Virginia General Assembly 2026: Caboose Budget Locks in Conformity & Makes PTET Permanent

For this year, it appears tax conformity will be resolved through committee amendments to the caboose budget bills (HB 29 and SB 29) rather than standalone legislation.

The “caboose” budget is the General Assembly’s amendment to the current two-year state budget. It is a must-pass vehicle typically used to make technical and policy adjustments before the next full budget cycle. Because it moves as part of the overall budget, policy issues included in the caboose are often decided more quickly — and with greater political viability — than they would be through the standard bill process.

Importantly, the House and Senate amendments are identical, eliminating the need for a conference committee and allowing for an expedited resolution.

The final budget language:

• Repeals rolling income tax conformity.
• Allows automatic conformity to federal extenders.
• Makes the pass-through entity tax (PTET) permanent, including the out-of-state credit.
• Provides a timely resolution to conformity questions related to federal tax code changes in HR 1.

The VSCPA is disappointed by the repeal of rolling conformity, which was enacted in 2023 following significant member advocacy and provided greater predictability for taxpayers and practitioners.

That said, we are appreciative of the timely resolution to HR 1 conformity questions, the move to automatic conformity for federal extenders, and the permanence of PTET. Addressing these issues through the caboose budget provides clarity well ahead of filing season and avoided the political and procedural hurdles a standalone emergency bill likely would have faced this year.