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Instructions for Preparing
2022 FORM 500
Virginia Corporation Income Tax Return
Commonwealth of Virginia
Department of Taxation
Richmond, Virginia
www.tax.virginia.gov
2601005 Rev. 08/22
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Table of Contents
What’s New ..................................................................................................................................... 1
General Information .......................................................................................................................3
Corporations Required to File .................................................................................................................... 3
Exempt Corporations ................................................................................................................................. 3
Period to be Covered by Return ................................................................................................................ 4
Accounting Methods................................................................................................................................... 4
When to File ............................................................................................................................................... 4
How to File ................................................................................................................................................. 4
Electronic Filing .......................................................................................................................................... 4
Extension of Time to File ............................................................................................................................ 5
Penalties and Interest ............................................................................................................................... 5
Return Forms and Schedules .................................................................................................................... 5
Consolidated or Combined Returns ........................................................................................................... 6
Change in Filing Status .............................................................................................................................. 7
In-State Corporations ................................................................................................................................. 7
Multistate Corporations ............................................................................................................................. 7
Report of Change in Federal Taxable Income ............................................................................................ 7
Refund of Virginia Tax ................................................................................................................................ 8
Net Operating Loss Deductions ................................................................................................................ 8
Estimated Income Tax ............................................................................................................................... 9
Virginia Taxable Income ............................................................................................................................ 9
Form 500 Instructions ....................................................................................................................9
Instructions for Schedule 500ADJ ..............................................................................................12
Fixed Date Conformity Update for 2022 .................................................................................................. 12
Section A – Additions to Federal Taxable Income .................................................................................... 12
Section B –Subtractions from Federal Taxable Income ................................................................................. 14
Section C – Amended Return .................................................................................................................. 17
Section D – Schedule of VK-1 Withholding .............................................................................................. 18
About Virginia Schedule 500CR, Credit Computation Schedule for Corporations ................ 18
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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 using Code 65
on the Schedule 500ADJ and enclose a copy of federal Form 8990. If an addition is required, use Code 20 on the Schedule
500ADJ.
Hybrid Sales Factor for Certain Property Information and Analytics Firms
For taxable years beginning on and after January 1, 2022, certain property information and analytics firms which have entered
into a memorandum of understanding with the Virginia Economic Development Partnership (VEDP) may use a hybrid sales
factor when filing Virginia corporate income tax returns. For sales of other than sales of tangible personal property, the
hybrid sales factor uses a market-based sourcing rule for sales of services and the standard cost of performance rule for all
other non-service sales. See Schedule 500A Instructions for more information.
Affiliated Groups of Corporations Changing to or from the Consolidated Filing Status
For taxable years beginning on and after July 1, 2022, an affiliated group that has filed on the same basis for at least the
preceding 12 years may change the basis of the type of return filed from consolidated to separate or from separate or
combined to consolidated if certain conditions are met. Under previous law, a group must have filed on the same basis for
20 years. See Page 7 of these instructions for additional information.
Food Crop Donation Tax Credit Sunset Date Extension
The sunset date for the Food Crop Donation Tax Credit has been extended through Taxable Year 2022.
Major Business Facility Tax Credit Sunset Date Extension
The sunset date for the Major Business Facility Tax Credit has been extended from July 1, 2022, to July 1, 2025.
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What’s New (Continued)
Changes to Worker Training Tax Credit
The sunset date of the portion of the Worker Training Tax Credit for eligible worker training has been extended from July 1,
2022, to July 1, 2025. The sunset date of the portion of the Worker Training Tax Credit for a business primarily engaged in
manufacturing has been extended from January 1, 2022, to January 1, 2025.
For taxable years beginning on and after January 1, 2022, the credit has been expanded by allowing businesses to earn
credits with respect to courses at any Virginia public institution of higher education. This also includes courses at the
New College Institute, the Roanoke Higher Education Authority, the Southern Virginia Higher Education Center, and the
Southwest Virginia Higher Education Center. Under prior law, a business was only allowed credits with respect to courses
at institutions recognized on the Eligible Training Provider List. See Form WTC and Schedule 500CR instructions for more
information.
Expansion of Community of Opportunity Tax Credit
The Community of Opportunity Tax Credit has been expanded by permitting certain landlords with qualified housing units
located in all census tracts in Virginia with poverty rates of less than 10% to qualify for the credit. Under prior law, the
credit was limited to census tracts in the Richmond Metropolitan, Virginia Beach-Norfolk-Newport News Metropolitan, and
Washington-Arlington-Alexandria Metropolitan Statistical Areas.
Assistance
Online Resources:
The Department’s website, www.tax.virginia.gov, contains valuable information to help you.
• Online Services for Businesses – Access online registration, filing, payment, and other electronic services.
• Laws, Rules, & Decisions – Access the Code of Virginia, Tax Regulations, Guidance Documents, 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:
Customer Service Inquiries Forms Requests
Department of Taxation Department of Taxation
P.O. Box 1115 P.O. Box 1317
Richmond, Virginia 23218-1115 Richmond, Virginia 23218-1317
Phone: (804) 367-8037 Phone: (804) 367-8037
Fax: (804) 254-6111 or visit www.tax.virginia.gov
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Instructions for Preparing 2022 Form 500
Virginia Corporation Income Tax Return
(References are to the Code of Virginia, unless otherwise noted)
General Information apportion income, and pay Virginia income tax, in the same
manner as other corporations. A Captive REIT is defined as
Corporations Required to File a REIT:
Every corporation organized under the laws of Virginia, every (i) whose shares are not publicly traded,
foreign corporation registered with the State Corporation (ii) 50% or more of the shares are owned by a corporate
Commission for the privilege of doing business in Virginia, entity, and
and every corporation having income from Virginia sources,
aside from corporations that qualify for an exception, must (iii) more than 25% of the income of the REIT consists of
(with the exceptions stated in these instructions) file a rents from real property.
return through the Federal/State e-File program. The return Exceptions are provided to ensure that an affiliated group
should be submitted and accepted on or before the 15th of REITs will not be considered captive REITs unless the
day of the 4th month (15th day of the 6th month for nonprofit ultimate ownership of the group is by a single corporate
corporations) following the close of its taxable year. entity. Also, entities organized under the laws of Australia and
Receivers, trustees in dissolution, trustees in bankruptcy, and other foreign countries that are similar to REITs will not be
assignees, operating the property or business of corporations considered a captive REIT, if they are widely held. In addition,
must make returns of income for such corporations. If a for taxable years beginning on or after January 1, 2016, any
receiver has full custody of and control over the business voting power or value of the beneficial interests or shares
or property of a corporation, he is deemed to be operating in a REIT that are held in a separate asset account of a life
such business or property, whether he is carrying on the insurance corporation are excluded from consideration for
business for which the corporation was organized or is only purposes of determining whether the REIT is a captive REIT
in marshaling, selling, or disposing of its assets for purposes for purposes of the addition.
of liquidation (Va. Code § 58.1-441). Electing small business corporations, not taxable as
A Foreign Sales Corporation (FSC) and any income attribut- corporations under Va. Code § 58.1-400, are required to file
able to an FSC are exempt under Virginia law; however, it Form 502, Pass-Through Entity Return of Income and Return
may be necessary for an FSC to file an information return of Nonresident Withholding Tax.
if it meets the provisions of Va. Code § 58.1-441 and the Exempt Corporations
regulations thereunder.
Corporations not organized for pecuniary profit, which
Any electric supplier, pipeline distribution company, gas utility, are also exempt from income tax under IRC § 501(c), are
or gas supplier that is subject to federal income tax is also taxed only on their unrelated business taxable income and
subject to the Virginia corporation income tax and should file must report that unrelated business income on Form 500;
a Virginia Corporation Income Tax Return, Form 500. otherwise, no returns are required.
Electric suppliers may be subject to a minimum tax instead Public service corporations that pay a state franchise tax or
of the corporate tax for any taxable year that their minimum license tax upon gross receipts, insurance companies that
tax liability is greater than their corporate income tax liability. pay a state license tax on gross premiums and reciprocal
Schedule 500EL is used to compute the minimum tax and or inter-insurance exchanges that pay a premium tax to
determine which tax applies. the state are not required to file an income tax return.
