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Instructions for Preparing
2022 FORM 765
Unified Nonresident
Individual Income Tax Return
(Composite Return)
Commonwealth of Virginia
Department of Taxation
Richmond, Virginia
www.tax.virginia.gov
2601042 Rev. 08/22
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What’s New
Advancement of Virginia’s Fixed Date Conformity with the Internal Revenue Code
Virginia’s date of conformity with the Internal Revenue Code (IRC) was advanced from December 31, 2020, to December 31,
2021, subject to certain exceptions. This legislation also allows Virginia to generally conform to the American Rescue Plan
Act of 2021 (“ARPA”) and provides additional benefits to recipients of certain coronavirus disease 2019 (“COVID-19”)
business assistance programs during Taxable Years 2021 and 2019. See Tax Bulletin 22-1, posted on the Department’s
website at www.tax.virginia.gov, for additional information regarding Virginia’s conformity with the IRC and adjustments
that may be required as a result of this legislation
Virginia will continue to deconform from the following: bonus depreciation allowed for certain assets under federal law;
the five-year carryback of certain federal net operating loss (NOL) deductions generated in the 2008 or 2009 taxable
years; the federal income treatment of applicable high yield discount obligations; and the federal income tax treatment
of cancellation of debt income realized in connection with certain business debts. In addition, Virginia will continue to
deconform from the following temporary changes made by the Coronavirus Aid, Relief, and Economic Security (“CARES”)
Act: suspension of certain NOL limitations for Taxable Years 2018, 2019, and 2020 and increasing the business interest
limitation for Taxable Year 2019 and 2020. See Tax Bulletin 21-4 for more information.
At the time these instructions were published, the only required fixed date conformity adjustments were those mentioned
above. However, if legislation is enacted that results in changes to the IRC for the 2022 taxable year, taxpayers may need
to make adjustments to their Virginia returns that are not described in these instructions. Information about any such
adjustments will be posted on the Department’s website at www.tax.virginia.gov.
Business Interest Deduction Increase
For taxable years beginning on and after January 1, 2022, the Virginia corporate income tax deduction for business
interest has increased to 30% of the business interest disallowed as a deduction under the federal business interest
limitation. Under prior law, the deduction was equal to 20% of disallowed business interest. Enter the deduction amount
on Form 765 using Code 59. If an addition is required, use Code 22 on Form 765.
Assistance
Online Resources:
The Department’s website, www.tax.virginia.gov, contains valuable information to help you.
• Online Services – Link to online registration, filing, payment, and other electronic services.
• Laws, Rules, & Decisions – Access the Code of Virginia, Tax Regulations, Legislative Summaries, Rulings by the Tax
Commissioner, Tax Bulletins, and Attorney General Opinions.
• Email Updates – Sign up and stay informed. By subscribing, you will periodically receive automatic email notifications
regarding legislative changes, filing reminders, and other relevant information.
Contact Us:
Mail Your Return to: Customer Services Forms Requests
Virginia Department of Taxation Virginia Department of Taxation Virginia Department of Taxation
P.O. Box 760 P.O. Box 1115 P.O. Box 1317
Richmond, VA 23218-0760 Richmond, Virginia 23218-1115 Richmond, Virginia 23218-1317
Phone: (804) 367-8031 Visit www.tax.virginia.gov
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Instructions for 2022 Virginia Form 765
Unified Nonresident Individual Income Tax Return (Composite Return)
GENERAL INSTRUCTIONS returns and acknowledging the participant’s understanding and
acceptance of all of the terms and conditions of participation
in a composite return as described in these instructions.
Explanation of Forms
The consent form must continue in force indefinitely until
Every pass-through entity (PTE) doing business in Virginia revoked in writing by the participant and must permit the PTE
or having income from Virginia sources is required to file a to file amendments or to take other actions concerning the
return of income for each taxable year with the Department composite return without additional authorization from the
of Taxation (the Department). This is done on the Form participant. The consent forms must be maintained by the PTE
502, Pass-Through Entity Return of Income and Return of and provided to the Department for inspection upon demand.
Nonresident Withholding Tax. The Form 502 is not optional.
It must be filed by every PTE doing business in Virginia or A pass-through entity may file a composite return for only a
having income from Virginia sources. portion of its qualified nonresident owners, provided that the
pass-through entity pays the pass-through entity withholding
Every PTE doing business in Virginia or having income from tax for any qualified nonresident owners who are not included
Virginia sources is required to pay a withholding tax equal to in the composite return.
