Pass-through entity SALT cap FAQ

The VSCPA is getting many questions related to legislation passed by the Virginia General Assembly regarding the State and Local Tax (SALT) federal income tax limitation for pass-through entities (PTE). As we get more questions, we will add them here:

When will the bill be signed by Virginia Gov. Glenn Youngkin? What if he doesn't sign?

Youngkin's deadline is April 11, 2022, and he is expected to sign. However, if he does not, the bills will automatically become law and go into effect on July 1, 2022. We have no reason to believe he intends to veto.

What should taxpayers do with 2021 returns if the law doesn't become effective until July 1?

Taxpayers eligible for the out-of-state credit (OSC) in 2021 should file an extension and then file after July 1, 2022. Taxpayers interested in the entity-level tax options should file for 2021 based on current law. The entity-level tax for 2021 will be available retroactively and we are awaiting guidance on how that will work. We do not expect guidance until later this calendar year and plan to convene a workgroup to provide feedback to the Virginia Department of Taxation before guidance is issued.

Why is this only available to PTEs owned by "natural persons?" What about trusts?

We expect clarification to the definition of "natural persons" through the guidelines.