Fixed-date tax conformity is a go for 2022

Thanks to fairly quick passage this year, fixed-date tax conformity was signed by Gov. Glenn Youngkin and became law on Feb. 23, 2022. HB 971 was passed by the Virginia House on Feb. 4 and then the Senate on Feb. 17. The bill advances Virginia's date of conformity with the Internal Revenue Code (IRC) from Dec. 31, 2020, to Dec. 31, 2021.

"We are so pleased that legislators and the governor recognized the importance of swift conformity adoption," said VSCPA President & CEO Stephanie Peters, CAE. "The sooner tax conformity is passed, the more quickly CPAs and taxpayers can file tax returns without fear of needing amended returns based on late conformity changes."

The legislation includes full conformity to the American Rescue Plan Act, including the Restaurant Revitalization Fund, and allows full deductibility of expenses paid with Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) for tax years beginning Jan. 1, 2021. The bill also includes a technical amendment to allow fiscal year filers to take advantage of the $100,000 deduction for forgiven PPP loans and Rebuild Virginia grants received in calendar year 2020. Additionally, the final legislation did NOT include an increase in 2020 PPP deductibility to $1 million.

The bill continues to deconform with the following:

• The special depreciation allowance for certain property provided for under §§168(k), 168(l), 168(m), 1400L, and 1400N of the IRC.
• The carry-back of certain net operating losses for five years under IRC § 172(b)(1)(H).
• The original issue discount on applicable high yield discount obligations under IRC § 163(e)(5)(F).
• The deferral of certain income under IRC § 108(i).
• For taxable years beginning on and after January 1, 2019, the suspension of the overall limitation on itemized deductions under IRC § 68(f).
• Expenses related to the calculation of medical care and federal adjusted gross income.
• Certain provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act related to net operating loss limitations and carry-backs, loss limitations applicable to taxpayers other than corporations, and limitations on business interest.
• Certain provisions related to the Consolidated Appropriations Act related to deductions, tax attributes, and basis increases for certain loan forgiveness and other business financial assistance.

For more information, read Tax Bulletin 22-1 from the Virginia Department of Taxation, or check out the full bill text. Questions or comments? Contact VSCPA Vice President, Advocacy, Emily Walker.