5% of its nonresident owners’ shares of income from Virginia
sources. This tax is reported by the PTE on the Form 502W. By filing a composite return, the participants join in a collective
See the Form 502W Instructions for more information. return, which is prepared and submitted by the PTE on
behalf of the participants. The composite return satisfies
When a PTE is required to file a Virginia return of income, the requirement that each participant file a separate Virginia
the owners of the entity will usually have a Virginia filing nonresident individual income tax return with respect to the
requirement also. For owners who are not residents of PTE income, but it does not transform the PTE into a taxable
Virginia, filing may be simplified through the use of the Form entity or transfer the tax liability of the participants to the PTE.
765. Form 765 is an optional “unified return” (henceforth
referred to as a composite return) that is filed by the PTE on A composite return may be filed without prior approval from
behalf of its qualified nonresident owners. All of the Virginia the Department provided the PTE and the participants agree
source income from the PTE that is passed through to the to comply with the Department’s rules described in these
qualified nonresident owners who participate is reported on instructions. If all of the rules described in these instructions
a single return. These owners are thereby relieved of the cannot be met, the PTE must receive written approval from
requirement that each file a return and pay tax separately. the Tax Commissioner before submitting a composite return.
The PTE is not required to pay the withholding tax for All requests must be submitted in writing to:
nonresident owners who are included on the Form 765.
Tax Commissioner
Who May File Virginia Department of Taxation
A partnership, S corporation, LLC, or any other type of PTE that P.O. Box 2475
transacts business in Virginia and has 2 or more nonresident Richmond, VA 23218-2475
individual owners may file a composite nonresident individual The Department may deny any PTE permission to file a
income tax return on behalf of its qualified nonresident composite return. In addition, the Department may refuse
individual owners (participants) who elect to participate, acceptance of any composite return not filed in a timely
provided that certain conditions are met. In addition, certain manner or in accordance with the prescribed rules and
estates and trusts which qualify and have income passed procedures. In such cases, the Department will require each
through to their nonresident beneficiaries may elect to file owner to file their own separate return in accordance with
a composite return. These filers will complete Form 765 in Virginia law and regulations.
a similar manner as a PTE filer. A composite return is an
Who Qualifies to Participate
alternative to the filing of a nonresident individual income
tax return by each nonresident individual owner of the PTE. A qualified owner is a natural person who is:
The composite return is filed in the name of the PTE, using 1. A direct owner of the PTE filing the return; and
the PTE’s federal employer identification number (FEIN) and 2. A nonresident of Virginia with Virginia source income
Virginia account number. An owner, officer, or employee of for the taxable year from the PTE filing the return. If an
the PTE who is authorized to act on behalf of the PTE in tax individual nonresident owner has other income from
matters (authorized representative) must sign the composite Virginia sources in addition to PTE income, they must file
return. By signing the return, the signer is declaring that they a Nonresident Individual Income Tax Return (Form 763)
are the authorized representative of the PTE and that each to account for that income. The individual may deduct
participant has signed a consent form authorizing the PTE income reported on Form 765.
to act on the participant’s behalf in the matter of composite
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Schedule L Example
2022 Virginia Schedule L (Form 765)
Unified Nonresident Individual Income Tax Return (Composite Return)
List of Participants
Name of Pass-Through Entity:
Federal Employer ID Number:
Identify the Participants:
Column 1 Column 2 Column 3 Column 4
SSN Name / Address Allocation % Guaranteed Payment Amt.
111-22-3344 John Doe 10.00 $1.00
123 Main St
Richmond, VA 23220
A pass-through entity may not include a corporation or any each nonresident owner should consult a tax professional to
other entity in a Virginia composite return. determine if they are required to file a separate Virginia return.
How Taxable Income and Amount of Tax are Determined When the Return is Due
For the composite return, Virginia taxable income is the If the PTE’s taxable year is:
aggregate of each participant’s income from the PTE, as
• Calendar year (January 1 - December 31) – the
allocated and apportioned to Virginia, adjusted by any
composite return for 2022 taxable year must be
modifications applicable to Virginia individual income tax,
postmarked no later than May 1, 2023, to avoid late
without benefit of any personal exemptions, or itemized
filing penalties and interest; or
or standard deductions. Virginia taxable income cannot
be reduced by carryovers from any other taxable years • Fiscal year or short year – the composite return is due
or returns of the PTE or any participant for net operating on or before the 15th day of the 4th month following the
losses, charitable contributions, Internal Revenue Code § 179 close of the PTE’s taxable year.
