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Northam Signs Tax Conformity Into Law

February 27, 2019

Virginia Gov. Ralph Northam signed tax conformity legislation into law Feb. 15, putting the complicated issue to bed and allowing the Virginia Department of Taxation to begin processing tax returns.

The legislation contains an emergency clause, meaning that it took effect with Northam's signature. Virginia now conforms with the U.S. Internal Revenue Code as of Dec. 31, 2018, including changes from the federal Tax Cuts and Jobs Act (TCJA). The bill makes the following changes:

  • Allocates $420 million in refunds to compensate taxpayers for higher state taxes resulting from the TCJA
    • Individual taxpayers who file before July 1, 2019, will receive $110 and married couples $220
  • Effective beginning in tax year 2018:
    • Eliminates deconformity with the temporary reduction in the medical expense deduction floor
    • Excludes Global Intangible Low-Taxed Income (GILTI) from definition of taxable income for corporations
    • Creates an individual and corporate income tax subtraction for 20 percent of the business interest allowed 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 state and local tax (SALT) limitation
    • Reinstates 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 toward tax reform