State and Local Taxation

2021 Virginia Tax Legislation Passed by the General Assembly

2021 Virginia Tax Legisla…

In January, I wrote about the various pieces of tax legislation that were introduced in the 2021 session of the Virginia General Assembly. Now that the session has adjourned, all of the bills have passed or failed. The approved bills have been sent to the Governor where he can either sign the bill in the form that it was passed, veto the bill, or propose an amendment to the bill that will be considered by the General Assembly in April. Below is a non-exhaustive list of the tax bills that passed with a brief explanation.

  • House Bill 1935 (Watts), Senate Bill 1146 (Howell): These bills deal with how Virginia conforms to the Internal Revenue Code for income tax purposes. This was a controversial subject during the session. The ultimate compromise was to (i) advance the date of conformity to December 31, 2020; (ii) deconform to certain provisions of the federal Coronavirus Aid, Relief, and Economic Security Act and the federal Consolidated Appropriations Act for 2020; and (iii) create a $100,000 deduction for expensed Paycheck Protection Program loan proceeds.
  • Senate Bill 1261 (Edwards): This bill expands the jurisdiction of the Virginia Court of Appeals to provide an appeal of right in every civil case. This bill represents a tremendous change for taxpayers. Currently, taxpayers who challenge a tax in circuit court only have the option to request that the Supreme Court of Virginia hear their case. If the Governor approves this bill, those same taxpayers would be guaranteed (for the most part) an appeal before the Virginia Court of Appeals.
  • House Bill 2273 (Morefield), Senate Bill 1423 (McPike): Expands the current sales tax exemption for data centers.
  • House Bill 2185 (Byron), Senate Bill 1403 (Pillion): Creates a sales tax exemption for purchases of personal protective equipment.
  • House Bill 1763 (Wilt), Senate Bill 1162 (Hanger): Creates an enhanced tax credit for agricultural best management practices.
  • House Bill 1774 (Walker): Creates a new class of property for certain vehicle with weight over 10,000 pounds.
  • House Joint Resolution 563 (Watts): Establishes a working group to assess the feasibility of transitioning Virginia to require a unitary combined reporting system for corporate income tax purposes.
  • House Bill 1800 (Torian): This is the state budget. As I warned in my previous blog, tax policy can be enacted through the budget. In the approved budget amendments, the General Assembly has approved a few things.
    • Corporations will be required to file informational unitary returns for 2019 for what I am assuming is assistance with the HJ 563 study. If they do not cooperate, they are subject to a penalty of $10,000.
    • A Joint Subcommittee on Tax Policy would be established to “(i) evaluat[e] the fiscal impact of amendments to tax brackets, tax rates, credits, deductions, and exemptions, as well as any other factors it deems relevant to making Virginia's individual income tax system more fair and equitable; (ii) giv[e] consideration to the fairness, certainty, convenience of payment, economy in collection, simplicity, neutrality, and economic efficiency of the Commonwealth's tax policies and any changes thereto; and (iii) [recommend] whether the General Assembly should amend the Code of Virginia.”

This session was lighter on enacted tax policy than previous sessions. Except for the conformity bills and the bills affecting court appeals, there is nothing that could be described as a major tax policy change. There are a few studies approved in this session that have been enacted to possibly preface future proposals.

Christian Tennant is a Virginia tax attorney and former employee of the Virginia Department of Taxation. Mr. Tennant regularly speaks and writes on Virginia taxation. In his private practice he advises and represents businesses and individuals on a range of tax matters.

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