On May 10, 2018, the City of Williamsburg repealed local Ordinances 17-09, 17-10, and 17-16. Accordingly, effective July 1, 2018, there will be an additional one percent regional sales and use tax levied in the City of Williamsburg and the Counties of James City and York (the “Historic Triangle”). 

This additional tax is authorized by Senate Bill 942 (2018 Acts of Assembly, Chapter 850). The total rate of the Retail Sales and Use Tax in these localities will increase to 7.0 percent, consisting of the 4.3 percent state tax, the 0.7 percent Hampton Roads regional tax, the new 1.0 percent Historic Triangle regional tax, and the 1.0 percent local option tax. The rate of tax on food purchased for home consumption is unaffected by the law change and will remain at the current 2.5 percent (1.5 percent state and 1 percent local) rate. 

Details about this change can be found in Tax Bulletin 18-3.

View the Tax Bulletin

Following the publication of Tax Bulletin 18-1 on February 26, we developed a medical expense deduction worksheet as an insert for the 760 instruction booklets.

We also posted the worksheet on our website and distributed it to tax software developers as a computational guide to supplement the information provided in TB 18-1.

We recently discovered that the worksheet did not adequately address situations where a taxpayer must add back the full amount of the federal deduction. If a taxpayer’s medical expenses do not exceed 10% of federal adjusted gross income, the Virginia addition is equal to the full amount of the federal deduction. We have clarified this issue on the worksheet by specifying that, in such cases, the amount on Line 6 should be entered as 0. This will allow taxpayers to correctly compute the Virginia addition.

Updated copies of both the worksheet and the instructions are now available on our website.

We are also communicating these changes to tax software vendors.

Should you have any questions, please contact Customer Services at 804.367.8031.

Under emergency legislation enacted by the 2018 General Assembly on February 22 and February 23, 2018, Virginia's fixed-date of conformity to the terms of the Internal Revenue Code will advance from December 31, 2016, to February 9, 2018.

This legislation is effective for the taxable year 2017 and allows Virginia to conform to the Disaster Tax Relief and Airport and Airway Extension Act of 2017.

This legislation also conforms to most of the provisions of the Tax Cuts and Jobs Act and the Bipartisan Budget Act of 2018 that are effective for Taxable Year 2017. However, this legislation does not conform to the provision of the Tax Cuts and Jobs Act that temporarily increases the medical expenses deduction for Taxable Years 2017 and 2018. In addition, this legislation deconforms from most of the provisions of the Tax Cuts and Jobs Act and the Bipartisan Budget Act of 2018 that are effective for Taxable Year 2018 and thereafter..

Tax Bulletin 18-1 details the conformity adjustments that may be necessary and provides more information on how the changes affect 2017 Virginia income tax returns.

View the Tax Bulletin

Additionally, Virginia will continue to deconform from:

• Federal income tax deductions for bonus depreciation allowed for certain assets under Internal Revenue Code (“IRC”) §§: 168(k), 168(l), 168(m), 1400L, and 1400N;
• The five-year carryback of federal net operating loss deductions generated in Taxable Year 2008 or 2009;
• Federal income tax deductions for applicable high yield discount obligations under IRC § 163(e)(5)(F); and
• Federal income tax exclusions related to cancellation of debt income realized in connection with a reacquisition of business debt at a discount after December 31, 2008, and before January 1, 2011.

Virginia Tax Commissioner Craig M. Burns has announced that Virginia will provide extensions and penalty waivers to individuals and businesses in Florida and Georgia who are unable to meet their filing and payment obligations because of Hurricane Irma.

Outlined in Tax Bulletin 17-12, income tax returns and estimated payments with an original or extended due date between the first day of the disaster* and January 31, 2018 will be granted a waiver of late filing and late payment penalties if the returns and payments are filed on or before March 2, 2018.

* September 4, 2017 in Florida and September 7, 2017 in Georgia

The Virginia Board of Accountancy (VBOA) announced a major update involving individual and firm licenses and their expiration date. The Virginia Society of CPAs (VSCPA) and the VBOA have agreed that this change requires an update to the 2017 Virginia-specific Ethics course. To that end, the VSCPA is working diligently to incorporate the change as quickly as possible into the course.

On Friday, July 7, you will receive a new PowerPoint that will include a new introductory video with an explanation of the change that takes place on July 1, 2017. Additionally, you will also receive a one-page handout that should be given to your CPE takers in addition to the current manual. We also recommend that you reach out to your previous Ethics takers who have taken classes prior to this change to make them aware.

Starting July 1, 2017, the additional 12-month period for late renewals ends. Unrenewed licensees will automatically go into Expired status the day after the renewal is due.

Under emergency legislation (House Bill 1521; Chapter 1 of the 2017 Acts of Assembly) passed by the 2017 General Assembly and signed by Governor McAuliffe on February 3, 2017, Virginia's fixed-date of conformity to the terms of the Internal Revenue Code will advance from December 31, 2015, to December 31, 2016.  Tax Bulletin 17-1 provides taxpayers with directions on how to reconcile this legislation with their 2016 Virginia income tax returns.  This legislation allows Virginia to conform to federal tax legislation enacted during 2016 that would impact the filing of Virginia income tax returns, including the United States Appreciation for Olympians and Paralympians Act of 2016.

