State and Local Taxation

2022 Virginia Tax Legislation Passed by the General Assembly

Virginia State Capitol Building In Richmond

In January, I wrote about various pieces of tax legislation that were introduced in the 2022 session of the Virginia General Assembly. Now the session has adjourned and will be reconvened to handle the budget for the upcoming biennium as well as numerous unresolved bills. However, some bills have passed. Those bills have been sent to the Governor and based on the timeline that he is required to act, he has either signed the bill in the form that it was passed or proposed an amendment to the bill. For those bills where the timeline has not expired, he will make a recommendation that will be considered by the General Assembly, if necessary, in April. Below is a non-exhaustive list of tax bills that passed with a brief explanation.

  • House Bill 226 (Coyner – Governor approval pending) provides that in court challenges to local taxes that the locality is named in the lawsuit challenging the tax. – While it may seem perfunctory that naming the locality in a lawsuit should have always been the practice, this legislation clarifies the statute for taxpayers as it was not entirely clear who should be named in lawsuits whether it is the locality or the local officer charged with administering the tax.
  • House Bill 348 (Watts – Governor approval pending) reduces the amount of time from 20 years to 12 years that an affiliated group of corporations must wait before it may change its filing status.
  • House Bill 453 (Knight – Governor approval pending) and Senate Bill 346 (Barker - Governor approval pending) allow certain property analytics firms to use market-based sourcing when calculating its sales factor for apportionment purposes.
  • House Bill 518 (Chapter 7) and Senate Bill 651 (Vogel - Governor approval pending) changes the process that accommodations intermediaries remit the sales and use tax and transient occupancy taxes on hotel rooms. Those taxes would be remitted directly to the Department of Taxation or the locality, as appropriate, instead of providing those taxes to the accommodations provider who then remit such taxes.
  • House Bill 791 (McNamara – Governor approval pending) and Senate Bill 513 (McPike – Governor approval pending) provide that data center real property includes certain fixtures installed at the data center.
  • House Bill 971 (Chapter 3) and Senate Bill 94 (Chapter 19) advance Virginia’s date of conformity to the Internal Revenue Code for income tax purposes from December 31, 2020 to December 31, 2021 as well as make other changes regarding the Paycheck Protection Program and the Economic Injury Disaster Loan program.
  • House Bill 1006 (Brewer - Governor approval pending) and Senate Bill 288 (Ebbin- Governor approval pending) increase from 20 percent to 30 percent the Virginia individual and corporate income tax deduction for business interest disallowed as a deduction under § 163(j) of the Internal Revenue Code.
  • House Bill 1121 (McNamara - Governor approval pending) and Senate Bill 692 (Petersen - Governor approval pending) provide that certain pass through entities may elect to pay income tax at the entity level and that such tax will be deemed to have been paid by its members for purposes of Virginia’s credit paid to other states. Also certain owners of such pass through entities are allowed to claim a refundable income tax credit based on its share of the income tax paid at the entity level.

Tax policy is a topic that will be considered in the budget for the upcoming biennium. Based on media reports, subjects such as the Virginia gas tax, the standard deduction for the individual income tax, the retail sales and use tax on certain food products, and rebates for Virginia taxpayers will be considered. It is difficult to predict how those subjects and others will be affected in the final budget compromise. Once a compromise is agreed upon, I will write about the compromise.

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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