Tax Type
Bank Franchise Tax
Description
Tax Bulletin
Topic
Basis of Tax
Date Issued
02-15-1995
95-1
BANK FRANCHISE TAX
Please direct this tax bulletin to the person who
prepares the Virginia bank franchise tax return.
Please direct this tax bulletin to the person who
prepares the Virginia bank franchise tax return.
Last year most banks were required to adopt an accounting method for the valuation of marketable securities pursuant to Statement of Financial Accounting Standards No. 115 of the Financial Accounting Standards Board (FASB Statement No. 115). As a result, the total equity capital reported on the Official Report of Condition (Call Report) now includes unrealized gains and losses of marketable securities classified as "available for sale."
The Virginia bank franchise tax return (Form 64) starts with the "total equity capital" from the Call Report. Thus, Line 1 of the 1995 Form 64 should be the amount reported on Line 28 or 28a of Schedule RC of the Call Report for December 31, 1994. This amount will include unrealized gains and losses required by FASB Statement No. 115. No adjustment is required or permitted on the Virginia return for unrealized gains and losses included pursuant to FASB Statement No. 115.
Virginia bank franchise tax law allows an adjustment for valuation reserve, which is shown on Schedule A of Form 64. Under current accounting standards, the book value of securities available for sale and in trading accounts is now shown at market value, and securities which will be held to maturity are shown at amortized cost. Because these values are included in total equity capital, there is no valuation reserve to adjust on the Virginia return.
Virginia bank franchise tax law also allows a deduction for U.S. Obligations. In computing this deduction, the value of U.S. Obligations reported on Schedule E of the 1995 Form 64 should be the same value included in Line 2 of Schedule RC of the quarterly Call Reports for 1994. Thus, U.S. Obligations classified as "held to maturity" would be valued at amortized cost, while U.S. Obligations classified as "available for sale" would be valued at market value. The total assets reported on Schedule RC, Line 12 of the quarterly Call Reports would be reported on Schedule E of the 1995 Virginia Form 64.
If you have any questions about the bank franchise tax, please contact the department at P.O. Box 1115, Richmond, VA 23208-1115, or call (804) 367-8326.
Related Documents
Rulings of the Tax Commissioner