Electric cooperatives are subject to tax on all modified net Additionally, state and national banks, banking associations,
income derived from nonmember sales and must file a trust companies, and credit unions organized and conducted
Form 500EC even if no tax is due. Electric cooperatives as banking institutions are not taxed on their income by
may be subject to a minimum tax instead of the modified Virginia and are not required to file an income tax return.
net income tax if their minimum tax liability is greater than In addition, effective for taxable years beginning on or after
their modified net income tax liability. See Schedule 500MT. January 1, 2014, Interest-Charged Domestic International
Sales Corporations (IC-DISCs) are exempt from Virginia
Home service contract providers are exempt from the
corporation income tax and are not required to file an income
insurance premiums license tax and instead will be subject
tax return (Va. Code § 58.1-401).
to the corporation income tax or a minimum tax. All home
service contract providers must submit Form 500HS with their Nonprofit Hospitals
Form 500. A noncorporate provider must complete Form 502 Nonprofit hospitals are required to provide the Department
in addition to Form 500 and Form 500HS. with a copy of the hospital’s federal Form 990 or Form 990-EZ
A Captive REIT is required to add back any federal deduction (or the successor form to such form) that was filed with the
for dividends paid to its shareholders. It will then allocate and Internal Revenue Service for the relevant year. Nonprofit
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hospitals are not required to file a Form 500; therefore, a • The federal and state returns may be filed electronically
paper copy of the federal Form 990 or Form 990-EZ must be at the same time.
mailed directly to the Department. A paper copy of the form • The federal return is automatically provided to the
must be provided to the Department within 30 days following state electronically.
the filing of the federal Form 990 or Form 990-EZ tax form
with the Internal Revenue Service. In addition, such hospital • Consolidated and combined returns are supported.
must provide the Department a copy of any interim tax form, • Portable Document Format (PDF) files of required
report, or return that the hospital filed with or provided to the documents may be attached.
Internal Revenue Service for the relevant year pursuant to
• Choice of approved e-File software programs.
Title 26 of the United States Code or the rules and regulations
Corporations may find their current software already
thereunder. The copy of the interim tax form, report, or return
supports e-Filing.
must be provided to the Department within 30 days following
the filing of the same with, or the providing of the same to, • The ability to schedule payment of a tax due through
the Internal Revenue Service. direct debit for a future date when filing before the
due date.
Period to be Covered by Return
• e-File prior year returns for up to 2 tax years.
A corporation’s taxable year is the same as its taxable year
for federal income tax purposes. If a corporation’s taxable In order to successfully e-File, the corporation must:
year is changed for federal income tax purposes, its taxable • Use an approved commercial e-File software product.
year also changes for state income tax purposes (Va. Code Approved e-File software vendors will be listed on our
§ 58.1-440). website.
Accounting Methods • Be able to create a readable PDF. This means you
A corporation’s method of accounting is the same as its must either have a scanner that allows you to scan
method of accounting for federal income tax purposes. In documents into a PDF file, or software that allows
the absence of any method of accounting for federal income you to save documents as a PDF. This feature will
tax purposes, Virginia taxable income must be computed allow you to e-file your state return if the IRS does not
using the accounting method that is regularly used in the support the federal return and/or schedules through
corporation’s bookkeeping, provided such method clearly the e-File system. You can attach unsupported federal
reflects income in the opinion of the Department. If a returns and schedules as PDF files to the electronic
corporation’s accounting method changes for federal income transmission of the state return.
tax purposes, it also changes for state income tax purposes • The Virginia e-File program has been designed to
(Va. Code § 58.1-440). accept transmission of the federal and state return
together or separately. This is often referred to as a
When to File
state-only transmission which can be used when the
Every corporation income tax return must be submitted on federal return being filed is not supported by the federal
or before the 15th day of the 4th month (15th day of the e-File system. This allows the state return to be e-Filed
6th month for nonprofit corporations) following the close of by itself. Most software vendors support the electronic
a corporation’s taxable year (Va. Code § 58.1-441). transmission of the federal and state returns together
How to File or separately.
The Department requires that corporation income tax • Large corporations must decide whether to use an
returns and payments be submitted electronically. There Electronic Return Originator (ERO) to electronically file
are two options available. Returns may be filed through the the return or prepare and e-File the return themselves.
Federal/State e-File program, or certain Virginia corporations If a corporation chooses to prepare and e-File the
may qualify to file a Form 500EZ using eForms on the return themselves, they may have to register and apply
Department’s website. See below for more information. with the IRS to obtain an Electronic Filing Identification
Number (EFIN) and possibly an Electronic Transmitter
Electronic Filing Identification Number (ETIN) depending upon the
The e-File system is supported by numerous commercial e-File option chosen. See our website for detailed
software programs. e-File software will automatically check information.
for completeness, correct errors, generate the applicable • Small corporations should use an online provider to
corporation income tax schedules, and electronically transmit avoid having to register with the IRS for an Electronic
the return and payment to the Federal/State e-File processing Filing Identification Number (EFIN).
systems. A list of approved commercial software is available
on the Department’s website. If a tax payment is required, eForms (Forms 500EZ, 500CP, 500V, and 500ES)
the payment can be made through e-File or eForms as a An online return, Form 500EZ, is available through the
direct debit, or the corporation may pay with an ACH credit eForms application on the Department’s website. This return
established through the corporation’s bank. The e-File is a shorter version of the existing Form 500, and is designed
program provides many benefits to corporations: to simplify the filing process. You can also submit corporation
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income tax payments electronically through eForms. This If Form 500 is filed within the automatic extension period,
includes return payments (Form 500V), estimated payments but less than 90% of the tax liability was paid by the original
(Form 500ES) and extension payments (Form 500CP). Using due date, an extension penalty will apply. The extension
eForms is a fast and free way to file and pay state taxes. penalty is imposed at the rate of 2% per month or fraction
thereof from the original due date through the date of full
To be eligible to file Form 500EZ, you must meet all
payment or the extended return due date, whichever occurs
of the criteria below: first, to a maximum of 14% (12% for nonprofit corporations
• 100% of the corporation’s business is in Virginia and entities other than C corporations). If an additional tax
(except in-state corporations that file Schedules 500A payment is needed to ensure that the tax liability has been
and 500AP). paid, the extension payment must be made electronically.
• The total additions to federal taxable income are The Department provides two secure online options for
$1,000 or less. submitting extension payments, eForms (using Form 500CP)
and Business Online Services. Corporations can also pay
• The total subtractions from federal taxable income are using an ACH credit transaction. Electric cooperatives
$1,000 or less. are required to make sufficient payments based on their
• The corporation may not claim the Savings and Loan estimated modified net income tax liability. If the return is
Association Bad Debt Deduction. filed after the extended due date, a 30% late filing penalty
• The corporation is not included in a consolidated or will apply on the balance of tax due with the return. The
combined filing of another entity. minimum penalty for failure to file timely is $100.
If any amount of the tax is underestimated, interest accrues
• The corporation claims no tax credits other than
at the underpayment rate set in IRC § 6621, plus 2%.
tentative tax payments or estimated tax payments.
• The taxpayer is not a Telecommunications Corporation Penalties and Interest
required to file Form 500T, an Electric Cooperative If the return is filed within the 7-month extension (6 months for
required to file Schedule 500EL, or a Home Service nonprofit corporations and entities other than C corporations),
Contract Provider required to file a Form 500HS. but the corporation failed to pay 90% of the tax due by
• The corporation will not claim a net operating loss the original due date, then the corporation is subject to
deduction for the year being filed. an extension penalty of 2% per month or fraction of a
month thereof from the original due date to the filing of
• The corporation is not a pass-through entity. the corporation income tax return to the date of payment.
• The federal taxable income of the corporation may The penalty is applied to the balance of tax due with the
not exceed $40,000 for the taxable year of this form. return from the original due date through the date of filing.
The maximum extension penalty is 14% (12% for nonprofit
• The corporation may not have any fixed date conformity
corporations and entities other than C corporations) of the
adjustments or modifications.
tax due. If the return is filed after the extended due date,
• The corporate return is not being amended as a result the extension provisions do not apply and the corporation
of a partnership-level federal adjustment. is subject to the late filing penalty (Va. Code § 58.1-455). In
If the corporation meets the above conditions, complete and no case will the penalty for failure to file timely be less than
file Form 500EZ on the Department’s website under eForms $100, and this minimum $100 penalty applies whether or not
at www.tax.virginia.gov. tax is due for the period covered by the return. If Form 500 is
filed within the extension period and the total amount due is
Note: if the corporation is a Homeowner Association (HOA) not included with the return, the late payment penalty will be
with either a refund due or no tax liability owed ($0) for the assessed at the rate of 6% per month from the date of filing
year being filed, it is eligible to use the 500EZ. through the date of payment, up to a maximum of 30% of the
Waiver Request tax due. Civil and criminal penalties may be imposed for filing
a fraudulent return. The criminal penalty for filing a fraudulent
If you are unable to file and pay electronically, you may
return is a Class 6 felony (Va. Code § 58.1-451 and Va. Code
request a waiver. All requests for waivers must be submitted
§ 58.1-452). Interest on the unpaid balance of any tax and
to the Department in writing using the Corporation
penalty is charged at the underpayment rate established by
Income Tax Electronic Filing Waiver Request form on the
IRC § 6621, plus 2%, from the due date until paid.
Department’s website at www.tax.virginia.gov.
Penalty for Returned Check or EFT Nonpayment.
