79474958.1-402Virginia Decodedhttps://vacode.org2016TaxationTaxes Administered By The Department Of TaxationIncome TaxTaxation Of CorporationsVirginia taxable incomeCode 1950, §§ 58-151.013, 58-151.032; 1971, Ex. Sess., c. 171; 1972, cc. 310, 827; 1973, cc. 198, 345, 458; 1974, cc. 320, 682; 1975, cc. 46, 50; 1976, cc. 528, 694, 781; 1977, cc. 297, 612; 1978, cc. 67, 158, 783, 785; 1979, cc. 226, 371, 596; 1981, cc. 402, 414; 1982, c. 633; 1983, cc. 452, 472; 1984, cc. 153, 162, 636, 672, 674, 675, 729; 1985, cc. 221, 465; 1987, c. 484; 1989, cc. 39, 639; 1992, c. 678; 1994, c. 590; 1997, c. 106; 1998, c. 874; 1999, cc. 339, 971; 2000, cc. 419, 1021, 1039; 2003, cc. 3, 58, 209; 2004, Sp. Sess. I, c. 3; 2006, c. 214; 2008, cc. 149, 211; 2009, cc. 426, 508, 558; 2010, cc. 802, 830; 2011, c. 851; 2012, cc. 96, 256; 2015, cc. 248, 335, 336; 2016, cc. 304, 342, 391.http://law.lis.virginia.gov/vacode/58.1-402/2.2-4000Short title; purpose/2.2-4000/58.1-315Transitional modifications to Virginia taxable income/58.1-315//58.1-402/58.1/I/3/10/58.1-40258.1-31558.1-370258.1-40358.1-513There shall be added to the extent excluded from federal taxable income:sectionBB1 Interest, less related expenses to the extent not deducted in determining federal taxable income, on obligations of any state other than Virginia, or of a political subdivision of any such other state unless created by compact or agreement to which the Commonwealth is a party;sectionB1B12 Interest or dividends, less related expenses to the extent not deducted in determining federal taxable income, on obligations or securities of any authority, commission or instrumentality of the United States, which the laws of the United States exempt from federal income tax but not from state income taxes;sectionB2B22 The amount of any net income taxes and other taxes, including franchise and excise taxes, which are based on, measured by, or computed with reference to net income, imposed by the Commonwealth or any other taxing jurisdiction, to the extent deducted in determining federal taxable income;sectionB4B42 Unrelated business taxable income as defined by § 512 of the Internal Revenue Code;sectionB5B52 The amount required to be included in income for the purpose of computing the partial tax on an accumulation distribution pursuant to § 667 of the Internal Revenue Code;sectionB7B72 a. For taxable years beginning on and after January 1, 2004, the amount of any intangible expenses and costs directly or indirectly paid, accrued, or incurred to, or in connection directly or indirectly with one or more direct or indirect transactions with one or more related members to the extent such expenses and costs were deductible or deducted in computing federal taxable income for Virginia purposes. This addition shall not be required for any portion of the intangible expenses and costs if one of the following applies:
sectionB8B82 The corresponding item of income received by the related member is subject to a tax based on or measured by net income or capital imposed by Virginia, another state, or a foreign government that has entered into a comprehensive tax treaty with the United States government;sectionB8(1B8(13 The related member derives at least one-third of its gross revenues from the licensing of intangible property to parties who are not related members, and the transaction giving rise to the expenses and costs between the corporation and the related member was made at rates and terms comparable to the rates and terms of agreements that the related member has entered into with parties who are not related members for the licensing of intangible property; orsectionB8(2B8(23 The corporation can establish to the satisfaction of the Tax Commissioner that the intangible expenses and costs meet both of the following: (i) the related member during the same taxable year directly or indirectly paid, accrued or incurred such portion to a person who is not a related member, and (ii) the transaction giving rise to the intangible expenses and costs between the corporation and the related member did not have as a principal purpose the avoidance of any portion of the tax due under this chapter.
