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April 2, 2021

Virginia requires unitary business groups to file corporate income tax informational report based on group's combined net income

A provision of Virginia's budget bill, Section 3-5.23 of 2021 Va. HB 1800 (HB 1800), requires corporations that are members of a unitary business to file a corporate income tax informational report (based on 2019 tax year computations) using the unitary combined net income of its unitary group. On March 31, 2021, Governor Ralph Northam approved HB 1800, but requested the adoption of 18 proposed amendments, including one to delay the due date for filing the informational report from June 1, 2021 to July 1, 2021.1 The governor's proposed amendment will become law if the General Assembly ratifies the amendment when it reconvenes on April 7, 2021.

Section 3-5.23(A)(2) of HB 1800 defines a "unitary business" as a "a single economic enterprise made up either of separate parts of a single business entity or of a commonly controlled group of business entities that are sufficiently interdependent, integrated, and interrelated through their activities so as to provide a synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts.". A "unitary business" includes certain partnership interest but does not include entities subject to Virginia's insurance premiums tax or bank franchise tax. Further, a unitary combined group must exclude the income and apportionment factors for foreign corporations that have at least 80% of property, payroll and sales outside the United States or otherwise includable foreign corporations with income that is subject to the provisions of a federal income tax treaty.

The informational report will be based on the combined group's 2019 tax year computations, and must include, at a minimum, the difference in tax owed as a result of filing a unitary combined report compared to the tax owed under current filing requirements. The Virginia Tax Commissioner will specify the computation method (or methods) for making this comparison.

The measure imposes a $10,000 penalty for late filing or making a "material omission or misstatement" in connection with the report.

The Virginia Tax Commissioner will be required to submit a report based on the information it receives under the reporting requirement to the Chairs of the Virginia General Assembly's Senate Finance and Appropriations, House Appropriations and House Finance Committees.


This legislation was passed after multiple bills to move Virginia to a mandatory unitary combined reporting regime were filed and considered during the 2020 and 2021 legislative sessions. According to the legislative proponents, the informational reports will be used in considering the adoption of a mandatory unitary combined reporting approach to the Virginia corporate income tax in the future. Taxpayers that meet the criteria of unitary group members filing Virginia corporate income tax returns will be required to file a corporate income tax informational report using the unitary combined net income of their unitary group. Affected taxpayers will only have a couple of months to gather the necessary information, make determinations of includable members and run the calculations to complete the report. The report cannot be completed, however, until guidance on what to include, the computation method to be employed, and the reporting format is issued by the Virginia Department of Taxation. It is currently unknown which combined reporting approach the Virginia Tax Commissioner will utilize, or if for these purposes, he will rely upon the Multistate Tax Commission model.


Contact Information
For additional information concerning this Alert, please contact:
State and Local Taxation Group
   • Deane Eastwood (


1 Gov. Northam, 2021 Special Session I: Budget Amendments - HB1800 (Governor's Recommendations) (March 31, 2021) (" … I propose an amendment to move the Corporate Income Tax Informational Reporting date by one month, from June 1, 2021, to July 1, 2021. This will allow time for the [Virginia] Department of Taxation to contract for services required to create the applicable changes related to this new requirement. In addition, as businesses continue to recover and manage the impacts of COVID, this delay will provide businesses more time to become aware of and to understand the reporting requirements.").