Extension of Time to File
If your bank does not honor your payment to the Department,
You are allowed an automatic 7-month extension of time
the Department may impose a penalty of $35, as authorized
(6 months for nonprofit corporations and entities other than
by Va. Code § 2.2-614.1. This penalty will be assessed in
C corporations) to file your corporation income tax return.
addition to other penalties due.
This provision does not extend the due date for payment of
taxes; and you must pay at least 90% of your tax due by the Return Forms and Schedules
original due date for filing the return. Listed below are the available forms and schedules to
submit through the Federal/State e-File Program.
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• Form 500 – Corporation Income Tax Return. Used that are eligible to apportion Virginia taxable income using
to compute a corporation’s income tax liability and to modified apportionment factors must use the Schedule
determine the amount of tax due or the amount of the 500AP to determine the modified Virginia apportionment
refund. factor prior to completing the apportionment schedule
• Schedule 500ADJ – Schedule of Adjustments. Used appropriate for the return type.
to report additions to or to claim subtractions from federal • Form 502FED-1 – Virginia Partnership-Level Federal
taxable income and to claim withholding reported to a Adjustments Report. Used to report partners distributive
corporation by a pass-through entity on Virginia Schedule share of partnership-level federal adjustments. A
VK-1. Also, used to compute the corrected tax liability for corporate partner that receives Form 502FED-1 from its
an amended Form 500. partnership and needs to file an amended Virginia return
• Schedule 500CR – Credit Computation Schedule for must enclose a copy of Form 502FED-1.
Corporations. Used to claim both nonrefundable and You must also enclose a copy of the federal return. The
refundable credits. corporation must submit a copy of the income tax return that
• Schedule 500FED – Schedule of Federal Line Items. it filed with the IRS to the Department.
Used to report specific line items from the corporation’s Not all federal income tax returns are available to electronically
federal income tax return. file. If the federal income tax return is not available to file
• Schedule 500A – Corporation Allocation and electronically, then the federal return can be attached as a
Apportionment of Income. Used to allocate and PDF file to the Virginia electronic return.
apportion income by corporations that transact or conduct Consolidated or Combined Returns
part of their business within Virginia and part of their
Affiliated corporations that are subject to Virginia income
business outside Virginia or VEDP-certified companies
taxes have the option to file a consolidated or combined return
that elect to use a modified apportionment method.
instead of filing separate returns. Two or more corporations
• Schedule 500AB – Schedule of Related Entity Add are affiliated when one corporation owns 80% or more of the
Backs and Exceptions. Used to: (i) add back certain outstanding voting stock of another corporation(s), or 80% or
deductions that may be taken by a corporation on its more of the outstanding voting stock of 2 or more corporations
federal return for interest, royalties, and other expenses is owned by the same interest.
related to intangible property such as trademarks and
A consolidated return is a single return for an affiliated group
patents; (ii) report payments; and (iii) identify exceptions.
of corporations prepared in accordance with the principles of
• Schedule 500AC – Schedule of Affiliated Corporations. IRC § 1502 and the regulations thereunder;
Corporations filing as Combined or Consolidated are
A combined return is a single return for an affiliated group of
required to submit a Schedule 500AC for each member,
corporations in which income or loss is separately determined
including the parent company, that is doing business in
in accordance with the following:
Virginia, or that has Virginia source income, and is part
of the group included in this tax return. The number of a. Virginia taxable income or loss is computed separately
Schedules 500AC enclosed with the return must equal for each corporation;
the number of affiliates reported on Form 500, Page 1. b. Allocable income is allocated to the state of commercial
• Form 500C – Underpayment of Estimated Tax. Used to domicile separately for each corporation;
determine if an addition to tax charge is owed for failure c. Apportionable income or loss is computed using
by the corporation to pay sufficient estimated tax during separate apportionment factors for each corporation;
the taxable year. and
• Form 500T – Telecommunication Companies Mini- d. Income or loss computed in accordance with items
mum Tax. Every telecommunications company as de- a through c above is combined and reported on a single
fined by statute and certified by the State Corporation return for the affiliated group.
Commission must complete and submit Form 500T.
If a corporation elects to file on a separate, consolidated,
• Schedule 500EL – Electric Suppliers Corporation or combined basis, all returns thereafter must be filed on
Minimum Tax and Credit Schedule. Every electric the same basis, unless the Department grants permission
supplier as defined by statute and certified by the State to change the election (Va. Code § 58.1-442). A binding
Corporation Commission must complete and submit election is made in the first year in which a group of affiliated
Schedule 500EL. corporations is eligible to file a consolidated or combined
• Form 500HS – Home Service Contract Provider Mini- return in Virginia. Prior elections continue in effect and can
mum Tax Computation. Every home service contract be changed only if permission is granted by the Department.
provider as defined by statute and certified by the State Returns filed on a consolidated or combined basis must
Corporation Commission must complete and submit enclose with the group return a completed Schedule of Affiliated
Form 500HS. Corporations, Schedule 500AC, for each member included
• Schedule 500AP – Modified Apportionment Schedule in the combined or consolidated Virginia return, including
for VEDP-Certified Companies. Certified companies
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all affiliates and the parent company. All supplementary and by net income or a franchise tax for the privilege of doing
supporting schedules filed with a consolidated or combined business in another state (Va. Code § 58.1-405).
return should be prepared in columnar form, one column being
Multistate Corporations
provided for each corporation included in the consolidated
or combined return. Supporting schedules for consolidated A corporation having income from business activity that is
returns should also include a column for totals of like items taxable both within and without Virginia must allocate and
before adjustments are made, a column for intercompany apportion its net income as provided in Va. Code §§ 58.1-406
eliminations and adjustments, and a column for totals of like through 58.1-422.4. Such a corporation must complete and
items after giving effect to the eliminations and adjustments. enclose Schedule 500A with the return. A corporation is
The items included in the columns for eliminations should not taxable in another state if that state is prohibited from
be symbolized to readily identify contra items affected, and imposing an income tax on the corporation because its
suitable explanations should be added if necessary. business activity in the state does not exceed the minimum
standards set forth in Public Law 86-272.(15 U.S.C.A. §§
Prohibition of worldwide consolidation or combination. The
381 - 384).
Department shall not require, and no corporation may elect,
that a consolidation or combination of an affiliated group Standard Apportionment Method for Corporations
include any controlled foreign corporation, the income of A double-weighted sales factor is used for corporate appor-
which is derived from sources outside of the United States tionment. Under this formula, the sales factor is weighted
(Va. Code § 58.1- 443). 50% and payroll and property are both weighted 25% in de-
Change in Filing Status termining the overall corporate income apportionment factor.
Any request to switch from one filing method to another must Alternative Methods of Apportionment
be submitted before the due date for the first return to use Motor carriers, financial corporations, construction corpora-
the requested filing method. The requests should be mailed tions, railway companies, retail companies, debt buyers,
to: Virginia Department of Taxation, P.O. Box 27203, manufacturers who elect the modified apportionment method,
Richmond, VA 23218-7203. and certain enterprise data center operations are required to
A $100 administrative fee, the Form Filing Status-Fee, and a use a single sales factor method of apportionment as provid-
copy of the federal Form 851 must accompany all requests. ed in Va. Code §§ 58.1-417 through 58.1-420 and 58.1-422
through 58.1-422.3. See the instructions for Schedule 500A
The Department will generally grant requests to change a
for details on how to compute apportionment factors.
filing status from separate to combined or from combined to
separate. Requests to change a filing status from separate or Certified Company Apportionment for Business
combined to consolidated, or from consolidated to separate Conducted in Certain Disadvantaged Localities
or combined will generally be denied. However a group
Certain companies may decrease the amount of their
of affiliated corporations that has filed Virginia income tax
income taxed by Virginia when they meet specific eligibility
returns on the same basis for at least the preceding 12 years
requirements and are certified by the Virginia Economic
will be granted permission to change its filing status from
Development Partnership Authority ("VEDP"). This includes a
consolidated to separate or from separate to combined or
requirement that a specified number of jobs be created and, if
consolidated if:
applicable, investments be made in particular disadvantaged
(1) the tax computed under the affiliated group’s requested localities.
return basis would be equal to or greater than the tax
Once the company is certified by VEDP as meeting the
for the preceding taxable year; and
applicable eligibility requirements, it is entitled to decrease
(2) the affiliated group agrees to compute its tax liability the amount of income taxed by Virginia. For multistate
under both the new filing status and the former filing certified companies, the decrease in income is accomplished
status and pay the greater of the two amounts for the by allowing such companies to make modifications to their
first 2 taxable years in which the new filing status is apportionment factors (“Certified Company Apportionment”).
effective. For in-state certified companies, this is accomplished by
Under prior law, an affiliated group was required to file on allowing such companies the ability to use apportionment
the same basis for at least the preceding 20 years rather and to use Certified Company Apportionment to make
than 12 years. modifications to their apportionment factors. See Schedule
500AP Instructions for detailed information.