sectionB8(3B8(33 a. For taxable years beginning on and after January 1, 2004, the amount of any interest expenses and costs directly or indirectly paid, accrued, or incurred to, or in connection directly or indirectly with one or more direct or indirect transactions with one or more related members to the extent such expenses and costs were deductible or deducted in computing federal taxable income for Virginia purposes. This addition shall not be required for any portion of the interest expenses and costs, if:
sectionB9B92 The related member has substantial business operations relating to interest-generating activities, in which the related member pays expenses for at least five full-time employees who maintain, manage, defend or are otherwise responsible for operations or administration relating to the interest-generating activities; andsectionB9(1B9(13 The interest expenses and costs are not directly or indirectly for, related to or in connection with the direct or indirect acquisition, maintenance, management, sale, exchange, or disposition of intangible property; andsectionB9(2B9(23 One of the following applies:
sectionB9(4B9(43 The corresponding item of income received by the related member is subject to a tax based on or measured by net income or capital imposed by Virginia, another state, or a foreign government that has entered into a comprehensive tax treaty with the United States government;sectionB9(4(iB9(4(i4 The related member engages in transactions with parties other than related members that generate revenue in excess of $ 2 million annually; orsectionB9(4(iiB9(4(ii4 a. For taxable years beginning on and after January 1, 2009, the amount of dividends deductible under §§ 561 and 857 of the Internal Revenue Code by a Captive Real Estate Investment Trust (REIT). For purposes of this subdivision, a REIT is a Captive REIT if:
sectionB10B102 It is not regularly traded on an established securities market;sectionB10(1B10(13 More than 50 percent of the voting power or value of beneficial interests or shares of which, at any time during the last half of the taxable year, is owned or controlled, directly or indirectly, by a single entity that is (i) a corporation or an association taxable as a corporation under the Internal Revenue Code; and (ii) not exempt from federal income tax pursuant to § 501(a) of the Internal Revenue Code; andsectionB10(2B10(23 More than 25 percent of its income consists of rents from real property as defined in § 856(d) of the Internal Revenue Code.
sectionB10(3B10(33 For purposes of applying the ownership test of subdivision 10 a (2), the following entities shall not be considered a corporation or an association taxable as a corporation:
sectionB10(3bB10(3b4 Any REIT that is not treated as a Captive REIT;sectionB10(3b(1B10(3b(15 Any REIT subsidiary under § 856 of the Internal Revenue Code other than a qualified REIT subsidiary of a Captive REIT;sectionB10(3b(2B10(3b(25 Any Listed Australian Property Trust, or an entity organized as a trust, provided that a Listed Australian Property Trust owns or controls, directly or indirectly, 75 percent or more of the voting or value of the beneficial interests or shares of such trust; andsectionB10(3b(3B10(3b(35 Any Qualified Foreign Entity.sectionB10(3b(4B10(3b(45 For purposes of subdivision B 10, the constructive ownership rules prescribed under § 318(a) of the Internal Revenue Code, as modified by § 856(d)(5) of the Internal Revenue Code, shall apply in determining the ownership of stock, assets, or net profits of any person.sectionB10(3cB10(3c4 The entity is not subject to a tax on amounts distributed to its beneficial owners, or is exempt from entity level tax;sectionB10(3d(2B10(3d(25 The entity distributes, on an annual basis, at least 85 percent of its taxable income, as computed in the jurisdiction in which it is organized, to the holders of its shares or certificates of beneficial interest;sectionB10(3d(3B10(3d(35 The shares or certificates of beneficial interest of such entity are regularly traded on an established securities market or, if not so traded, not more than 10 percent of the voting power or value in such entity is held directly, indirectly, or constructively by a single entity or individual; andsectionB10(3d(4B10(3d(45 The entity is organized in a country that has a tax treaty with the United States.sectionB10(3d(5B10(3d(55 For taxable years beginning on or after January 1, 2016, for purposes of subdivision B 10, any voting power or value of the beneficial interests or shares in a REIT that is held in a segregated asset account of a life insurance corporation as described in § 817 of the Internal Revenue Code shall not be taken into consideration when determining if such REIT is a Captive REIT.sectionB10(3eB10(3e4 For taxable years beginning on or after January 1, 2016, to the extent that tax credit is allowed for the same donation pursuant to § 58.1-439.12:12, any amount claimed as a federal income tax deduction for such donation under § 170 of the Internal Revenue Code, as amended or renumbered.sectionB11B112There shall be subtracted to the extent included in and not otherwise subtracted from federal taxable income:sectionCC1 Income derived