expenses, or other deductions. In addition, Virginia taxable The composite return must be submitted to the Department
income cannot be reduced by deductions or subtractions nor at the same time or after the PTE submits its Virginia return
may any tax be offset by credits that did not flow through from (Form 502).
the PTE to the participants. Only Virginia modifications and
credits reported on the participants’ Schedules VK-1 or SVK-1 Estimated Tax and Extension Payments
that are applicable to individual income tax may be claimed Effective July 1, 2022, unified nonresidents must electronically
on the composite return. Although Virginia credits may not file all installment payments of estimated tax and all payments
be carried over to other taxable years on the PTE’s return made with regard to a return or an extension of time to file if:
(Form 502), the owners may be able to carry over unused (i) any one payment exceeds or is required to exceed
credits on their Virginia returns. Refer to the section titled $1,500, or
What Forms and Schedules to Use for instructions on claiming
Virginia credits and carryover credits on the composite return. (ii) the taxpayer’s total liability exceeds or can be reasonably
expected to exceed $6,000.
The amount of tax is computed on the Virginia taxable income
by applying the tax rates for individual income tax specified If either of the thresholds above apply, all future unified
in Va. Code § 58.1-320 or by reference to the tax tables nonresident income tax payments must be made
published by the Department, without regard to the number electronically. This includes all payments for estimated
of participants. taxes, extensions of time to file, and any other amounts due
when a return is filed.
NOTE: The composite return is an option the Department
provides to qualifying nonresident individual owners of a The Department provides 2 secure electronic options for
PTE to simplify the return filing process. Its use may result submitting estimated payments for unified nonresident
in the loss of certain benefits and tax advantages available taxpayers: eForms is a debit EFT program through which
to nonresident individuals filing separate Virginia returns. you may schedule your payment for a future date or you
In addition, the amount of tax computed on a composite may pay by an ACH credit transaction through your bank.
filing basis may exceed the aggregate of the participants’ Some banks may charge a fee for this service. An Electronic
tax liabilities had each participant filed their own return. The Payment Guide is available on the Department’s website,
qualifying owners of each PTE must decide whether to file a www.tax.virginia.gov, with information on how to submit
composite return. If the composite return option is not elected, ACH credit payments to the Department.
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How to Make Estimated Payments A composite return filing must include:
The rules and procedures for payment of estimated individual • A completed and signed Form 765, Unified Nonresident
income tax apply to composite returns. To submit estimated Individual Income Tax Return (Composite Return); and
tax payments, use Form 770ES, Virginia Estimated Income • A Schedule L, Unified Nonresident Individual Income
Tax Payment Vouchers for Estates, Trusts, and Unified Tax Return (Composite Return) List of Participants,
Nonresidents which can be filed electronically using the which includes the name, home address, Social Security
Department’s eForm available at www.virginia.tax.gov. number, allocation percentage, and guaranteed
Payments of the estimated tax must be made in the name of payment amount of each participant.
the PTE, using the PTE’s FEIN. The estimated tax is computed Schedule L can be replaced by a spreadsheet or word
using the estimated Virginia taxable income for the composite processing document in either portrait or landscape
return, without regard to the number of participants. Estimated orientation on 8.5” x 11” paper. The document should
tax paid by a participant to their own account may not be be in table format with grid lines, including the same 4
applied to a composite return, and estimated tax paid by a columns and the same information in the same order
PTE for use on a composite return may not be applied to a as shown on Schedule L. The substitute form cannot
participant’s individual account. contain additional columns of data. The year, the title
Automatic Extension to File “Schedule L,” the name of the PTE, and the FEIN of the
PTE must be clearly printed at the top of the substitute
An automatic extension of time to file is granted to the
version. The data must be in 10 point font or larger. An
date 6 months after the original due date or 30 days after
example of a substitute Schedule L is provided above.
the extended date for filing the federal income tax return,
whichever is later, provided the full amount estimated as the If claiming more additions or subtractions than the Form 765
tax due has been paid on or before the original due date. If allows, the composite return must also include:
sufficient payments have been made, no further action is • Schedule ADJS.
required to obtain the extension to file. If an additional tax
payment is needed to ensure the tax liability has been paid, If any Virginia credits are claimed on the composite return,
use Form 770IP, Virginia Fiduciary and Unified Nonresident then the composite return must also include:
Automatic Extension Payment Voucher, to remit the payment. • A Schedule CR, Credit Computation Schedule; and
The payment must be made in the name of the PTE, using
• The required forms and documentation, as described in
the PTE’s FEIN. If either of the thresholds detailed in the
the Schedule CR instructions, for each credit claimed;
Estimated Tax and Extension Payments section apply to the
and
tentative tax payment, the Form 770IP and payment must be
submitted electronically. • If any carryover credit is claimed, a reconciliation of the
available carryover credit accounting for any change in
If you are not required to submit the 770IP and payment
the participants from the prior year.
