Virginia's Conformity to the Internal Revenue Code

Tax Bulletin 18-1 – February 26, 2018

Under emergency legislation enacted by the 2018 General Assembly on February 22 and February 23, 2018, Virginia’s fixed-date of conformity to the terms of the Internal Revenue Code will advance from December 31, 2016, to February 9, 2018.

This legislation is effective for the taxable year 2017 and allows Virginia to conform to the Disaster Tax Relief and Airport and Airway Extension Act of 2017.

This legislation also conforms to most of the provisions of the Tax Cuts and Jobs Act and the Bipartisan Budget Act of 2018 that are effective for Taxable Year 2017. However, this legislation does not conform to the provision of the Tax Cuts and Jobs Act that temporarily increases the medical expenses deduction for Taxable Years 2017 and 2018. In addition, this legislation deconforms from most of the provisions of the Tax Cuts and Jobs Act and the Bipartisan Budget Act of 2018 that are effective for Taxable Year 2018 and thereafter..

Tax Bulletin 18-1 details the conformity adjustments that may be necessary and provides more information on how the changes affect 2017 Virginia income tax returns.

Additionally, Virginia will continue to deconform from:

  • Federal income tax deductions for bonus depreciation allowed for certain assets under Internal Revenue Code (“IRC”) §§: 168(k), 168(l), 168(m), 1400L, and 1400N;
  • The 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); and
  • Federal income tax exclusions related to cancellation of debt income realized in connection with a reacquisition of business debt at a discount after December 31, 2008, and before January 1, 2011.