In-State Corporations
Report of Change in Federal Taxable Income
Except as provided in Va. Code § 58.1-405.1, if the entire
business of the corporation is transacted or conducted within If the amount of a corporation’s federal taxable income as
Virginia, the tax is computed upon the entire Virginia taxable reported on its federal income tax return for any taxable
income of the corporation for each taxable year. The entire year is changed or corrected by the IRS (or other competent
business of the corporation will be considered to have been authority), or is changed as the result of a renegotiation of a
transacted or conducted within this state if the corporation contract or subcontract with the United States, the taxpayer
is not subject to a net income tax, a franchise tax measured must report this change to the Department within one year
of the final determination date.
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The final determination date is defined as one of the Enclose a copy of federal Forms 1120X or 1139, the Revenue
following: Agent’s Report, Statement of Adjustment to Your Account, or
• If the federal adjustment is the result of an audit or other forms or statements (including the Form 502FED-1, if
other action by the IRS, the final determination date is applicable) showing the nature of any federal change and the
defined as the first day on which no federal adjustments final determination date. For an Electric Cooperative subject
arising from that audit or other action remain to be finally to the modified net income tax, an amended return may be
determined. For agreements required to be signed by filed on Form 500EC.
the IRS and the taxpayer, the final determination date The Federal/State e-File program only supports amended
is defined as the date on which the last party signed returns for the current taxable year and the 2 preceding
the agreement. taxable years. Amended returns for prior taxable years must
• If the federal adjustment is the result of an audit or other be filed by paper. Amended Forms 500EC will also need to be
action by the IRS, and the taxpayer filed as a member filed by paper. For the above-mentioned types of amended
of a Virginia combined or consolidated return, the final returns, write to: Virginia Department of Taxation, P.O.
determination date is defined as the first day on which Box 1500, Richmond, Virginia 23218-1500.
no related federal adjustments arising from that audit Net Operating Loss Deductions
remain to be finally determined for the entire group.
There is no Virginia net operating loss available for carryback
• If the federal adjustment results from filing an or carryover. However, since the starting point for the Virginia
amended federal return, a federal refund claim, or an corporation income tax is federal taxable income (Form 500,
administrative adjustment request or if it is a federal Line 1), net operating loss deductions are generally taken
adjustment reported on an amended federal return into account on the Virginia return to the extent that such
or other similar report, the final determination date losses are included in federal taxable income. Virginia’s date
is defined as the day on which the amended return, of conformity with the Internal Revenue Code (IRC) was
refund claim, administrative adjustment request, or advanced from December 31, 2020, to December 31, 2021,
other similar report was filed. subject to certain exceptions. Therefore, Virginia continues
If the corporation is an owner of a partnership and receives to conform to the changes made to the NOL deduction by
Form 502FED-1, Virginia Partnership-Level Federal the federal Tax Cuts and Jobs Act, including the general
Adjustments Report, from the partnership and needs to file repeal of NOL carrybacks. For taxable years ending after
an amended Virginia return in order to report its distributive December 31, 2017, only NOLs from certain farming losses
share of the partnership-level adjustment, the corporation and the losses incurred by certain insurance companies may
must enclose a copy of Form 502FED-1 with the amended be carried back as set forth in IRC § 172(b). No other types
return. of NOLs may be carried back for such taxable years.
Any taxpayer filing an amended federal return must also file Since federal income must be modified for Virginia additions
an amended state return and must pay any additional tax and subtractions, the additions and subtractions of the loss
and interest due, if applicable. year follow the federal loss to the year the loss is used. Thus,
if the federal net operating loss is fully used in a carryback or
Refund of Virginia Tax carryover year, the net amount of additions and subtractions
A corporation may file an amended return to claim a refund will be applied in the same ratio to the applicable year. The
within the later of: federal net operating loss deduction may be used only to
reduce federal taxable income, and a federal net operating
(1) 3 years from the due date of the return or extended due
loss deduction cannot create or increase a federal net
date (whichever is later);
operating loss.
(2) 1 year from the final determination date of any change Also, due to the reduced tax liability in carryback and
or correction in the liability of the taxpayer for any federal carryforward years, any credits previously claimed in those
tax upon which the state tax is based, provided that the years may need to be adjusted as well as the credit carryover
refund does not exceed the amount of the decrease amounts. An amended Form 500 should be filed indicating
in Virginia tax attributable to such federal change or the change in the amount of credits claimed and the corrected
correction; carryover amounts. Enclose a revised Schedule 500CR
(3) 2 years from the filing of an amended Virginia return with the amended returns filed to report the changes to the
resulting in the payment of additional tax, provided that credit(s) claimed or carryover amount resulting from the net
the amended return raises issues relating only to the operating loss carryback.
prior amended return and the refund does not exceed In most cases, Virginia conforms to the federal rules regarding
the amount of the tax payment made with the prior carrybacks that are in effect for a particular taxable year.
amended return; or However, under IRC § 172(b)(1)(H),taxpayers may carryback
(4) 2 years from the payment of an assessment, provided net operating loss deductions generated in Taxable Years
that the amended return raises issues relating only to 2008 and 2009 for 5 years for federal purposes. Section
the prior assessment and the refund does not exceed 2303 of the federal Coronavirus Aid, Relief, and Economic
the amount of tax paid on the prior assessment. Security Act, P.L. 116-136 (2020) (“ the CARES Act”) allowed
a similar five-year carryback for net operating losses arising
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in Taxable Years 2018, 2019, and 2020. Virginia does not Virginia Taxable Income
conform to these provisions of federal tax law and such losses
Virginia taxable income for a taxable year means the
may generally not be carried back for Virginia purposes.
federal taxable income for such year of a corporation (or
In addition, Section 2303 of the CARES Act temporarily
the “investment company taxable income” of regulated
removed the 80%-of-taxable-income limitation for Taxable
investment companies, or the “real estate investment trust
Years 2018, 2019, and 2020. Virginia does not conform to this
taxable income” of real estate investment trusts, to which shall
provision of federal tax law and the 80%-of-taxable-income
be added in each case any amount of capital gains taxable to
limitation applies for Virginia purposes. Consequently, to the
the corporation under federal law) or the unrelated business
extent that federal and Virginia net operating loss carrybacks
taxable income of organizations exempt from income tax
and carryforwards differ, separate accounting will be required.
under IRC § 501(c), adjusted as provided under Va. Code
IMPORTANT: Form 500NOLD, Corporation Application for § 58.1-402; except a corporation subject to the provisions of
Refund Carryback of Net Operating Loss, must be used Va. Code § 58.1-403.
to carry back a net operating loss. Do not use Form 500.
Using the incorrect form will delay the processing of your Form 500 Instructions
return and may result in having your tax return sent back
to you. File Form 500NOLD by paper – the form is not Page 1 Instructions
supported by the Federal/State e-File Program.
For a copy of the Virginia regulations, visit www.tax. Fiscal Year Filers or Short Year Filers
virginia.gov. For more information, call (804) 367-8037 or Complete this line only if your taxable year is not from
write to Virginia Department of Taxation, P.O. Box 1115, January 1 to December 31. You must use the same taxable
Richmond, VA 23218-1115. period on your Virginia return as on your federal return.
Estimated Income Tax Check if:
Corporation estimated income taxes must be filed and paid • Initial Filer – This is your first time filing in Virginia.
electronically using the Form 500ES. Visit www.tax.virginia.
gov for details on electronic payment options which include • Name Change – Your name has changed since your
e-Forms, Business Online Services, and ACH credit EFT. last filing.
In case of any underpayment of estimated tax by a corporation, • Mailing Address Change – Your mailing address has
Va. Code § 58.1-504 requires that an addition to tax be made changed since your last filing.
at the established interest rate for underpayments unless one • Physical Address Change – Your physical address
of the exceptions in that section applies. UseForm 500C to has changed since your last filing.
compute this addition to the tax and/or to indicate that an
Be sure that your federal employer identification number,
exception applies.
name, mailing address, and physical address are correctly
Calendar Year Filers reported. Enter the date and state or country of incorporation.
Every corporation subject to Virginia income tax that uses
Entity Type
a calendar year accounting period is required to make a
declaration of estimated tax for the calendar year if its Virginia Enter the entity type code from the list below:
income tax for that period can reasonably be expected to
Code Entity Type
exceed $1,000. Payment of the estimated tax must be made
to the Department as follows: CC C Corporation
• 1st payment = 25% –by– April 15. SC S Corporation
• 2nd payment = 25% –by– June 15. LL Limited Liability Company
• 3rd payment = 25% –by– September 15. NP Nonprofit Corporation
• 4th payment = 25% –by– December 15. BA Bank
Fiscal Year Filers SL Savings and Loan
If a corporation’s accounting period is a fiscal year, the CO Cooperative
corporation is required to make a declaration of estimated
PS Public Service
income tax and pay 25% of the amount due to the Department
in 4 payments: OB Other Business
• 1st payment: 15th day of the 4th month following
NAICS Code
the beginning of its fiscal year.