Virginia will continue to disallow federal income tax deductions for bonus depreciation allowed for certain assets under Internal Revenue Code (“IRC”) §§ 168(k), 168(l), 168(m), 1400L and 1400N; the five-year carryback of federal net operating loss deductions generated in Taxable Year 2008 or 2009; federal income tax deductions for applicable high yield discount obligations under IRC § 163(e)(5)(F); and federal income tax exclusions related to cancellation of debt income realized in connection with a reacquisition of business debt at a discount after December 31, 2008, and before January 1, 2011.

Tax Bulletin 17-1 can be found on the Department’s website by clicking here.

The 2016 Legislative Summary has been released.  The full text of the Legislative Summary can be found on the Department's website in the "Facts and Figures" section or by clicking here. 

The Legislative Summary is published by the Department of Taxation as a convenient reference guide to state and local tax legislation enacted by the 2016 Session of the General Assembly, including the reconvened session on April 20, 2016.  Please note that any legislation enacted after this date is not included.  The Summary includes a general description of enacted legislation affecting:

• State taxes administered by the Department, and
• Local taxes for which the Department assists with administration or on which the Department renders advisory assistance.

References to chapter numbers are to the corresponding chapters in the Acts of Assembly, which may be viewed at: http://lis.virginia.gov.  Effective dates of the legislation vary and are set out in each description.

In general, legislation affecting taxes administered by other state agencies is not included in the Summary.

The Summary is intended to provide a synopsis of enacted legislation and is for informational purposes only.  The Summary is not a substitute for the actual state law, local ordinances, or tax related regulations. 

To view the full text of the Legislative Summary, click here. 

If you have additional questions, please visit the Department's website at http://www.tax.virginia.gov, or contact the Department at (804) 367-8031 for individual income tax questions or (804) 367-8037 for business tax questions.

Our Customer Services Walk-In Center, located at 1957 Westmoreland St. in Richmond, will close for the 2016 individual income tax filing season on Friday, May 27. Until then, the center is open 8:30 a.m. to 5 p.m., Monday through Friday. For walk-in assistance, please arrive no later than 4:30 pm. 

The Cashiers' Office at the same location is open year-round to receive tax payments, sell tobacco stamps, and receive tax returns.

To get help by phone year-round, call our Customer Contact Center, 8:30 a.m. to 5 p.m., Monday through Friday.

• Individual income taxes: (804) 367-8031
• Business taxes: (804) 367-8037

Effective April 22, 2016, dealers are no longer required to collect sales and use tax on prepared meals, catering, and labor related to preparing and serving food purchased by nonprofit organizations, churches, state agencies, and local governments that have Virginia sales tax exemption certificates and meet certain requirements. 

In order for the purchases to qualify for the exemption, the nonprofit organization, church, or government entity must demonstrate all of the following:

• The provision of prepared meals, catering, and related services supports a function, mission, service, or purpose of the organization.
• The charge for prepared meals, catering, and services is billed to and paid for by the organization claiming the sales tax exemption.
• The organization that claims the exemption controls when, how, and who consumes the prepared food or catered meals.   

The Department of Taxation is not issuing new nonprofit exemption certificates at this time. New certificates will be issued when organizations renew their sales tax exemption. Instead, the department is sending letters explaining this policy change to all organizations holding department-issued nonprofit exemption certificates.

Organizations should provide the letter along with their exemption certificate when purchasing prepared meals, catering, or related services from dealers. 

For more information, see Tax Bulletin 16-3 “Important Information Regarding Meals and Catering Purchased by Nonprofit Organizations, Churches, and Governmental Entities” on the department’s website. 

The Virginia Department of Taxation is sending “Review of Tax Return” letters (AUIN073A RAP Additional Review) to some taxpayers to verify withholding information. Because of the increase in identity theft and refund fraud, we’re taking extra precautions this year to validate the refund returns we process.  

Processing of tax returns could take longer as we work to protect taxpayer information and ensure that taxpayers receive the state income tax refunds to which they are entitled.

We understand that taxpayers may be concerned if they receive a Review of Tax Return letter. Receiving the letter does not mean they are victims of identity theft or that their returns contain errors or missing data. It just means that their returns were stopped for review. 

If your clients receive this letter, they should read it carefully to determine what action they might need to take.

Please let your clients know the following:  

• If they did not submit an individual income tax return, they should check where indicated in the first paragraph of the letter and return it using the fax number or address provided.
• If they did file a return, they should follow the instructions in the letter and submit all requested documents as soon as possible by fax or mail. We will continue processing returns once we receive all requested documents and confirm that their returns are correct. Please allow 7 business days for us to receive the documents. 
• If they filed a return and already received their refunds, or receive one before sending us the requested information, we were able to verify their returns through other means. We no longer need documentation from them, and they may disregard the letter.

We’re asking taxpayers for their patience during the filing season. We take identity theft and tax refund security seriously and must take the time necessary to verify that the refunds we're processing are correct. It could take 8-10 weeks after submitting all requested documents for taxpayers to receive their refund. If it’s been longer than this, please have them contact us.