Document Number
88-187
Bulletin Number
VTB 88-9
Tax Type
General Provisions
Description
1988 Legislative Changes: Income Taxes
Topic
ACRS Modifications
Returns/Payments/Records
Withholding of Tax
Date Issued
06-01-1988

Virginia Tax Bulletin
Virginia Department of Taxation

88-9


SUBJECT: Income Taxes - 1988 Legislative Changes

The 1988 session of the General Assembly enacted several law changes which impact the individual and corporation income taxes. Brief summaries of the enacted legislation, arranged by the type of tax, are provided below:
INDIVIDUAL INCOME TAX
  • •Deduction for Law Enforcement Rewards: House Bill 916 (Chapter 756) amends Va. Code § 58.1-322 to provide a deduction from federal adjusted gross income of up to $1,000 for rewards received for providing information to any law enforcement official or agency, or to any nonprofit corporation created exclusively to assist law enforcement officials or agencies, in solving crimes. This deduction, however, does not apply to an individual employed by or under contract with a law enforcement agency, a victim or the perpetrator of the crime for which the reward was paid, or to any other person compensated for the investigation of crimes or accidents.
Effective Date: Taxable years beginning on and after January 1, 1988.
  • •Retirement Income Exclusion: House Bill 910 (Chapter 755) and Senate Bill 6 (Chapter 741) both amend Va. Code § 58.1-322 to provide a deduction from federal adjusted gross income of the first $3,000 of retirement benefits received by a retiree aged 62 or over, reduced by any Social Security or other nontaxable retirement benefits received during the taxable year. An individual would be limited to the $3,000 deduction or the current retirement income credit.
Effective Date: Taxable years beginning on and after January 1, 1990.
  • •Voluntary Refund Checkoffs: Several bills were enacted which amend the Virginia Code by adding §§ 58.1-345.1 and 58.1-346.1 to permit individuals to voluntarily designate all or part of their income tax refunds to certain designated funds. House Bill 197 (Chapter 817) would permit individuals to designate all or part of their income tax refunds to the "Open Space Recreation and Conservation Fund"; House Bill 257 (Chapter 819) would permit individuals to designate all or part of their income tax refunds to the "United States Olympic Committee"; and House Bill 990 (Chapter 861) would permit individuals to designate all or part of their income tax refunds to the "Housing for the Homeless, Elderly and Disabled Fund." These voluntary income tax refund contributions are in addition to the current checkoffs provided for the Virginia Nongame Wildlife program and the state Democratic or Republican parties.
Effective Date: Taxable years beginning on and after January 1, 1988, but expiring on December 31, 1993.
  • •Lump Sum Distributions: House Bill 223 (Chapter 743) amends Va. Code § 58.1-322 to clarify that lump sum distributions from a qualified retirement plan are not taken into account when calculating the standard deduction. This technical correction was necessary due to the Virginia Tax Reform Act of 1987, which changed the standard deduction from a percentage of federal adjusted gross income to a flat amount.
Effective Date: Taxable years beginning on and after January 1, 1987.
CORPORATION INCOME TAX
  • •Credit for Cogenerators: House Bill 748 (Chapter 730) amends Va. Code § 58.1-2600 to define "cogenerator" by reference to federal law and regulations, and adds § 58.1-433 to allow cogenerators to claim a credit against corporate income tax for purchases of coal mined in Virginia. The credit is equal to $1.00 per ton for taxable years beginning on and after January 1, 1988, and $2.00 per ton for taxable years beginning on and after January 1, 1989. The credit is limited to the amount of income tax liability, but any credit not usable may be carried over to the extent usable for the next five succeeding taxable years.
Effective Date: Taxable years beginning on and after January 1, 1988, but expiring on December 31, 1996.
  • •Telecommunications Companies: Senate Bill 312 (Chapter 899) adds and amends numerous sections in the Virginia Code to subject telecommunications companies to the corporate income tax for taxable years beginning on and after January 1, 1989, and exempt them from the public service corporation license tax on gross receipts and the pole line tax for tax years 1989 and after. The transfer from the gross receipts tax to the income tax is phased in over ten years. A minimum tax on gross receipts and a credit for a portion of the income tax liability are included for several years so that initially the total tax liability will be approximately equal to the gross receipts tax.
Effective Date: Taxable years beginning on and after January 1, 1989.
INDIVIDUAL AND CORPORATION INCOME TAXES

  • •Recovery of ACRS Modifications: Senate Bill 441 (Chapter 773) amends Va. Code § 58.1-323.1 to permit a taxpayer who filed a final federal and Virginia return for a taxable year beginning before January 1, 1988, to apply for a refund of the outstanding amounts of excess cost recovery which have not been previously subtracted. The applications will be subject to the provisions of § 58.1-1823 and must be made pursuant to regulations and on forms prescribed by the department.
Effective Date: July 1, 1988.

