the Internal Revenue Code, of property made on or after January 1, 2009, may, at the election of the taxpayer, be recognized under the installment method described under § 453 of the Internal Revenue Code, provided that (i) the election relating to Ohethe dealer disposition of the property has been made on or before the due date prescribed by law (including extensions) for filing the taxpayer's return of the tax imposed under this chapter for the taxable year in which the disposition occurs, and (ii) the dealer disposition is in accordance with restrictions or conditions established by the Department, which shall be set forth in guidelines developed by theorthe Department.

Along with such restrictions or conditions, the guidelines shall also address the rEcapturerecapture of such income under certain circumstances.

DG. included in and not otherwise subtracted from federal taxable income 20 percent of business interestt disallowed as a deduction pursuant to § 163(j) of the Internal Revenue Code.

For taxable years beginning on and after January 1, 2018, there shall be deducted to the extent included in and not otherwise subtracted from federal taxable income 20 percent of business interest disallowed as a deduction pursuant to § 163(j) of the Internal Revenue Code.

beH. deducted to the extent not otherwise subtracted from federal taxable income up to $100,000 oH theall amount that is not deductible when computing federal taxable income solely on account of the portion of subdivision B 10 of § 58.1-301 related to Paycheck Protection Program loans.

7For 2.taxable years beginning on and after January 1, 2020, but before January 1, 2021, there shall be deducted to the extent not otherwise subtracted from federal taxable income up to $100,000 of the amount that is not deductible when computing federal taxable income solely on account of the portion of subdivision B 10 of § 58.1-301 related to Paycheck Protection Program loans.

2.

E R