Enter the 6-digit North American Industry Classification
• 2nd payment: 15th day of the 6th month.
System (NAICS) code. You can access a list of these codes
• 3rd payment: 15th day of the 9th month. on the Department’s website, www.tax.virginia.gov.
• 4th payment: 15th day of the 12th month following
Check the Applicable Boxes to indicate any of the
the beginning of its fiscal year.
following:
See Va. Code §§ 58.1-500 through 58.1-504.
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• Consolidated – Schedule 500AC Enclosed the Form 500 for which a change is reported, and give the
• Combined – Schedule 500AC Enclosed reason for each change. Show any computation in detail and
include any applicable schedules. Also, include federal Form
• Change in Filing Status (Do not check this box unless 1120X if an amended federal return was filed.
you have prior approval from the Department to change
The Federal/State e-File program only supports amended
your filing status. See Page 7 of these instructions for
returns for the current taxable year and the 2 preceding
more information.)
taxable years. Amended returns for prior taxable years must
• Schedule 500A Enclosed be filed by paper. Amended Forms 500EC will also need
• Schedule 500AB Enclosed to be filed by paper. Do not file Form 500 to carry back
a net operating loss. Use Form 500NOLD, Corporation
• Nonprofit Corporation
Application for Refund Carryback of Net Operating
• Certified Company Apportionment – Schedule 500AP Loss. Be sure to file using the correct form. Using the
Enclosed incorrect form will delay the processing of your return and
• Amended Return. Check the box and enter the may result in having your tax return sent back to you. File
amended return reason code in the space provided. Form 500NOLD by paper – the form is not supported by the
See table below. Federal/State e-File Program.
If the box for either the consolidated or combined return Final Return
is checked, enter the number of affiliates included in the If this is the final return, check the applicable boxes and
return on the line provided. Enclose a Schedule 500AC for provide the requested information.
each member included in the combined/consolidated return,
including the parent company. Corporate Telecommunications Company
Complete Form 500T and enter the amount from Form 500T,
Amended Return
Line 7 on Page 1 of Form 500 in the Telecommunications
If amending a return, mark the amended return check box and Company section and Line 11 on Page 2 of Form 500 .
enter the reason code in the space provided. Use the reason
code that best describes why the return is being amended Noncorporate Telecommunications Companies
and enclose the appropriate documentation. Complete Form 500T, check the Noncorporate Telecommu-
nications Company box, and enter the amount from Form
Code Amended Return Reason 500T, Line 10 on Form 500 on Page 1 in the Noncorporate
01 Net operating loss Telecommunications section and Line 11 on Page 2 of Form
Partnership-level federal adjustment – 500.
02
Enclose Form 502FED-1 Electric Supplier Company
Federal return amended or adjusted –
03 Complete Schedule 500EL and enter the amount from
Enclose copy of IRS final determination Schedule 500EL, Line 7 or 14.
Virginia return changes to subtractions,
04 Home Service Contract Provider
deductions, additions, and credits.
Complete Form 500HS and enter the amount from Form
05 Capital loss carryback
500HS, Line 10. Noncorporate home service contract
Allocation and apportionment changes –
10 providers must also check the box in this section.
Enclose Form 500A
Questions and Related Information
11 Schedule 500AB Changes
Complete questions A–F.
30 Other – Enclose Explanation
Line Instructions
Complete Form 500, Schedule 500ADJ, Schedule 500CR,
and all other applicable forms and schedules. If the Line 1 – Federal Taxable Income
corporation is an owner of a partnership and it amends its
corporate return in order to report a partnership-level federal Enter taxable income after net operating loss deductions
adjustment, the corporation must enclose with the amended and special deductions for dividends as it appears on the
return a copy of the Form 502FED-1 that it received from federal income tax return filed with the Internal Revenue
the partnership. Complete the amended Form 500 using Service. Line 1 may not be less than zero except to report a
the corrected figures, as if it were the original return. Do not net operating loss in the current year. Any corporation that
make any adjustments to the amended return to show that is included in a consolidated return for federal income tax
you received a refund or paid a balance due as a result of purposes, but files separate or combined Virginia returns or
the original return. This computation is made on Schedule files a consolidated Virginia return with fewer than all of the
500ADJ, Section C. Include any original schedules filed members included in the federal return, must include with
(as adjusted) as well as any new or added schedules. You the Virginia return, schedules and statements necessary to
must also enclose an explanation of changes to income and reconcile actual consolidated federal taxable income to the
modifications with your return. Provide the line reference from federal taxable income reported on the Virginia return.
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Line 2 – Total Additions from Schedule 500ADJ the taxpayer, including investment income such as capital
gains, unless the capital transaction serves an investment
Enter the total additions reported on Schedule 500ADJ,
function that is completely unrelated to any operational
Section A, Line 7.
activities carried on in the state. The Court also reinforced
Line 3 – Total the principle that investment income may be included in
Add Line 1 and Line 2. apportionable income if there is a unitary relationship between
the taxpayer and the entity in which the taxpayer has invested.
Line 4 – Total Subtractions from Schedule 500ADJ However, the Court made it clear that the absence of a unitary
Enter the total subtractions reported on Schedule 500ADJ, relationship does not necessarily preclude apportionment.
Section B, Line 10. These adjustments are only available to those multistate
Line 5 – Balance corporations that file a Virginia Schedule 500A to apportion
and allocate their income, and provide clear and cogent
Subtract Line 4 from Line 3. evidence that the asset producing the income serves an
Line 6 – Savings and Loan Bad Debt Deduction investment function that is unrelated to operational functions.
The denominator of the relevant apportionment factors must
If a Savings and Loan Association used the percentage of
also be adjusted to exclude items related to the investment
income method to compute its federal deduction for bad
assets.
debts, then it must add the federal bad debt deduction and
recompute the bad debt deduction for Virginia purposes by Any taxpayer who qualifies for an alternative method of
multiplying the amount on Line 5 by 40%. If the Savings and allocation and apportionment for this type of income is
Loan Association used the percentage of loans method or the required to add back any loss included in federal taxable
experience method, enter the amount claimed for addition income that is attributable to the acquisition, ownership,
Code 13 on Schedule 500ADJ (Va. Code § 58.1-403). management, stewardship, sale, or exchange of investment
assets that are unrelated to the taxpayer’s operational
Line 7 – Virginia Taxable Income function on Line 8(d). If the taxpayer has previously claimed a
Subtract Line 6 from Line 5. This is your Virginia taxable subtraction for nonapportionable investment function income
income if the entire business of the corporation is transacted with respect to any investment assets, the addition is required
or conducted within Virginia. Corporations other than for any subsequent losses generated by such assets.
multistate corporations, skip to Line 9.
Burden of Proof: As a prerequisite to the ability to claim
Line 8 – Apportionable Income (Schedule 500A an adjustment on Lines 8(c) and 8(d) (which effectively
Filers) allocates income other than dividends) the taxpayer must
be able to demonstrate that the application of Virginia law
Multistate corporations with no Virginia income must enter
to their particular facts will be unconstitutional. The burden
zeroes in 8(a) and 8(b). Otherwise, follow the instructions for
is on the taxpayer to provide clear and cogent evidence
Lines 8(a) through 8(d) below.
that the capital investment was completely separate from
Line 8(a) – Income Subject to Virginia Tax its operations, and that the taxpayer’s investment function
A corporation with income from business activity that is taxable was located outside of Virginia. The taxpayer must also
both within and without Virginia should enter its multistate demonstrate that the classification of the capital asset and
income that is subject to Virginia tax from Schedule 500A, its income for Virginia purposes is consistent with the manner
Section B, Line 3(j). in which the income has been allocated and apportioned
with other state tax authorities. The taxpayer will be under a
Line 8(b) – Apportionment Factor particularly heavy burden of proof in cases where the asset
Enter the apportionment factor from the appropriate line from was clearly operational at any time. Objective evidence is
Schedule 500A, Section B, Line 1 or 2(f). required; an unsubstantiated statement as to the taxpayer’s
intent, purpose, or state of mind will be insufficient to meet
Line 8(c) and 8(d) – Nonapportionable Investment the burden.
Nonapportionable Investment Function Net Income and Loss Taxpayers claiming an adjustment for nonapportionable
(applicable only to multistate corporations): income on the 2022 corporate tax returns must enclose a
Virginia law does not provide for an addition or subtraction statement with the return stating the nature of the adjustment
of this income, nor does the law provide for the allocation of and the basis for the position that relief is provided under
any income other than dividends. Lines 8(c) and 8(d) on the the Constitution. Supplemental evidence should be clearly
Form 500 recognize that some taxpayers may be entitled referenced and included with the return. The taxpayer should
to an alternative method of allocation and apportionment submit all evidence considered necessary to support the
if they can demonstrate that the application of Virginia’s taxpayer’s position. For additional information, see Virginia
apportionment law to their particular facts for the taxable year Tax Bulletin 93-4 (4/6/93).
would be contrary to the principles set forth in Allied Signal,
Line 9 – Income Tax
Inc. v. Director, Div. of Taxation, 504 U.S. 768 (1992).
