Tax Type
Corporation Income Tax
Description
Taxable income; Modifications to federal taxable income; Basis adjustment
Topic
Computation of Income
Date Issued
08-26-1997
August 26, 1997
Re: Request for Ruling: Corporate Income Tax
Dear**************
This will respond to your letter of June 12, 1997, in which you request a ruling regarding the Virginia income tax treatment of expenditures eligible for the credit provided by Internal Revenue Code (IRC) § 44.
FACTS
Pursuant to IRC § 38(a)(7), a credit is allowed against federal income tax for the eligible access expenditures used to determine the disabled access credit under IRC § 44(a). When utilizing this credit, IRC § 44(d)(7) specifically provides that no further deduction or credit is allowable for such expenditures nor is there any increase in the adjusted basis of property allowed with respect to expenditures for the credit (no double benefit). Because Virginia does not allow a similar credit, you believe this creates a "Virginia basis" in the property that is different from the federal basis. You request the proper treatment for this "basis" difference on the Virginia return.
RULING
Code of Virginia § 58.1-402.A. 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 adjusted as provided in subsections B, C, or D.
It is recognized that there are a number of IRC provisions where credits are involved that create a perceived basis difference for federal and Virginia tax purposes. When such credits are taken at the federal level, the usual corresponding adjustment is to reduce the depreciable asset basis or reduce the asset basis subject to the § 179 election to expense the item.
In the instant case, Virginia does not allow a similar credit nor does it allow a subtraction for the amount of basis reduction. In contrast, Code of Virginia § 58.1-402.C.6. does allow a specific subtraction for expenses disallowed for federal income tax purposes due to the federal targeted jobs credit. Accordingly, the amount of IRC § 44 credit elected to be taken by a taxpayer is not considered to be a subtraction from federal taxable income in the computation of Virginia taxable income.
If you have any questions regarding this ruling, please contact *****in the Office of Tax Policy at********* .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12656P
Rulings of the Tax Commissioner