A provision that was enacted on April 7th in Virginia’s budget bill Section 3-5.23 of 2021 Va. HB 1800 will require Virginia businesses to file a disclosure for Virginia Unitary Businesses. These disclosures are due on July 1, 2021. Failure to provide the disclosure for affected businesses is a $10,000 penalty. The Virginia General Assembly is now requiring corporations to submit this report to provide detailed reporting of revenue impacts of combined corporate income tax reporting.
Below are some key points about the new reporting requirements you need to know:
What Are Unitary Businesses:
C Corps working as a single economic enterprise made up either of separate parts of a single business entity, or of a commonly controlled group of business entities that are sufficiently interdependent, integrated, and interrelated through their activities.
Is Any One Exempt:
Businesses subject to insurance premiums license tax or bank franchise taxes are exempt from the new filing requirement.
On or before July 1, 2021. Failure to file by this date is a $10,000 penalty. While there are no taxes due at the time of filing this report, according to a guide posted by the VA Department of Taxation “…if you don’t file the report, or if you make a material misstatement or omission on it, you may be subject to a $10,000 penalty.”
Why Are They Doing This:
Virginia is looking to switch to a unitary combined reporting system for corporate tax purposes and needs data to look at the feasibility.
There is an electronic report that is needed to be submitted. A sample report and technical instructions were provided by the Virginia Department of Taxation and can be found Here > Unitary Report Template. Additional instructions and details > Unitary Combined Report Reference Guide
It is important Virginia corporate taxpayers start gathering information and consider any potential liability as a combined group prior to the July 1st reporting deadline. While there are still numerous questions for Virginia corporations, now is the time to start planning. Do not hesitate to reach out to your YHB team member for assistance.
About the Author
Nick’s expertise includes helping high wealth individual and large business entities with complex tax compliance, along with specializing in international, non-for-profit tax issues, and tax ethics issues. He has used his tax expertise not only to serve his clients, but also his peers. He has authored publications for the AICPA’s Journal of Accountancy, AICPA’s Tax Advisor, NATP’s Tax Pro Journal, and CCH’s Journal of Tax Practice and Procedure and co-authored a textbook, Tax Preparer Penalties and Circular 230 Enforcement, published by Thomas Reuters. He has also lectured nationally on topics such as ethics, complex tax transactions, and IRS practice and procedure.