electronically, you have the option to mail Form 770IP and
payment to: Credits: When claiming an original credit, add the credit
amount allocated to each participant (from the participants’
Virginia Department of Taxation Schedules VK-1) and enter the total on the appropriate line
P.O. Box 760 on Schedule CR. If a credit reported on the participants’
Richmond, VA 23218-0760 Schedules VK-1 is not listed on the Schedule CR, it may
An automatic 6-month extension is also granted to the PTE not be used as a credit to lower an individual income tax
(Form 502). Penalties are assessed for returns filed after the liability. For instance, a credit limited by the Code of Virginia
extended due date. See the Form 502 instructions for further to corporations may not be used to reduce individual income
information. tax, either on a composite return or on a separate individual
income tax return. Credit for income tax paid to another state
How the Department will Mail Refunds, Assessments, may not be claimed on a composite return.
and Correspondence If any credit is unused and the credit allows for carryover,
The Department will issue correspondence and all assessments report the carryover on Schedule CR. Unused credits may
of tax, penalty, and interest in the name of the PTE. Although be carried over in accordance with each credit’s specific
the PTE is required to make all payments of tax, penalty, and carryover provisions. If a participant who did not previously
interest, and is authorized to act on the participants’ behalf, qualify to participate in a composite filing has carryover credit,
each participant remains liable for their respective share of any that participant’s carryover credit may be included on the
tax, penalty, and interest owed. The Department will refund composite return, provided such credit was originally passed
overpaid tax to the PTE. through to the participant by the PTE and the carryover
credit is within the carryover period allowed for that credit.
What Forms and Schedules to Use
Conversely, any portion of a carryover credit allocated to
Form 765 may not be filed unless the entity has also filed an owner who qualified to participate in a composite filing
Form 502. Form 502 is a separate return and not an enclosure. for a prior taxable year but who no longer qualifies may not
Do not mail Form 765 with Form 502.
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be included on the composite return, as that portion of the If the amended composite return reduces the tax liability and
carryover credit may only be used by that owner when filing results in a net overpayment of tax, by law, the Department
their separate Virginia return. may issue a refund only if the amended return is filed within:
If any carryover credit is claimed, enclose with the Schedule • 3 years from the due date of the original return, including
CR, along with all required forms and documentation, a valid filing extensions;
reconciliation of the available carryover credit accounting • 1 year from the final determination date of the amended
for any change in the participants from the prior year. The federal return or federal change, whichever is later,
reconciliation must include the type of credit, amount and provided that the allowable refund is not more than
taxable year earned, and amount(s) and taxable year(s) used the decrease in Virginia tax attributable to the federal
or partially used for each participant having a carryover. change or correction;
Amended Returns: When filing an amended composite • 2 years from the filing of an amended Virginia return
return, always provide an amended return reconciliation and resulting in the payment of additional tax, provided
a statement substantiating the reason for the amendment. If that the current amended return raises issues relating
you are filing an amended return as the result of a partnership- solely to the prior amended return and that the refund
level federal adjustment, you must enclose a copy of the does not exceed the amount of tax payment made as a
partnership’s Form 502FED-1, Virginia Partnership-Level result of the prior amended return; or
Federal Adjustments Report, with the Form 765. Refer to the
instructions for filing an amended composite return provided • 2 years from the payment of an assessment, provided
below. the amended return raises issues relating only to the
prior assessment and the refund does not exceed the
When and How to File an Amended Return amount of tax paid on the prior assessment.
If the PTE files an amended federal return reflecting changes Where to Mail the Composite Return
to the taxable income amount or any other amounts that flow
through to the owners, the PTE is required to file an amended Submit the return to:
Form 502 and issue each owner an amended Schedule VK-1 Virginia Department of Taxation
within 1 year of filing the amended federal return. If the PTE’s P.O. Box 760
federal return is adjusted by the Internal Revenue Service, the Richmond, VA 23218-0760
PTE is required to file an amended Form 502 and issue each Do not mail the composite return with the PTE’s return to the
owner an amended Schedule VK-1 and SVK-1, if applicable, Department in the same envelope. Follow the instructions
within 1 year following the final determination of such federal for submitting the Form 502, provided in the Form 502
change, correction, or renegotiation. instructions.
