Virginia Gov. Ralph Northam recently signed a budget bill for the 2020 – 2022 biennium that contains several significant new and familiar tax provisions, including COVID-19 administrative tax relief, a sales tax exemption for certain research and development centers, and a deduction for ABLE account contributions.
Read on for our summary of the most relevant tax provisions contained in the budget.
COVID-19 tax relief – The Virginia Department of Taxation is waiving interest on late payments for any income tax payments originally due from April 1, 2020, to June 1, 2020. This relief is granted if the income tax payments are made by July 1, 2020. The Department is also waiving interest on any sales tax payments originally due by March 20, 2020, if the sales tax payments were remitted to the Department no later than April 20, 2020.
Internet service provider sales tax exemption – Internet service providers that receive Virginia sales and use tax exemptions for the production, distribution, and other equipment used to provide internet access services must make a refund request to the Virginia Tax Commissioner in order to receive the exemption.
Achieving a Better Life Experience (ABLE) account contribution deduction – A deduction from Virginia adjusted gross income (AGI) is allowed for an amount contributed to an ABLE savings trust account entered with the Virginia College Savings Plan. The deduction is limited to $2,000 per ABLE savings trust account and cannot be taken if the contributions are deducted on the contributor’s federal tax return. If a taxpayer’s ABLE contribution exceeds the $2,000 limit, then the remainder can be carried forward and subtracted in future years.
Sales tax exemption for certain research and development centers – Federally funded research and development centers that are sponsored by the U.S. Department of Energy will be exempt from the Virginia retail sales and use tax on purchases of tangible personal property.
Historic Rehabilitation Tax Credit – For taxable years beginning on or after Jan. 1, 2017, the amount of the historic rehabilitation tax credit that may be claimed cannot exceed $5 million for any tax year. This limitation includes amounts carried over from prior tax years.
What does CohnReznick think?
Virginia is now requiring internet providers to pay sales tax on their purchases of equipment and to maintain invoice records to request a sales tax refund on these purchases. The Virginia Legislature did pass the abatement of interest on certain income and sales tax payments that are now due July 1, 2020.
During these unprecedented times, taxpayers should be mindful that the states are going to be running deficits, and we are likely to see income and sales tax legislation that may be unfavorable.
Subject matter expertise
JD, Principal, Practice Leader, State and Local Tax (SALT) Services
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