  • •Exemption for S Corporations: House Bill 222 (Chapter 581) amends Va. Code § 58.1-401 to clarify that electing small business corporations (S corporations) are exempt from the corporate income tax. This bill reinstates the corporate income tax treatment of S corporations prior to the enactment of the Virginia Technical Corrections Act of 1987.
Effective Date: Taxable years beginning on and after January 1, 1987.
ESTIMATED INCOME TAX
  • •Threshold for Declaration: House Bill 221 (Chapter 248) amends Va. Code § 58.1-490 to clarify that the threshold for filing a declaration of estimated income tax is computed based upon tax liability. This bill also conforms the threshold for filing a declaration of estimated income tax by estates and trusts to that of individual taxpayers.
  • Emergency Virginia Regulation 630-2-490.2 sets the filing threshold for individuals at $150 in tax due. This means that taxpayers whose estimated tax liability is less than $150, after taking into account withholding and all other credits, will no longer be required to make estimated payments.
Effective Date: Taxable years beginning on and after January 1, 1987.
INCOME TAX WITHHOLDING
  • •Eighth-monthly Filing: Senate Bill 312 (Chapter 899) amends Va. Code § 58.1-472 to accelerate the collection of income tax withholding by requiring employers whose monthly withholding tax liability exceeds $1,000 to file and pay the tax as often as eight times a month instead of four. Such payments would conform to the same payment dates required for federal withholding taxes. For more detailed information see Virginia Tax Bulletin 88-7.

Effective Date: July 1, 1988.
SET-OFF DEBT COLLECTION
  • •Payment of Interest on Refunds Erroneously Set-Off: House Bill 148 (Chapter 331) provides that interest will be paid on tax refunds erroneously held under the Set-Off Debt Collection program due to an error by the Department of Taxation or by a claimant agency. Such interest will be computed at the rate set forth in Va. Code § 58.1-15 and calculated in the manner set forth in Va. Code § 58.1-1833. The agency responsible for the erroneous set-off is required to reimburse the General Fund for the interest paid to the taxpayer.
Effective Date: July 1, 1988.

  • •Seizure of Funds on Deposit: House Bill 1017 (Chapter 563) and Senate Bill 322 (Chapter 768) both expand the collection remedy provided under the Set-Off Debt Collection Act by authorizing any claimant agency to apply funds that it has on deposit for a debtor toward the payment of any delinquent debt the debtor may owe the claimant agency. "Funds on deposit" which may be applied to claimant agency debts include overpayment of taxes, funds due to a debtor arising from a contractual agreement with a claimant agency, and any other funds of a debtor that a claimant agency may have in its possession. One claimant agency would not, however, be permitted to set-off funds for the payment of a debt owed to another claimant agency. In addition, the claimant agency must notify debtors prior to the application of funds to a debt owed to the claimant agency and must pay interest on funds erroneously denied.

Effective Date: July 1, 1988.
PARTNERSHIPS
  • •Repeal Tax Filing Requirement: House Bill 242 (Chapter 249) amends Va. Code § 58.1-392 to repeal the requirement that partnerships file informational income tax returns. Due to this change, the department will not require the filing of Virginia partnership returns (Form 501) for taxable years beginning on and after January 1, 1987. The bill also contains provisions which allow the Tax Commissioner to request information from partnerships and prescribe penalties for failure to furnish requested information or for furnishing fraudulent information. See Virginia Tax Bulletin 88-2 for further details.

Effective Date: March 23, 1988.


If you have any questions on these legislative changes, please do not hesitate to call the Department of Taxation or write us at P.O. Box 6-L, Richmond, Virginia 23282.

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Last Updated 08/25/2014 16:44