In addition, the PTE must amend the Form 765, within 1 year
How to Pay Tax Due Amounts
of filing its amended federal return or within 1 year following
the final determination date of the federal change, correction, Effective July 1, 2022, if any tax is due, payment must be
or renegotiation. When amending a composite return, whether submitted at the time the return is filed. Unified nonresidents
the amendment is the result of the PTE filing an amended must electronically file all installment payments of estimated
return, a federal change, or any other reason, always enclose tax and all payments made with regard to a return or an
a statement with the amended composite return substantiating extension of time to file if
the reason for the amendment. If Form 765 is being amended (i) any one payment exceeds or is required to exceed
as a result of a partnership-level federal adjustment, enclose $1,500, or
Form 502FED-1, Virginia Partnership-Level Adjustments
Report, and all associated schedules, with the Form 765, (ii) the taxpayer’s total liability exceeds or can be reasonably
within 90 days of the final determination date. expected to exceed $6,000.
To amend the composite return, complete a new composite Return payments can be submitted electronically using the
return using the corrected figures, as if the return were the eForm 770-PMT available on the Department’s website,
original return. Mark the amended return check box located www.tax.virginia.gov.
on the top left of Form 765, Page 1 and enter a reason code If you are not required to submit payments electronically, you
in the space provided (see the next page for a list of amended have the option to pay by check. Make your check payable
return reason codes). In addition, enclose a reconciliation to the Virginia Department of Taxation and staple it to the left
of any tax due amounts paid or refunds received based on front of Form 765.
the original return filing with the amount of tax due or refund
How to Contact Customer Services
computed for the amended composite return.
For forms, instructions, and information, or to email the
If the amended composite return increases the tax liability and Department a question, pay a bill, or file an extension, visit
results in a net tax due, enclose a check or money order for the Department’s website at www.tax.virginia.gov or call
the net tax due with the return and mail it to the Department . You can mail inquiries to:
(804) 367-8031
with the amended composite return.
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Virginia Department of Taxation reported on the participants’ Schedules VK-1. Line 2 is not an
P.O. Box 1115 aggregate number; it is the Virginia Apportionment Percentage
Richmond, VA 23218-1115 reported to each participant on Schedule VK-1, Page 1, Line 7.
Follow the line instructions on Form 765.
RETURN PREPARATION INSTRUCTIONS Determine the Participants’ Additions to Income
Requirement for the Provision of Preparer Tax Complete Lines 6 through 11. For each line item, enter
the aggregate amount in Column A, computed by totaling
Identification Numbers
the corresponding amounts reported on the participants’
An income tax return preparer who has the primary Schedules VK-1. Multiply any amount reported in Column A by
responsibility for the overall substantive accuracy of the the Virginia apportionment percentage, Line 2, and enter the
preparation of a return or claim for refund is required to include result in Column B. Enter guaranteed payments to partners
their Preparer Tax Identification Number on such return. on Line 10, using Code 99, and enclose an explanation with
the return. Only those additions that flow through from the
STEP 1 PTE to the participants and are required by Virginia in the
computation of individual income tax may be reported on the
Fiscal or Short Year Filer: The taxable period for the
composite return.
composite return is the same as the taxable period for the
PTE. If the taxable period is other than a calendar year, enter The additions applicable to individual income tax are listed
the beginning and ending dates of the PTE’s taxable year. on Form 765 (Lines 6, 7, and 9) or reported on the Form 765
(Line 10) using the addition codes listed below. If you have
Name and Address: Enter the name and address of the PTE.
more than 2 additions, use the Schedule ADJS to provide the
FEIN: Enter the PTE’s federal employer identification number. code and amount for each addition in excess of 2. Enter the
Virginia Account Number: Enter the PTE’s Virginia account total of all additions on Line 11 of Form 765 and check the
number. box to indicate the Schedule ADJS is enclosed.
Change in Address or Legal Name Change: If the PTE’s Code Description
legal name or address has changed, check the appropriate 10 Interest on Federally Exempt U.S. Obligations.
box.
Enter the amount of interest or dividends exempt
Amended Return: Check the box and refer to the instructions from federal income tax, but taxable in Virginia, less
provided in the When and How to File an Amended Composite related expenses. See Va. Code § 58.1-322.01 2.
Return section.
