Virginia corporations would calculate state taxes using state loss rules

Corporations would calculate and deduct Virginia net operating losses under the bill’s rules. The rules apply to corporations filing Virginia returns, with distinct rules for consolidated and combined returns. The deduction is limited to the lesser of the loss arising that year or 80% of Virginia taxable income calculated under the stated rules. A loss cannot reduce Virginia taxable income below zero. For combined returns, each corporation calculates its deduction separately, and a loss that offsets another affiliate’s current income cannot carry forward. The deduction applies to taxable years beginning on or after January 1, 2027. A transitional loss may apply to a corporation’s 2027 tax year if it meets the stated 2026 and 2027 filing and federal-loss conditions.

Corporations would calculate Virginia taxable income without federal net operating loss deductions. This applies to corporations calculating Virginia taxable income. This calculation applies to taxable years beginning on or after January 1, 2027.

The Department of Taxation would issue preliminary and final guidelines for the bill’s provisions. Before issuing either set of guidelines, the Department must seek input from interested stakeholders. The bill states that its provisions would take effect January 1, 2027, but sets no separate deadline for the guidelines.