The table below summarizes the tax legislation enacted by the General Assembly during its 2023 Regular Session and approved by Gov. Youngkin that will become law on or before July 1, 2023. Please note that any legislation enacted after March 27, 2023 is not included in this summary.
HIGHLIGHTS
- Pass-Through Entity Tax: House Bill 1456 and Senate Bill 1476 provide that a pass-through entity is no longer required to be owned entirely by individuals or S corporation to make the election. The bill, which is effective for tax years beginning on or after 2021, is beneficial to some pass-through entities that were not structured in a way to qualify for the pass-through entity election, as originally enacted in 2022.
- Filing Method for Affiliated Corporations: House Bill 1405 and Senate Bill 796 amend the requirements for an affiliated group to elect to change its corporate income tax filing status by removing the condition that its tax liability for the previous tax year not be decreased by such a change in filing status. This bill legislation retains all other current requirements regarding changing an affiliated group’s filing status.
- Installment Agreements: House Bill 1369 requires the Department of Taxation to offer installment agreements to individual income taxpayers in which the taxpayer may satisfy his or her entire tax liability over a term of up to 5 years. Historically, the Department’s policy has been to limit the maximum term of installment agreements to 2 years with some exceptions. The legislation does not affect installment agreements for any other tax.
- Period of Limitations on Collection. House Bill 1625 suspends the statute of limitations on state tax collections actions while any administrative or judicial proceedings contesting the assessment are pending. Under current law, collection actions must cease after seven years from the date of assessment. The running of the seven-year statute of limitations is suspended while the taxpayer is in bankruptcy, is located outside of Virginia for more than six months, or has entered into an installment agreement.
The General Assembly is still working through the budget bills (House Bill 1400 and Senate Bill 800), where additional tax changes are typically found. Williams Mullen will continue to track all tax legislation and will update this alert when these and any new tax legislation becomes law in 2023.