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2004 SESSION
047655204Be it enacted by the General Assembly of Virginia:
1. That §§ 58.1-391, 58.1-392 and 58.1-441 of the Code of Virginia are amended and reenacted, and that the Code of Virginia is amended by adding sections numbered 58.1-390.1, 58.1-390.2 and 58.1-393.1 and by adding in Article 9 of Chapter 3 of Title 58.1 sections numbered 58.1-394.1, 58.1-394.2 and 58.1-395 as follows:
§ 58.1-390.1. Definitions.
The following words and terms, when used in this article, shall have the following meanings unless the context clearly indicates otherwise:
“Pass-through entity” means any entity, including a limited partnership, a limited liability partnership, a general partnership, a limited liability company, a professional limited liability company, a business trust or a Subchapter S Corporation, that is recognized as a separate entity for federal income tax purposes, in which the partners, members or shareholders report their share of the income, gains, losses, deductions and credits from the entity on their federal income tax returns.
“Owner” means any individual or entity that is treated as a partner, member, or shareholder of a pass-through entity for federal income tax purposes.
§ 58.1-390.2. Taxation of pass-through entities.
Except as provided for in this article, owners of pass-through entities shall be liable for tax under this chapter only in their separate or individual capacities.
§ 58.1-391. Virginia taxable income of owners of a pass-through entity.
A. In determining Virginia taxable income of a partner an owner of a
pass-through entity, any modification described in § 58.1-322 which relates to
an item of partnership pass-through entity income, gain, loss or deduction
shall be made in accordance with the partner'sowner's distributive share, for
federal income tax purposes, of the item to which the modification relates. Where
a partner's an owner's distributive share of any such item is not included
in any category of income, gain, loss or deduction required to be taken into account separately
for federal income tax purposes, the partner'sowner's distributive share of
such item shall be determined in accordance with his distributive share, for federal income tax
purposes, of partnership pass-through entity taxable income or loss.
B. Each item of partnership pass-through entity income, gain, loss or deduction
shall have the same character for a partner an owner under this chapter as for
federal income tax purposes. Where an item is not characterized for federal income tax purposes, it
shall have the same character for a partner an owner as if realized directly
from the source from which realized by the partnership pass-through entity or
incurred in the same manner by the partnership pass-through entity.
C. Where a partner's an owner's distributive shares of an item of partnership
pass-through entity income, gain, loss or deduction is determined
for federal income tax purposes by special provision in the partnership
pass-through entity agreement with respect to such item, and where
the principal purpose of such provision is the avoidance or evasion of tax under this
chapter, the partner's owner's distributive share of such item, and any
modification required with respect thereto, shall be determined as if the
partnership pass-through entity agreement made no special provision with
respect to such item.
§ 58.1-392. Reports by pass-through entities.
No report shall be required to be filed with the Department of Taxation by any
partnership organized under the laws of the Commonwealth or having income from
Virginia sources. However, the Tax Commissioner shall have the authority to
promulgate regulations requiring that partnerships furnish copies of federal
partnership returns and attached schedules or any other information which he
deems necessary. In promulgating such regulations, the Tax Commissioner may
prescribe the imposition of a penalty in the amount of $100 for failure to
comply, within a reasonable time, to the request for information as set forth
therein.
A. Every pass-through entity doing business in Virginia, or having income from Virginia sources, shall make a return to the Department of Taxation on or before the fifteenth day of the fourth month following the close of its taxable year. Such returns shall be made and filed in the manner prescribed by the Department.
B. The return of a pass-through entity shall be signed by any one of the owners. An owner’s name signed on the return shall be prima facie evidence that such owner is authorized to sign the return on behalf of the pass-through entity.
C. The Tax Commissioner may establish an income threshold for the filing of returns by pass-through entities and their owners. Pass-through entities and owners with income below this threshold shall not be required to file a return.
D. Receivers, trustees in dissolution, trustees in bankruptcy, and assignees, operating the property or business of pass-through entities must make and file returns of income for such pass-through entities. If a receiver has full custody of and control over the business or property of a pass-through entity, he shall be deemed to be operating such business or property, whether he is engaged in carrying on the business for which the pass-through entity was organized or only in marshaling, selling, or disposing of its assets for purposes of liquidation.
E. Pass-through entities may be required to file the return using an electronic medium prescribed by the Tax Commissioner. The Tax Commissioner shall establish a minimum number of owners for the electronic filing requirement. Waivers shall be granted only if the Tax Commissioner finds that the requirement creates an unreasonable burden on the pass-through entity. All requests for waiver must be submitted to the Tax Commissioner in writing. Pass-through entities that have fewer than the established minimum number of owners may, at such pass-through entity's option, file such annual return on such prescribed electronic medium in lieu of filing the annual return on paper.