Multiply the income (Line 7 or Line 8(a), whichever applies)
In Allied Signal, Inc., the Court reaffirmed the continued by 6%.
validity of apportionment of any income received directly by
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Line 10 – Nonrefundable Tax Credits Line 19 – Interest
Enter the total nonrefundable credit amount allowable this Enter the amount due at the underpayment rate established
year from Schedule 500CR, Section 2, Line 1B. by IRC § 6621, plus 2%, from the due date of the return until
payment. This underpayment rate is subject to quarterly
Line 11 – Adjusted Corporate Tax
adjustment. When penalty is entered under 18(a) above,
Subtract Line 10 from Line 9. Telecommunication companies interest is added from the due date to the date of payment.
should refer to Form 500T; electric supplier companies should
refer to Schedule 500EL; and home service contract providers Line 20 – Additional Charge
should refer to Form 500HS. Enter the amount from Line 17, Form 500C. Enclose Form
500C.
Line 12 – Estimated Income Tax Credits
Enter the total amount paid as estimated income tax. Include Line 21 – Total Due
the amount of overpayment for the taxable year 2021, elected Enter the total of Lines 17, 18, 19, and 20. This is the total
as a credit against 2022 estimated tax. amount due. The following payment options are available:
Line 13 – Extension Payments • Direct debit through the e-File system, or
Enter the amount of any extension payments. • ACH credit transaction.
Line 14 – Total Refundable Tax Credits If you choose direct debit, you can schedule to pay your
tax due for a future date, when filing before the due date. In
Enter the amount from Schedule 500CR, Section 4, Line 1A.
addition, payment may be made using eForms (Form 500V).
If filing a combined or consolidated return with a home service
contract provider or telecommunications company, do not Line 22 – Overpayment
enter refundable credits included on Forms 500HS or 500T. If Line 16 is greater than Line 11, subtract Line 11 from
Line 16.
Line 15 – Pass-Through Entity Withholding from
Schedule 500ADJ Line 23 – Amount to be Credited to 2023
Enter the total amount of Virginia income tax withheld from Enter the amount of overpayment that you want credited to
Schedule 500ADJ, Page 2, Section D. your 2023 estimated tax, if any.
Line 16 – Total Payments and Credits Line 24 – Amount to be Refunded
Add Lines 12 through 15. Subtract Line 23 from Line 22 and enter the amount to be
refunded.
Line 17 – Tax Owed
If Line 11 is greater than Line 16, subtract Line 16 from Instructions for Schedule 500ADJ
Line 11.
Fixed Date Conformity Update for 2022
Line 18 – Penalty for Return Filed After the Original
Virginia's date of conformity with the Internal Revenue
Due Date With or Without Payment of Amount Due
Code (IRC) was advanced from December 31, 2020, to
(a) If filed within the extension period and the balance of tax December 31, 2021, subject to certain exceptions.
due exceeds 10% of the actual tax liability (Line 9), enter
Virginia will continue to deconform from thefollowing: bonus
2% per month or fraction thereof of the balance (Line 17).
depreciation allowed for certain assets under federal law;
The maximum extension penalty is 14% of the tax due the five-year carryback of certain federal net operating loss
(12% for nonprofit corporations and entities other than (NOL) deductions generated in the 2008 or 2009 taxable
C corporations). In addition, if the tax is not paid in full years; the federal income treatment of applicable high yield
when the return is filed, a late payment penalty will be discount obligations; and the federal income tax treatment
assessed on the amount of tax due (Line 17) at the rate of of cancellation of debt income realized in connection with
6% per month or part of a month from the date the return certain business debts. In addition, Virginia will continue
is filed through the date the tax is paid, up to a maximum to deconform from the following temporary changes made
of 30%. If the return is filed during the extension period, by the Coronavirus Aid, Relief, and Economic Security
but the tax due is not paid when the return is filed, both (“CARES”) Act: suspension of certain NOL limitations for
the extension penalty and the late payment penalty may Taxable Years 2018, 2019, and 2020 and increasing the
apply. The extension penalty will apply from the due date business interest limitation for Taxable Year 2019 and 2020.
of the return through the date the return is filed, and the See Tax Bulletin 21-4 for more information.
late payment penalty will apply from the date the return
is filed through the date of payment. To avoid paying the Section A – Additions to Federal Taxable Income
late payment penalty during the extension period, the tax
owed must be paid when the return is filed; OR Line 1 – Fixed Date Conformity Addition – Depreciation
(b) If filed after the extended due date, enter 30% of Line 17 Enter the amount that should be added to federal taxable
or $100, whichever is greater. income based upon the recomputation of allowable
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depreciation. If depreciation was included in the computation Line 6 – Other Additions to Federal Taxable Income
of your federal taxable income and one or more of the
On Lines 6a-6c, enter the 2-digit code, listed below, in the
depreciable assets received the special bonus depreciation
boxes followed by the amount of the addition. If Code 99 is
deduction for federal purposes in any year from 2001 through
claimed and you are filing electronically, provide a detailed
2022, then depreciation must be recomputed for Virginia
explanation in the space provided by the software program.
purposes as if such assets did not receive the special bonus
If Code 99 is claimed and you are filing by paper, enclose
depreciation deduction for federal purposes in any year from
an explanation and supporting documentation, if applicable.
2001 through 2022. If the total 2022 Virginia depreciation
is less than 2022 federal depreciation, then the difference If you are filing by paper and have more than 3 of the additions
must be recognized as an addition on Line 1. For further listed below or in the supplemental instructions, check
instructions, see Virginia Tax Bulletins 19-1, 20-1, 21-4, and the box on Schedule 500ADJ and use the supplemental
22-1, which are available at www.tax.virginia.gov or call Schedule 500ADJS to provide information on additions in
(804) 367-8037. excess of three.
Line 2 – Fixed Date Conformity Addition – Other Addition Codes for Use on Schedule 500ADJ
Disposed Asset – If an asset was disposed of in 2022 and Code Description
such asset received the special bonus depreciation deduction 01 A gas supplier, pipeline distribution company, or
for federal purposes in any year from 2001 through 2022, gas utility must add to federal taxable income any
and a gain or loss was recognized for federal purposes, amount that was deducted in determining taxable
then the gain or loss must be recomputed as if such asset income as a net operating loss carryover from any
did not receive the special bonus depreciation deduction for taxable year beginning on or before December 31,
federal purposes in any year from 2001 through 2022. The 2000 (Va. Code § 58.1-403 8).
adjustment will be the difference in the federal and Virginia
basis of the asset when sold. If the federal basis of the asset 02 A gas supplier, pipeline distribution company or
is greater than the Virginia basis, (resulting in a lower gain gas utility must add to federal taxable income any
reported for federal purposes), then the difference between amount that was actually deducted in determining
the bases is an addition on the Virginia return. For further taxable income as a net operating loss carryover or
instructions, see Virginia Tax Bulletins 19-1, 20-1, 21-4, net capital loss carryover which would have been an
and 22-1, which are available on the Department’s website: allowable deduction as a net operating or net capital
www.tax.virginia.gov or call (804) 367-8037. loss carryover in computing taxable income for a
year beginning after December 31, 2000, except
Other fixed date conformity additions – If you are required that such loss had been carried back for a taxable
to make any other fixed date conformity additions listed in year beginning prior to January 1, 2001 (Va. Code
the Fixed Date Conformity Update for 2022 above, enter the § 58.1-403 9).
total amount of such additions. Also, enclose a schedule and
explanation of such additions. 03 Unrelated business taxable income as defined by
IRC § 512, to the extent excluded from Form 500,
Line 3 Line 1 (Va. Code § 58.1-402 B.5).
Enter the amount on Schedule 500AB, Line 10, as the taxable 05 The amount required to be included in income for
amount of payments to a related entity in connection with the purpose of computing the partial tax on an
trademarks, patents and similar intangible property. Enclose accumulation distribution under IRC § 667 (Va.
Schedule 500AB. See Va. Code § 58.1-402 B.8 and Va. Code Code § 58.1-402 B.7).
§ 58.1-402 B.9. 10 Interest or dividends, less related expenses to the
Line 4 extent not deducted in determining federal taxable
income, on obligations or securities of any authority,
Net income taxes and other taxes, including franchise and
commission or instrumentality of the United States,
excise taxes, which are based on, measured by, or computed
which the laws of the United States exempt from
with reference to net income, imposed by this state or any
federal income tax, but not from state income taxes
other taxing jurisdiction to the extent deducted in determining
(Va. Code § 58.1-402 B.2).
federal taxable income (Va. Code § 58.1-402 B.4).
