Fixed-date tax conformity in Virginia will move forward for 2022 after Governor Glenn Youngkin signed an emergency conformity legislation on February 23rd, 2022. This bill (HB 971) will ensure most aid granted through pandemic-related loans and grants will not be treated as taxable income by the state of Virginia. It advances Virginia’s date of conformity with the Internal Revenue Code (IRC) from December 31, 2020, to December 31, 2021, and is effective immediately.
What Does This Mean for Taxpayers?
- The legislation passed includes full conformity to the American Rescue Plan Act, including the Restaurant Revitalization Fund. The bill also allows full deductibility of expenses paid with Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) for tax years beginning Jan. 1, 2021 (for 2020, Virginia will continue to allow only $100,000 as non-taxable).
- The bill also includes a technical amendment to allow fiscal year filers to take advantage of the $100,000 deduction for forgiven PPP loans and Rebuild Virginia grants received in calendar year 2020.
- For example, a 7/1/19 – 6/30/20 C Corp receives a PPP loan on 3/20/20. Since the PPP loan was received before the corporation’s tax year starting in 2020, they would have not received the $100,000 PPP exclusion to be non-taxable and 100% would have been taxed. This conformity bill fixed this and now allows those fiscal year filers to get the $100,000 as non-taxable. To fix this issue, fiscal year companies will need to file an amended return.
- Virginia conforms with all other new provisions in the tax law.
Taxpayers are encouraged to read Tax Bulletin 22-1 by the Virginia Department of Taxation to learn more about the newly passed legislation. Please consult your YHB advisor with any questions before attempting to make an adjustment or filling out an amended return, if applicable.
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.