§ 58.1-393.1. Extension of time for filing return by pass-through entity.
A. Whenever any pass-through entity has been allowed or granted an extension of time within which to file any federal report of its income for any taxable year, the due date for the filing of the report or return required by this article shall be extended to the date six months after such due date, or thirty days after the extended date for filing the federal report, whichever is later.
B. In addition, the Department may grant an extension or extensions of time not to exceed a maximum of six months beyond the due date required by this article for filing such pass-through entity return.
§ 58.1-394.1. Failure of pass-through entity to make a return.
A. Any pass-through entity that fails to file a return required by this article within the time required shall be liable for a penalty of $200 if the failure is for not more than one month, with an additional $200 for each additional month or fraction thereof during which such failure to file continues, not exceeding six months in the aggregate. In no case, however, shall the penalty be less than $200.
B. If any pass-through entity’s failure to file a return required by this article exceeds six months, the Department shall assess a penalty of six percent of the total amount of Virginia taxable income derived by its owners from the pass-through entity for the taxable year. The Department may determine such penalty from any information in its possession. The penalty assessed pursuant to this subsection shall be reduced by the penalty assessed pursuant to subsection A and any tax paid by the owners on their share of income from the pass-through entity for the taxable year.
C. The penalties set forth in this section shall be assessed and collected by the Department in the manner provided for the assessment and collection of taxes under this chapter or in a civil action, at the instance of the Department. In addition, such pass-through entity shall be compellable by mandamus to file such return.
§ 58.1-394.2. Fraudulent returns, etc., of pass-through entities; penalty.
A. Any officer or owner of any pass-through entity who makes a fraudulent return or statement with the intent of assisting or facilitating the evasion of the payment of the taxes prescribed by this chapter by the pass-through entity or an owner shall be liable for a penalty of not more than $1,000, to be assessed and collected in the manner provided for the assessment and collection of taxes under this chapter or in a civil action, at the instance of the Department.
B. In addition to other penalties provided by law, any officer or owner of a pass-through entity who makes a fraudulent return or statement with the intent of assisting or facilitating the evasion of the payment of the taxes prescribed by this chapter by the pass-through entity or an owner, shall be guilty of a Class 6 felony, or who willfully fails or refuses to make a return required by this chapter at the time or times required by law shall be guilty of a Class 1 misdemeanor. A prosecution under this section shall be commenced within five years next after the commission of the offense.
§ 58.1-395. Nonresident owners.
Pass-through entities may make written application to the Tax Commissioner for permission to file a statement of combined pass-through entity income attributable to nonresident owners and thereby relieve nonresident owners from filing individual nonresident returns. The application must state the reasons for seeking such permission. The Tax Commissioner, in his sole discretion, may, for good cause, grant permission to file a combined nonresident return upon such terms as he may determine.
§ 58.1-441. Reports by corporations.
A. Every corporation organized under the laws of the Commonwealth, or having income from Virginia sources, other than a Subchapter S corporation subject to the return filing requirements of § 58.1-392, shall make a report to the Department on or before the fifteenth day of the fourth month following the close of its taxable year. Such reports shall be made on forms prescribed by the Department and shall contain such information, including the gross receipts from any business carried on in the Commonwealth and a depreciation schedule of property used in such trade or business, as may be necessary for the proper enforcement of this chapter and be accompanied by a copy of any federal tax return or report filed for such taxable year. The Department shall not require any nonprofit organization created exclusively to assist a law-enforcement official or agency in apprehending and convicting perpetrators of crimes, to report on such returns, or otherwise, the names of individuals or amounts paid to such individuals by the organization for providing information about certain crimes.
Receivers, trustees in dissolution, trustees in bankruptcy, and assignees, operating the property or business of corporations must make returns of income for such corporations. If a receiver has full custody of and control over the business or property of a corporation, he shall be deemed to be operating such business or property, whether he is engaged in carrying on the business for which the corporation was organized or only in marshaling, selling, or disposing of its assets for purposes of liquidation.
B. Notwithstanding the provisions of subsection A, every organization to whom subdivision 5 of § 58.1-401 applies, and having unrelated business taxable income or other taxable income, shall make a report to the Department on or before the fifteenth day of the sixth month following the close of the organization's taxable year.
2. That §§ 58.1-390 and 58.1-394 of the Code of Virginia are repealed.
3. That the provisions of this act may result in a net increase in periods of imprisonment or commitment. Pursuant to § 30-19.1:4, the estimated amount of the necessary appropriation cannot be determined for periods of imprisonment in state adult correctional facilities and is $0 for periods of commitment to the custody of the Department of Juvenile Justice.