Document Number
95-144
Tax Type
Corporation Income Tax
Description
Taxable income Carry forward of wage expense deduction
Topic
Computation of Income
Date Issued
06-06-1995
June 6, 1995



Re: § 58.1-1821 Application: Corporate Income Tax


Dear*************

This will reply to your letter of May 2, 1995, in which you protest the disallowance of a carryforward subtraction of salaries and wages not deducted due to the election to take the federal Targeted Jobs Credit for*************(the "Taxpayer") .
FACTS

Internal Revenue Code (I.R.C.) § 280C(a). disallows the federal deduction for wage and salary expenses to the extent such expenses are utilized in computing the federal Targeted Jobs Credit. Virginia law permits a deduction for this amount in the year it is disallowed at the federal level. You believe that amounts disallowed on the federal return may be carried forward for Virginia purposes, and deducted in subsequent taxable years.
DETERMINATION

Code of Virginia §58.1 -402 defines Virginia taxable income as "federal taxable income and any other income taxable to the corporation under federal law for such year of a corporation", with specific statutory adjustments as provided. In determining Virginia taxable income, Code of Virginia §58.1-402.C.6. provides that there shall be a subtraction, to the extent included in and not otherwise subtracted from federal taxable income, for the amount of salaries and wages not deducted for federal tax purposes due to I.R.C. § 280C(a). However, it makes no provision for a carryforward subtraction when such expenses exceed income on the return which generated the subtraction.

The carryforward of the subtraction of disallowed Targeted Jobs Credit salary and wages you are suggesting is essentially a Virginia net operating loss. It has long been established that there is no provision in the Code of Virginia for a Virginia net operating loss. Absent a federal net operating loss, there is no authority for the carryforward which you have suggested. Virginia subtractions can never be used to create a Virginia net operating loss where there is no federal net operating loss.

Accordingly, your request for the carryforward of unused deductions of salaries and wages due to the Targeted Jobs Credit must be denied. The remaining balance of the assessment,******** as shown on the attached schedule, should be paid within 30 days to avoid accrual of additional interest. Please forward your payment to the Office of Tax Policy, Virginia Department of Taxation, P.O. Box 1880, Richmond, Virginia 23282. Should you have additional questions regarding this matter, please contact*************.
                        • Sincerely,



                          Danny M. Payne
                          Tax Commissioner


OTP/9695P

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46