from obligations, or on the sale or exchange of obligations, of the United States and on obligations or securities of any authority, commission or instrumentality of the United States to the extent exempt from state income taxes under the laws of the United States including, but not limited to, stocks, bonds, treasury bills, and treasury notes, but not including interest on refunds of federal taxes, interest on equipment purchase contracts, or interest on other normal business transactions.sectionC1C12 Income derived from obligations, or on the sale or exchange of obligations of this Commonwealth or of any political subdivision or instrumentality of this Commonwealth.sectionC2C22 Dividends upon stock in any domestic international sales corporation, as defined by § 992 of the Internal Revenue Code, 50 percent or more of the income of which was assessable for the preceding year, or the last year in which such corporation has income, under the provisions of the income tax laws of the Commonwealth.sectionC3C32 The amount of any refund or credit for overpayment of income taxes imposed by this Commonwealth or any other taxing jurisdiction.sectionC4C42 Any amount included therein by the operation of the provisions of § 78 of the Internal Revenue Code (foreign dividend gross-up).sectionC5C52 The amount of wages or salaries eligible for the federal Targeted Jobs Credit which was not deducted for federal purposes on account of the provisions of § 280C(a) of the Internal Revenue Code.sectionC6C62 Any amount included therein by the operation of § 951 of the Internal Revenue Code (subpart F income).sectionC7C72 Any amount included therein which is foreign source income as defined in § 58.1-302.sectionC8C82 The amount of any dividends received from corporations in which the taxpaying corporation owns 50 percent or more of the voting stock.sectionC10C102 [Repealed.]12, 13. [Expired.]sectionC11C112 For taxable years beginning on or after January 1, 2000, the total amount actually contributed in funds to the Virginia Public School Construction Grants Program and Fund established in Chapter 11.1 (§ 22.1-175.1 et seq.) of Title 22.1.sectionC15C152 For taxable years beginning on or after January 1, 2000, but before January 1, 2015, the gain derived from the sale or exchange of real property or the sale or exchange of an easement to real property which results in the real property or the easement thereto being devoted to open-space use, as that term is defined in § 58.1-3230, for a period of time not less than 30 years. To the extent a subtraction is taken in accordance with this subdivision, no tax credit under this chapter for donating land for its preservation shall be allowed for three years following the year in which the subtraction is taken.sectionC16C162 For taxable years beginning on and after January 1, 2001, any amount included therein with respect to § 58.1-440.1.sectionC17C172 [Repealed.]sectionC1819,C1819,3 For taxable years beginning on and after January 1, 2004, any amount of intangible expenses and costs or interest expenses and costs added to the federal taxable income of a corporation pursuant to subdivision B 8 or B 9 shall be subtracted from the federal taxable income of the related member that received such amount if such related member is subject to Virginia income tax on the same amount.sectionC21C212 For taxable years beginning on and after January 1, 2009, any gain recognized from the sale of launch services to space flight participants, as defined in 49 U.S.C. § 70102, or launch services intended to provide individuals the training or experience of a launch, without performing an actual launch. To qualify for a deduction under this subdivision, launch services must be performed in Virginia or originate from an airport or spaceport in Virginia.sectionC22C222 For taxable years beginning on and after January 1, 2009, any gain recognized as a result of resupply services contracts for delivering payload, as defined in 49 U.S.C. § 70102, entered into with the Commercial Orbital Transportation Services division of the National Aeronautics and Space Administration or other space flight entity, as defined in § 8.01-227.8, and launched from an airport or spaceport in Virginia.sectionC23C232For taxable years beginning on and after January 1, 2006, there shall be subtracted from federal taxable income contract payments to a producer of quota tobacco or a tobacco quota holder as provided under the American Jobs Creation Act of 2004 (P.L. 108-357) as follows:sectionDD1 If the payment is received in installment payments, then the recognized gain, including any gain recognized in taxable year 2005, may be subtracted in the taxable year immediately following the year in which the installment payment is received.sectionD1D12 If the payment is received in a single payment, then 10 percent of the recognized gain may be subtracted in the taxable year immediately following the year in which the single payment is received. The taxpayer may then deduct an equal amount in each of the nine succeeding taxable years.sectionD2D22Adjustments to federal taxable income shall be made to reflect the transitional modifications provided in § 58.1-315.sectionEE1