State and Local Taxation

2022 Virginia Legislation Enacted by the Regular Session of the General Assembly

Capitol building

Even though the Virginia General Assembly is not done considering tax issues for the year, a number of bills have been enacted that make changes to the Code of Virginia in areas concerning taxes. A summary of the legislation can be found here. Most of the legislation is effective on July 1, 2021. Here are some of the more important pieces of tax legislation:

  • For Virginia income tax purposes, Virginia’s date of conformity to the Internal Revenue Code is advanced from December 31, 2020 to December 31, 2021. This advancement allows Virginia to generally conform to the American Rescue Plan Act and makes other changes.
  • For Virginia income tax purposes, a state and local tax cap workaround was adopted. In general, certain pass-through entities may make an annual election to pay an elective income tax at the entity level. A corresponding refundable income tax credit to prevent double taxation is also created.
  • For Virginia income tax purposes the deduction for business interest is increased to 30 percent (from 20 percent) of the business interest disallowed as a deduction under the business interest limitation.
  • For Virginia corporate income tax purposes, certain property analytics firms will be allowed to source sales using market-based sourcing but otherwise following the standard apportionment formula.
  • For local tax purposes, any locality is permitted to provide a credit to an individual who provides approved volunteer services against taxes and fees imposed by the locality.
  • For local business, professional, and occupational license tax purposes, localities are prohibited from imposing a license tax on a director of a bank or trust company.

For a more thorough summary of the 2022 Virginia tax legislation, click here.

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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