Fixed Date of Conformity Changed to January 7, 2005

February 24, 2005 — Gov. Mark Warner has signed emergency legislation HB 2411 to conform Virginia's tax code to that of the IRS by bringing the fixed date of conformity forward to January 7, 2005, with exceptions for IRC Section 168 (k) first-year bonus depreciation and the five-year net operating loss provisions for NOLs generated in 2001 and 2002.

In a letter to all General Assembly members, the Society supported the measure and urged legislators to expeditiously pass the legislation to reduce the need for filing amended returns.

According to the Virginia Department of Taxation (TAX), for income tax this means:

1. Tsunami contributions made in January 2005 and included in federal itemized deductions for 2004 may flow through to the Virginia individual income tax return.
2. The teachers expense deduction (up to $250) allowed on the 2004 federal individual income tax return does not need to be added back on the 2004 Virginia individual income tax return.
3. Taxpayers who elect to deduct sales tax payments on the federal return are not required to reduce their itemized deduction by the amount of the sales tax payments on the Virginia income tax return, as they must do with state income tax payments. Taxpayers should be aware that the decision regarding which deduction to use on the federal return cannot be changed on the Virginia return.
4. The limit on the Virginia return for the Clean-Fuel Vehicle Credit (line 30a, Schedule CR) is $200 for taxable year 2004. The limit for the federal deduction was extended to $2,000 during 2004, as opposed to phasing down to $1,500. Virginia's credit is 10 percent of the federal deduction.

For more information on this issue, check out a TAX bulletin released March 7, 2005.

If you have questions or concerns regarding this or other legislation, contact VSCPA Government Affairs Director Erin Collins at (800) 733-8272. The VSCPA will keep you apprised of any pertinent developments from the Virginia General Assembly and the governor's desk. Watch your e-mail in box for Issue Alerts or the VSCPA Web site for breaking news.