A provision of Virginia’s budget bill requires all corporations subject to Virginia income tax to file a one-time report with Virginia Tax by July 1, 2021. This report will show the difference between the amount of tax the corporation would pay if it filed as part of a unitary combined group and the amount of tax based on how they currently file.
What is a unitary combined group?
Section 3-5.23(A)(2) of HB 1800 defines a “unitary business” as a “a single economic enterprise made up either of separate parts of a single business entity or of a commonly controlled group of business entities that are sufficiently interdependent, integrated, and interrelated through their activities so as to provide a synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts.”. A “unitary business” includes certain partnership interests but does not include entities subject to Virginia’s insurance premiums tax or bank franchise tax. Further, a unitary combined group must exclude the income and apportionment factors for foreign corporations that have at least 80% of property, payroll and sales outside the United States or otherwise includable foreign corporations with income that is subject to the provisions of a federal income tax treaty.
What if my corporation is not part of a unitary combined group?
You are still required to file with the state of Virginia and let them know you are not a unitary combined group. This must be completed by July 1, 2021 to avoid a $10,000 penalty.
How do you complete the report?
All corporations should receive a two-page correspondence from the State of Virginia providing a correspondence ID number. Once this is received the report can be completed online at https://www.business.tax.virginia.gov/unitary/#/ubg/reporting. If correspondence has not yet been received, the correspondence ID can be obtained by calling 804-367-8037 and selecting option #4.
If you have further questions or need assistance, please contact your KWC adviser.