The shifting saga of tax conformity appears to be coming to a close. A positive resolution appears to be in sight in the form of a deal between both parties and the Governor’s administration that would conform Virginia’s tax code with the U.S. Internal Revenue Code effective Dec. 31, 2018. HB 2529 and SB 1372 passed their opposite chambers and are on track to reach the Governor’s desk by the end of this week after the amendments are affirmed in their chambers of origin.
The bills are identical and each contains an emergency clause, meaning they will take effect with the Governor’s signature, which would allow the Virginia Department of Taxation to begin processing returns.
Here is a complete list of the changes contained in the bill:
- Allocates $420 million in refunds to compensate taxpayers for higher state taxes resulting from the Tax Cuts and Jobs Act (TCJA)
- Individual taxpayers will receive $110 and married couples $220
- Refunds will only be issued to taxpayers who file before July 1, 2019
- Effective beginning in tax year 2018:
- Eliminates the deconformity with the temporary reduction in the medical expense deduction floor
- Excludes Global Intangible Low-Taxed Income (GILTI) from the definition of taxable income for corporations
- Creates an individual and corporate income tax subtraction for 20 percent of the business interest disallowed on federal
- Effective beginning in tax year 2019:
- Standard deduction raised by 50 percent to $4,500 for individuals and $9,000 for married couples
- Deconforms with federal SALT limitation
- Reinstates the overall limitation on itemized deductions (also known as the Pease limitation)
- Creates a nonreverting fund for any additional revenues created by TCJA to be used towards tax reform