18 Income from Dealer Disposition of Property
Amended Return Reason Codes
Enter the amount that would be reported under
If you are amending your return, use one of the following the installment method from certain dispositions of
codes to indicate the reason you are filing an amended property. If, in a prior year, the taxpayer was allowed a
return. Enter the 2-digit code next to the “Amended Return” subtraction for certain income from dealer dispositions
check box on the “Enter Reason Code” line. of property made on or after January 1, 2009, in the
years following the year of disposition, the taxpayer
Code Amended Return Reason is required to add back the amount that would have
Partnership-level federal adjustment – Enclose
02 been reported under the installment method. Each
Form 502FED-1 disposition must be tracked separately for purposes
Federal return amended or adjusted – Enclose of this adjustment. See Va. Code § 58.1-322.04 4.
03
copy of IRS final determination 22 Addition Related to the Business Interest
Virginia return changes to subtractions, deductions, Deduction
04
additions, and credits For taxable years beginning on and after January
30 Other – Enclose Explanation 1, 2022, an income tax deduction is allowed in an
amount equal to 30% of the business interest that
Form 760C: If Form 760C is enclosed claiming an exception is disallowed for federal income tax purposes. If (i)
or providing the addition to tax computation, check the you claimed a Virginia Business Interest Deduction
appropriate box. on prior year Virginia return(s) and (ii) you are able
to fully utilize your federal carryover of business
STEP 2 interest from those prior year(s) on your current year
Complete Page 2, the summary of the participants’ income federal return, you must report an addition on your
and Virginia modifications, as reported on each participant’s current year Virginia return equal to the amount of
Schedule VK-1. the Virginia Business Interest Deduction claimed on
the prior year Virginia return(s). However, if you are
Determine the Participants’ Income able to only partially utilize your federal carryover
Complete Lines 1 through 5. Line 1 and Line 4 are aggregate of business interest from the prior year(s) on your
amounts, computed by totaling the corresponding amounts
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current year federal return, the Business Interest 51 Gains from Land Preservation
Addition will be applied in the same proportion as the Enter the amount of gain or loss recognized on the
amount of federal carryover that is utilized. If reporting sale or transfer of a Land Preservation Tax Credit that
this addition, enclose a copy of federal Form 8990. was included in federal adjusted gross income. See
Under prior law, the amount of the deduction was Va. Code § 58.1-513(D).
limited to 20% of business interest disallowed.
52 Certain Long-Term Capital Gain
23 Federal Partnership Income Addition Enter any income taxed as a long-term capital gain
Income related to certain partnership-level adjustments for federal income tax purposes, or any income
that result from federal tax changes and other changes taxed as investment services partnership interest
to federal taxable income must be claimed as an income (otherwise known as investment partnership
addition on an amended composite return filed in carried interest income) for federal income tax
response to a federal partnership-level audit or a purposes. To qualify for this subtraction, the income
federal administrative adjustment request if the must be attributable to an investment in a “qualified
income was not previously reported on the original business,” as defined in Va. Code § 58.1-339.4,
Virginia return. The amount of the addition is equal or in any other technology business approved by
to the federal taxable income that was not included the Secretary of Technology or the Secretary of
in Virginia taxable income on the original composite Commerce and Trade, provided the business has
return but should have been included. When reporting its principal office or facility in the Commonwealth
this addition, enclose the partnership’s completed and less than $3 million in annual revenues in the
Form 502FED-1. fiscal year prior to the investment. The investment
must be made between the dates of April 1, 2010,
99 Other (Enclose Explanation)
and June 30, 2020. Taxpayers claiming the Qualified
Enter the amount of any other income not included Equity and Subordinated Debt Investments Credit,
in federal adjusted gross income that is taxable in the subtraction for income attributable to a Virginia
Virginia. Enclose an explanation and supporting venture capital account, or the subtraction for income
documentation, if applicable. Refer to the Form 760 attributable to a Virginia real estate investment trust
instructions for further information. cannot claim this subtraction relating to investments
Determine the Participants’ Subtractions from Income in the same business. In addition, no investment is
“qualified” for this subtraction if the business performs
Complete Lines 12 through 17. For each line item, enter
research in Virginia on human embryonic stem cells.
the aggregate amount, computed by totaling the amounts
reported on the participants’ Schedules VK-1. Multiply any 53 Gains from Historic Rehabilitation
amount reported in Column A by the Virginia apportionment To the extent included in federal adjusted gross
percentage, Line 2, and enter the result in Column B. Only income, any amount of gain or income recognized
those subtractions that flow through from the PTE to the by a taxpayer in connection with the Historic
participants and are allowed by Virginia in the computation Rehabilitation Tax Credit is allowed as a subtraction
of individual income tax may be reported on the composite on the Virginia return. See Va. Code § 58.1-339.2(F).
return.