13 The deduction for bad debts allowed in computing
Line 5 federal taxable income for a state or federal savings
Interest, less related expenses to the extent not deducted and loan association (Va. Code § 58.1-403 1).
in determining federal taxable income, on obligations of any 14 Enter the amount of dividends deductible under
state other than Virginia or of a political subdivision of any IRC § 561 and IRC § 857 by a REIT (Va. Code §
state other than Virginia unless it was created by a compact 58.1-402 B.10).
or agreement to which this state is a party (Va. Code § 58.1-
402 B.1).
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Addition Codes for Use on Schedule 500ADJ Addition Codes for Use on Schedule 500ADJ
Code Description Code Description
16 Income from Dealer Disposition of Property – 99 Other – Enter the amount of any other income not
Enter the amount that would be reported under included in federal taxable income, which is taxable
the installment method from certain dispositions in Virginia. If you are filing electronically, provide a
of property. If, in a prior year, the taxpayer was detailed explanation in the space provided by the
allowed a subtraction for certain income from software program. If you are filing by paper, enclose
dealer dispositions of property made on or after an explanation and supporting documentation, if
January 1, 2009, in the years following the year of applicable.
disposition, the taxpayer is required to add back
the amount that would have been reported under Line 7 – Total Additions
the installment method. Each disposition must be Add Lines 1-5, all amounts for Line 6(a)-(c), and the total of
tracked separately for purposes of this adjustment additions listed on the supplemental Schedule(s) 500ADJS,
(Va. Code § 58.1-402 F). if applicable. Enter the result here and on Form 500, Line 2.
19 Food Crop Donation – To the extent a credit is
allowed for growing food crops in the Commonwealth Section B – Subtractions from Federal Taxable
and donating such crops to a nonprofit food bank an Income
addition to the taxpayer’s federal taxable income is
required for any amount claimed by the taxpayer as Enter the amount by which any of the following changes
a federal income tax deduction for such donation. increased your federal taxable income.
20 Addition Related to the Business Interest Line 1 – Fixed Date Conformity Subtraction –
Deduction – For taxable years beginning on and Depreciation
after January 1, 2022, a corporate income tax Enter the amount that should be subtracted from federal
deduction is allowed in an amount equal to 30% of taxable income based upon the recomputation of allowable
the business interest that is disallowed for federal depreciation. If depreciation was included in the computation
income tax purposes. If (i) you claimed a Virginia of your federal taxable income and one or more of the
Business Interest Deduction on prior year Virginia depreciable assets received the special bonus depreciation
return(s) and (ii) you are able to fully utilize your deduction for federal purposes in any year from 2001 through
federal carryover of business interest from those 2022, then depreciation must be recomputed for Virginia
prior year(s) on your current year federal return, you purposes as if such assets did not receive the special bonus
must report an addition on your current year Virginia depreciation deduction for federal purposes in any year from
return equal to the amount of the Virginia Business 2001 through 2022. If the total 2022 Virginia depreciation
Interest Deduction claimed on the prior year Virginia is more than 2022 federal depreciation, then the difference
return(s). However, if you are able to only partially must be recognized as a subtraction on Line 1. For further
utilize your federal carryover of business interest instructions, see Virginia Tax Bulletins 19-1, 20-1, 21-4, and
from the prior year(s) on your current year federal 22-1 at www.tax.virginia.gov or call (804) 367-8037.
return, the Business Interest Addition will be applied
in the same proportion as the amount of federal Line 2 – Fixed Date Conformity Subtraction – Other
carryover that is utilized. If reporting this addition, Disposed Asset – If an asset was disposed of in 2022
enclose a copy of federal Form 8990. and such asset received the special bonus depreciation
deduction for federal purposes in any of the years 2001
Under prior law, the amount of the deduction was
through 2022, and a gain or loss was recognized for federal
limited to 20% of business interest disallowed.
purposes, then the gain or loss must be recomputed as if
21 Partnership-Level Federal Adjustments Income such asset did not receive the special bonus depreciation
Addition – Income related to certain partnership deduction for federal purposes in any of the years 2001
adjustments that result from federal tax changes through 2022. The adjustment will be the difference in the
and other changes to federal taxable income must federal and Virginia basis of the asset when sold. If the federal
be added to the owner’s income tax return if the basis of the asset is lower than the Virginia basis (resulting
income was not previously reported on the original in a greater gain for federal purposes), then the difference
Virginia return. The amount of the addition is equal to between the two bases is included as a subtraction on the
the income that was not included in Virginia taxable Virginia return. For further instructions, see Virginia Tax
income. When reporting this addition, enclose the Bulletins 19-1, 20-1, 21-4, and 22-1 on the Department’s
partnership’s completed Form 502FED-1. website, www.tax.virginia.gov, or call (804) 367-8037.
Other fixed date conformity subtractions – If you are
required to make any other fixed date conformity subtractions
listed in the Fixed Date Conformity Update for 2022 above,
enter the total amount of such subtractions on this line. Also,
enclose a schedule and explanation of such subtractions.
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Line 3 explanation in the space provided, by the software program. If
you are filing by paper, enclose an explanation and supporting
Enter the amount of income (interest, dividends, and gain)
documentation, if applicable.
derived from obligations or the sale or exchange of obligations
of the United States and on obligations or securities of any If you are filing by paper and have more than 3 of the
authority, commission or instrumentality of the United States subtractions listed below or in the supplemental instructions,
to the extent included in federal taxable income, but exempt check the box and use the supplemental Schedule 500ADJS
from state income taxes under the laws of the United States. to provide information on subtractions in excess of three.
This includes, but is not limited to, stocks, bonds, treasury
bills, and treasury notes. It does not include interest on Subtraction Codes for Use on Schedule 500ADJ
refunds of federal taxes, equipment purchase contracts, or Code Description
normal business transactions. See Va. Code § 58.1-402 C.1.
50 The amount of wages and salaries eligible for the
Line 4 federal Work Opportunity Tax Credit that are not
Any amounts included under the provisions of IRC § 78 (Va. deducted for federal tax purposes (Va. Code §
Code § 58.1-402 C.5). 58.1-402 C.6).
54 The amount contributed to the Virginia Public
Line 5
School Construction Grants Program and Fund
The amount of any refund or credit for overpayment of income that has not been claimed as a deduction on the
taxes imposed by this state or any other taxing jurisdiction corporation’s federal income tax return (Va. Code
(Va. Code § 58.1-402 C.4). § 58.1-402 C.15).
Line 6 55 There shall be subtracted from federal taxable
Any amount included therein by the operation of IRC § 951 income, by a gas supplier, pipeline distribution
(subpart F income) and/or, for taxable years beginning on company or gas utility company, the amount that
and after January 1, 2018, IRC § 951A (Global Intangible could have been deducted as a net operating loss
Low-Taxed Income). (Va. Code § 58.1-402 C.7.) carryover or net capital loss in arriving at taxable
income except that such loss or portion thereof had
Line 7 been carried back for federal purposes (Va. Code
Any amount included in federal taxable income which is § 58.1-403 9).
foreign source income and defined as follows: 56 A subtraction for gas suppliers, pipeline distribution
1. Interest other than interest derived from sources within companies, gas utility companies, and electric
the United States; suppliers, except cooperatives, for the amortization
of the Virginia tax basis of assets that are
2. Dividends other than dividends derived from sources recoverable for financial accounting and/or income
within the United States; tax purposes placed in service prior to the first day of
3. Rents, royalties, license, and technical fees from the taxable year that the company became subject
property located or services performed without the to Virginia corporate income tax (adjustment date).
United States or from any interest in such property, “Virginia tax basis” means the aggregate adjusted
including rents, royalties, or fees for the use of or the book basis less the aggregate adjusted tax basis
privilege of using without the United States any patents, of such assets as recorded on the company’s
copyrights, secret processes and formulas, goodwill, books of accounts as of the last day of the taxable
trademarks, trade brands, franchises, and other like year immediately preceding the adjustment date.
properties; and The amortization of the Virginia tax basis shall be
computed using the straight-line method over a
4. Gains, profits, or other income from the sale of
period of thirty years, beginning on the adjustment
intangible or real property located without the United
date. Gain or loss on the disposition or retirement
States (Va. Code § 58.1-402 C.8).
of any such asset shall be computed using its
Line 8 adjusted federal tax basis, and the amortization
The amount of any dividends received from corporations of the Virginia tax basis shall continue thereafter
in which the taxpaying corporation owns 50% or more of without adjustment. See Va. Code § 58.1-440.1.
the voting stock, to the extent they are included in federal 57 A subtraction for intangible expenses and costs
taxable income and to the extent not otherwise subtracted added to the federal taxable income of a related
from federal taxable income (Va. Code § 58.1-402 C.10). member as shown on the Schedule 500AB
enclosed with the Virginia return filed by such
Line 9 – Other Subtractions from Federal Taxable
related member (Va. Code § 58.1-402 C.21).
