Virginia’s date of conformity with the Internal Revenue Code (IRC) was advanced from December 31, 2015 to December 31, 2016, with limited exceptions. Virginia will continue to disallow the five-year carry back of net operating losses (“NOL”) allowed for NOLs generated in Taxable Years 2008 and 2009.
Virginia will continue to disallow federal income tax deductions for:
- Virginia will continue to disallow any bonus depreciation claimed for certain assets under IRC § 168(k) during Taxable Year 2001 and thereafter.
- bonus depreciation allowed for certain assets under IRC §§ 168(k), 168(l), 168(m), 1400L, and 1400N
- five-year carryback of federal net operating loss deductions generated in taxable year 2008 or 2009
- federal income tax deductions for applicable high yield discount obligations under IRC § 163(e)(5)(F)
- Virginia does not conform with this federal provision and required taxpayers to claim a Virginia addition equal to the amount of the federal exclusion. However, for transactions completed on or before April 21, 2010, taxpayers were permitted to partially defer such income by claiming the Virginia addition over three taxable years.
You must add back the difference in regular depreciation and special depreciation if you depreciated assets on your Federal return and the depreciation affected your Federal Adjusted Gross Income.
For example, if you depreciated an asset that you purchased during the tax year for your Schedule C business and opted to use the special 50% depreciation method, the deduction is greater than what is currently allowed in Virginia. You must re-figure the depreciation amount using the regular method of depreciation and add back the difference in the deduction on your Virginia tax return.
For additional information on how to report see Tax Bulletin 17-1 which provides taxpayers with directions on how to reconcile this legislation with their 2016 Virginia income tax returns.
|Asset purchase price||$5,000.00|
|Asset purchase date||1/15/2016|
|Depreciation method||5 year MACRS|
|Federal regular depreciation deduction||$1,000.00 (20% of $5,000|
|Federal depreciation using bonus option||$3,000.00 (50% of $5,000 + 20% of balance)|
|Virginia adjustment difference to add||$2,000.00 ($3,000 - $1,000)|
For additional information please see Form 760 instructions