56 Virginia Venture Capital Account Income Tax
The subtractions applicable to individual income tax are listed Subtraction
on Form 765 (Lines 12, 13, and 15) or reported on Form 765
(Line 16) using the subtraction codes listed below. If you have For taxable years beginning on or after January 1,
more than 3 subtractions, use the Schedule ADJS to provide 2018, taxpayers may claim a subtraction for income
the code and amount for each subtraction in excess of 3. attributable to an investment in a Virginia venture
Enter the total of all subtractions on Line 17 of Form 765 and capital account made on or after January 1, 2018,
check the box to indicate the Schedule ADJS is enclosed. but before December 31, 2023. For the purposes of
this subtraction, income includes, but is not limited
Code Description to investment services partnership interest income,
20 Income from Virginia Obligations otherwise known as investment partnership carried
interest income. See Va. Code § 58.1-322.02(27).
Enter the amount of income from Virginia obligations
included in your federal adjusted gross income. See In order for the subtraction to be claimed on the
Va. Code § 58.1-322.02 2. investors’ income tax returns, the fund in which
they invest must be certified by the Department as
21 Federal Work Opportunity Tax Credit Wages
a Virginia venture capital account for the taxable
Enter the amount of wages or salaries eligible for the year during which the investment was made. If the
Federal Work Opportunity Tax Credit that is included fund is approved, a 9-digit certification number will
in federal adjusted gross income. Do not enter the be provided. Enter this number in the “Certification
federal credit amount. See Va. Code § 58.1-322.02 6. Number” space provided by the subtraction code.
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No subtraction is allowed to an individual taxpayer: for the income was previously reported on the original
an investment in a company that is owned or operated composite return. The amount of the subtraction
by a family member or affiliate of the taxpayer; who is equal to the federal taxable income that was
claimed the subtraction for certain long-term capital included in Virginia taxable income on the original
gains for the same investment; who claimed the composite return but should not have been included.
Qualified Equity and Subordinated Debt Investments When claiming this subtraction, include a copy of the
Tax Credit for the same investment; or who claimed partnership’s Form 502FED-1.
the Real Estate Investment Trust subtraction for the
99 Other (Enclose Explanation)
same investment.
Enter the amount of any other subtractions from
57 Virginia Real Estate Investment Trust federal adjusted income as allowed for Virginia
For taxable years beginning on and after January 1, individual income tax purposes and supporting
2019, taxpayers may claim a subtraction for income documentation, if applicable. Refer to the Form 760
attributable to an investment in a Virginia real estate instructions for further information.
investment trust made on or after January 1, 2019
but before December 31, 2024. STEP 3
In order for the subtraction to be claimed on the Complete Form 765, Page 1, Lines 1 through 17. Lines not
investors’ income tax returns, the real estate listed below are explained on Form 765.
investment trust in which they invest must be
certified by the Department as a Virginia real estate Line 6 – Amount of Tax:
investment trust for the taxable year during which Use the amount on Line 5, Virginia Taxable Income, to
the investment was made. If the fund is approved, compute the tax amount as follows:
a 9-digit certification number will be provided. Enter
– If Line 5 is not over $3,000, the tax is 2% of Line 5.
this number in the “Certification Number” space
provided by the subtraction code. – If Line 5 is over $3,000 but not over $5,000, the tax
is $60 plus 3% of the excess over $3,000.
No subtraction is allowed to an individual taxpayer:
for an investment in a company that is owned – If Line 5 is over $5,000 but not over $17,000, the tax
or operated by a family member or affiliate of is $120 plus 5% of the excess over $5,000.
the taxpayer; who claimed the subtraction for – If Line 5 is over $17,000, the tax is $720 plus 5.75% of
certain long-term capital gains or Venture Capital the excess over $17,000
Investments for the same investment; or who
Tax tables can be downloaded at
claimed the Qualified Equity and Subordinated Debt www.tax.virginia.gov.
Investments Tax Credit for the same investment. For Line 7 – Estimated Payments
more information, see the Form REIT instructions.
Enter the total of the estimated tax payments reported on Form
58 Gain from Eminent Domain 770ES, if any, made by the PTE on behalf of the participants.
For taxable years beginning on or after January 1, Line 8 – Extension Payment:
2019, taxpayers may claim a subtraction for any
Enter the extension payment reported on Form 770IP, if any,
gain recognized from the taking of real property by
made by the PTE on behalf of the participants.
condemnation proceedings.
