Bulletin Number
VTB 84-14
Tax Type
Corporation Income Tax
Individual Income Tax
Description
1984 Legislative Changes
Topic
Computation of Income
Computation of Tax
Date Issued
06-15-1984
INCOME TAX - 1984 LEGISLATIVE CHANGES
INDIVIDUAL INCOME TAX
Retirement Benefits: Va. Code §§ 58-151.013 and 58-151.014:1 were amended to provide a subtraction in computing Virginia taxable income equal to the amount used in computing the federal disability income tax credit allowed a qualified individual under § 37 of the Internal Revenue Code. The deduction may be claimed only by a retiree under age 65 who qualified for such retirement on the basis of permanent and total disability. A qualified individual may claim this disability deduction, the deduction for pension income received by certain state and local officials or the age credit set forth in Va. Code § 58-151.014:1, but may claim only one of the three.
Effective Date: Taxable years beginning on and after January 1, 1984. (Chapter 674, House Bill 69).
Additional Withholding for Out-of-State Tax Credit: Va. Code §151.2 was amended to allow a reduction in the amount or income tax withheld from an employee's wages comparable to the amount of any income tax credit for income tax paid to another state allowable under Va. Code §58-151.015. This allowance is in addition to the personal exemption and standard deduction allowances currently allowed.
Effective Date: Taxable years beginning on and after January 1, 1985. (Chapter 682, House Bill 433).
Subtraction of Tier 1 Railroad Retirement Benefits and Certain Workmen's Compensation: Va. Code § 58-151.013 was amended to allow a subtraction in the computation of Virginia taxable income for Tier 1 railroad retirement benefits and certain workmen's compensation benefits to the extent included in federal adjusted gross income. All or a portion of these benefits and Title II social security benefits became taxable for federal purposes (IRC § 86) effective in 1984. Legislation was enacted in 1983 to provide a subtraction for federally taxed social security benefits and this bill broadens the subtraction to encompass the other benefits which became taxable for federal purposes pursuant to IRC § 86. Tier 2 railroad retirement benefits will remain taxable for federal and state purposes.
Effective Date: Taxable years beginning on and after January 1, 1984. (Chapter 162, House Bill 28).
Charitable Contributions: Va. Code § 58-151.013 was amended to allow an individual to adjust his/her federal itemized charitable contribution to result in a Virginia deduction for mileage of 18 cents per mile. If the individual uses the standard mileage rate of 9 cents per mile for federal purposes, the result would be an increased deduction of 9 cents per mile for Virginia purposes. If the individual uses actual expenses for federal purposes, the result would be an increased Virginia deduction to the extent that actual expenses are less than the equivalent of 18 cents per mile. If actual expenses for federal purposes exceed 18 cents per mile, no adjustment to the Virginia return would be required.
Effective Date: Taxable years beginning on and after January 1, 1985. (Chapter 636, House Bill 196).
Interest Addition: Va. Code § 58-151.013 was amended to require an addition in computing Virginia taxable income for the amount of interest income excluded from federal adjusted gross income pursuant to § 128 of the Internal Revenue Code. The federal exclusion, which is effective for taxable years beginning on and after January 1, 1985, allows individuals to exclude a portion of net interest income. Net interest income is determined by subtracting from certain interest income (e.g., savings certificate interest), qualified interest expenses (interest paid with certain exceptions e.g., mortgage interest). The amount to be added is reduced by any interest on U.S. or Virginia obligations included in the federal exclusion so that these types of interest will continue their protection from taxation in Virginia.
Effective Date: Taxable years beginning on and after January 1, 1985. (Chapter 153, Senate Bill 161).
CORPORATION INCOME TAX
Subtraction For ESOP Credits: Va. Code §§ 58-151.032, 58-151.032:1 and 58-151.032:2 were amended to provide a subtraction for employer contributions to a tax credit Employee Stock Ownership Plan (ESOP) not deducted by a corporation in computing federal taxable income because of ESOP tax credit elections under § 44G of the Internal Revenue Code. The subtraction provided by this bill replaces a previous subtraction which was applicable to federal income tax credits elected under the provisions of § 46(a)(2)(E) of the Internal Revenue Code before its repeal.
In addition to providing a new subtraction, this bill repeals the now obsolete subtraction under § 58-151.032(cl) and provides an addition for the amount of employee stock ownership credit carryover deducted under § 404(i) of the Internal Revenue Code. This addition is required because any unused credit remaining at the close of the last taxable year to which the federal credit may be carried is allowed as a federal tax deduction for that taxable year under Internal Revenue Code § 404(i).
Effective Date: Taxable years beginning on and after January 1, 1983. (Chapter 302, Senate Bill 311).
INDIVIDUAL AND CORPORATION INCOME TAXES
Deferral of Excess Cost Recovery (ACRS): Va. Code §§ 58-151.013 and 58-151.013:1 were amended to continue the deferral of Excess Cost Recovery by extending the Virginia additions for 30% of the ACRS deduction to taxable years subsequent to 1983 and by extending the subtraction periods for recovery of additions. This bill requires that 30% of the actual ACRS deductions be deferred for two years. In each of the next five years (the first through fifth taxable years beginning after a biennium), 20% of the amount added may be deducted. A biennium means the two taxable years beginning in 1982 and 1983 and each two succeeding taxable years.
Effective Date: Taxable years beginning on and after January 1, 1984. (Senate Bill 127).
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