59 Business Interest Deduction Line 9 – Total Credits
For taxable years beginning on and after January 1, Enclose a completed Schedule CR and all required
2022, taxpayers may claim a deduction of 30% of documentation. Refer to the Schedule CR instructions for
business interest disallowed as a deduction pursuant details and read the section in these instructions titled What
to § 163(j) of the Internal Revenue Code, to the Forms and Schedules to Use. Enter the total of all allowable
extent included in and not otherwise subtracted from credit amounts from Section 5, Part 1, Line 1A of Virginia
federal taxable income. If claiming this deduction, Schedule CR.
enclose a copy of federal Form 8990. Line 13 – Overpayment Credited to Next Year
Under prior law, the deduction was limited to 20% Enter the amount of overpayment the PTE would like credited
of business interest disallowed. to next year’s estimated taxes.
60 Federal Partnership Income Subtraction Line 15a – Addition to Tax
Income related to certain partnership-level adjustments An addition to tax is not owed if:
that result from federal tax changes and other
• All estimated tax payments for the taxable year were
changes to federal taxable income may be claimed
made timely;
as a subtraction on an amended composite return
filed in response to a federal partnership-level audit • The amount, if any, on Form 765, Line 11, is less than
or a federal administrative adjustment request if $150; and
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• Total estimated payments were at least 90% of the STEP 4
composite filers’ 2022 tax liability after nonrefundable
credits or 100% of the 2021 tax liability after Complete Schedule L, List of Participants (see instructions
nonrefundable credits. for Schedule L on Page 3 under the heading “What Forms
and Schedules to Use”). Schedule L is a required enclosure
Use Form 760C to compute the addition to tax, if applicable.
and must include the name, home address, Social Security
Check the box in the upper left corner of Form 765 if Form
number, allocation percentage, and guaranteed payment
760C is enclosed.
amount of each participant.
Line 15b – Late Filing Penalty or Extension Penalty:
STEP 5
Late Filing Penalty: If a tax due return is filed after the
extended due date, it is subject to a late filing penalty. The Assemble the composite return as follows:
penalty is 30% of the tax due. • Form 765, Unified Nonresident Individual Income Tax
Extension Penalty: If the return is filed on or before the Return (Composite Return).
extended due date, an extension penalty is assessed if the • Schedule CR, Credit Computation Schedule, if
tax due (Form 765, Line 11) is greater than 10% of the tax applicable, along with all supporting documentation
amount (Form 765, Line 6). The extension penalty is 2% per and the carryover reconciliation.
month or part of a month from the original due date of the
return until the date the tax is paid. The maximum extension • Schedule ADJS, Virginia Supplemental Schedule of
penalty is equal to 12% of the tax due. If a tax due return is Adjustments, if you have more additions or subtractions
submitted after the extended due date, the extension is invalid than the Form 765 allows.
and the late filing penalty is assessed. • Schedule L, List of Participants.
NOTICE: A late payment penalty may be assessed if a tax • Form 502FED-1, Virginia Partnership-Level Federal
due return is filed after the original due date but before the Adjustments Report, if you are submitting an amended
extended due date AND full payment is not made when the return as the result of certain partnership adjustments
return is filed. The late payment penalty is 6% per month or that result from federal tax changes and other changes
part of a month during which any tax due amount remains to federal taxable income.
unpaid, not to exceed 30%. For any month that the late filing
For a tax due composite return, payment must be submitted
penalty applies, the late payment penalty will not apply. The
at the time the return is filed. You must submit payment
total of any late filing penalty and late payment penalty cannot
of any tax due with your return electronically if you meet
exceed 30% of the tax due.
any of the thresholds detailed in the Estimated Tax and
Line 15c – Interest Extension Payments section above. Use the Department’s
If a tax due return is filed after the original due date, interest eForm 770-PMT available on the Department’s website,
is assessed on the amount of tax due from the original due www.tax.virginia.gov, to submit your payment electronically.
date to the date the return is filed. Interest is assessed even If you are not required to submit your payment electronically,
if the return is submitted by the extended due date. To obtain you have the option to pay by check. If you choose this
the daily interest factor, visit www.tax.virginia.gov or call option, make your check payable to the Virginia Department
(804) 367-8031. of Taxation and staple it to the front left of the return.
Form 765 cannot be filed electronically. Even if the return
Line 17 – Refund
payment is submitted electronically, Form 765 and applicable
Refunds are paid to the PTE, except that: enclosures must be mailed to the Department at the address
1. the Department may apply the overpayment to any below.
outstanding amounts related to composite returns filed
by the same PTE, without regard to the identities of the
participants; and Mail the return to:
2. an overpayment may be applied to the estimated tax for Virginia Department of Taxation
the following taxable year. P.O. Box 760
Richmond, VA 23218-0760
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