Income
On Lines 9a-9c, enter the 2-digit code, listed below, in the
boxes followed by the amount of the subtraction. If Code 99
is claimed and you are filing electronically, provide an
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Subtraction Codes for Use on Schedule 500ADJ Subtraction Codes for Use on Schedule 500ADJ
Code Description Code Description
58 For taxable years beginning on and after January 1, 61 Certain Long-Term Capital Gains – Provided
2006, there shall be subtracted from federal the long-term capital gain or investment services
taxable income contract payments to a producer partnership qualified income is attributable to an
of quota tobacco or a tobacco quota holder as investment in a “qualified business” as defined in
provided under the American Jobs Creation Act Va. Code § 58.1-339.4 or any other technology
of 2004 (P.L. 108-357). If the payment is received business approved by the Secretary of Technology
in installment payments, then the recognized gain or the Secretary of Commerce and Trade, it may
may be subtracted in the taxable year immediately be allowed as a subtraction. For taxable years
following the year in which the installment payment beginning on or after January 1, 2011, enter any
is received. If the payment is received in a single qualified income taxed as a long-term capital
payment, then 10% of the recognized gain may gain for federal income tax purposes, or any
be subtracted in the taxable year immediately income taxed as investment services partnership
following the year in which the single payment is interest income (otherwise known as investment
received. The taxpayer may then deduct an equal partnership carried interest income) for federal
amount in each of the 9 succeeding taxable years. income tax purposes. To qualify for this subtraction,
See Va. Code § 58.1-402 D. For more information, the income must be attributable to an investment
visit www.tax.virginia.gov. in a “qualified business,” as defined in Va. Code
59 Income from Dealer Disposition of Property § 58.1-339.4, or in any other technology business
– An adjustment is available for certain income approved by the Secretary of Technology or the
from dealer dispositions of property made on or Secretary of Commerce and Trade, provided that
after January 1, 2009. In the year of disposition the business has its principal office or facility in the
the adjustment will be a subtraction for gain Commonwealth and less than $3 million in annual
attributable to installment payments to be made in revenues in the fiscal year prior to the investment.
future taxable years provided that (i) the gain arises The investment must be made between the dates
from an installment sale for which federal law does of April 1, 2010, and June 30, 2020. No taxpayer
not permit the dealer to elect installment reporting that has claimed a tax credit for an investment in a
of income, and (ii) the dealer elects installment “qualified business” under Va. Code § 58.1-339.4,
treatment of the income for Virginia purposes on a subtraction for income attributable to a Virginia
or before the due date prescribed by law for filing venture capital account under Va. Code § 58.1-402
the taxpayer’s income tax return. In subsequent C.25, or a subtraction for income attributable to an
taxable years, the adjustment will be an addition investment in a Virginia real estate investment trust
for gain attributable to any payments made during under Va. Code § 58.1-402 C.26 shall be eligible
the taxable year with respect to the disposition. for the subtraction under this subdivision for an
Each disposition must be tracked separately for investment in the same business. See Va. Code §
purposes of this adjustment. See Va. Code § 58.1- 58.1-402 C.24.
402 F. 62 Historic Rehabilitation – To the extent included
60 Gains from Land Preservation Tax – Enter the in federal taxable income, any amount of gain or
amount of federal gain or income recognized as a income recognized by a taxpayer in connection with
result of the sale of Land Preservation Tax Credits. the Historic Rehabilitation Tax Credit is allowed as
See Va. Code § 58.1-513 D. a subtraction on the Virginia return.
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Subtraction Codes for Use on Schedule 500ADJ Subtraction Codes for Use on Schedule 500ADJ
Code Description Code Description
63 Venture Capital Account Investment – Taxpayers 65 Business Interest Deduction – For taxable
may claim a subtraction for income attributable to years beginning on and after January 1, 2022,
an investment in a Virginia venture capital account corporations may claim a deduction of 30% of
made on or after January 1, 2018, but before business interest disallowed pursuant to § 163(j) of
December 31, 2023. For the purposes of this the Internal Revenue Code, to the extent included
subtraction, income includes, but is not limited to, in and not otherwise subtracted from federal
investment services partnership interest income, taxable income. If claiming this deduction, enclose
otherwise known as investment partnership carried a copy of federal Form 8990.
interest income. No subtraction shall be allowed Under prior law, the deduction was limited to 20%
under this subdivision for an investment in a of business interest disallowed.
company that is owned or operated by an affiliate
of the taxpayer or for a taxpayer who has claimed 66 Gain from Eminent Domain – For taxable years
a subtraction for certain long-term gains under Va. beginning on or after January 1, 2019, taxpayers
Code 58.1-402 C.24 or a subtraction for income may claim a subtraction for any gain recognized
attributable to an investment in a Virginia real from the taking of real property by condemnation
estate investment trust under Va. Code § 58.1-402 proceedings.
C.26 for the same investment. See Va. Code § 67 Partnership-Level Federal Adjustments Income
58.1-402 C.25. Subtraction – Income related to certain partnership
In order for the subtraction to be claimed on the adjustments that result from federal tax changes
investors’ income tax returns, the fund in which and other changes to federal taxable income may
they invest must be certified by the Department as be subtracted from Virginia taxable income if the
a Virginia venture capital account for the taxable income was previously reported on the owner’s
year during which the investment was made. If the Virginia return. The amount of the subtraction is
fund is approved, a 9-digit certification number will equal to the federal taxable income that was included
be provided. Enter this number in the “Certification in the owner’s Virginia original income tax return
Number” space provided by the subtraction code. but should not have been reported. When claiming
this subtraction, include a copy of the partnership’s
64 Virginia Real Estate Investment Trust – For Form 502FED-1.
taxable years beginning on and after January 1,
2019, taxpayers may claim a subtraction for income 99 Other – Enter the amount of any other income
attributable to an investment in a Virginia real estate included in federal taxable income, which is not
investment trust made on or after January 1, 2019 taxable in Virginia. If you are filing electronically,
but before December 31, 2024. provide a detailed explanation in the space
provided by the software program. If you are filing
In order for the subtraction to be claimed on the
by paper, enclose an explanation and supporting
investors’ income tax returns, the real estate
documentation, if applicable.
investment trust in which they invest must be
certified by the Department as a Virginia real estate
investment trust for the taxable year during which Line 10 – Total Subtractions.
the investment was made. If the fund is approved, Add Lines 1-8, 9a-9c, and the total of subtractions from the
a 9-digit certification number will be provided. Enter supplemental Schedule(s) 500ADJS, if applicable. Enter here
this number in the “Certification Number” space and on Form 500, Line 4.
provided by the subtraction code.
Section C – Amended Return
No subtraction is allowed to an individual taxpayer:
for an investment in a company that is owned If you are filing an amended return, complete a new return
or operated by a family member or affiliate of using the corrected figures, as if it were the original return.
the taxpayer; who claimed the subtraction for Do not make any adjustments to the amended return to show
certain long-term capital gains or Venture Capital that you received a refund or paid a balance due as the result
Investments for the same investment; or who of the original return. Check the Amended Return checkbox
claimed the Qualified Equity and Subordinated on Form 500, Page 1 and enter the appropriate amended
Debt Investments Tax Credit for the same return reason code from the list provided on Page 10 of these
investment. For more information, see the Form instructions in the space provided.
REIT instructions. If the corporation is an owner of a partnership and it amends
its corporate return in order to report a partnership-level
federal adjustment, the corporation must enclose with the
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amended return a copy of Form 502FED-1 that it received The credits that can be claimed against corporate income
from the partnership. tax are listed below.
In cases where a Form 500NOLD is filed to carry back or • Neighborhood Assistance Act Tax Credit
carry forward a net operating loss, an amended Form 500 • Enterprise Zone Act Tax Credit
should be filed indicating the change in the amount of credits
• Conservation Tillage Equipment Tax Credit
claimed and the corrected carryover amounts. Enclose a
revised Schedule 500CR with the amended returns filed • Biodiesel and Green Diesel Fuels Tax Credit
to report the changes to the credit(s) claimed or carryover • Precision Fertilizer and Pesticide Application Equipment
amount resulting from the NOL carryback. Tax Credit
The Federal/State e-File program only supports amended • Recyclable Materials Processing Equipment Tax Credit
returns for the current taxable year and the 2 preceding • Clean-Fuel Vehicle and Vehicle Emissions Testing
taxable years. Amended returns for prior taxable years must Equipment Tax Credits
be filed by paper. Amended Forms 500EC will also need to • Major Business Facility Tax Credit
be filed by paper.
• Historic Rehabilitation Tax Credit
Section D – Schedule of VK-1 Withholding • Waste Motor Oil Burning Equipment Tax Credit
If you are claiming withholding on Form 500, Line 15, • Riparian Waterway Buffer Tax Credit
complete Schedule 500ADJ, Page 2. • Land Preservation Tax Credit
• Virginia Coal Employment and Production Incentive
About Virginia Schedule 500CR Tax Credit
Credit Computation Schedule • Community of Opportunity Tax Credit
Complete Schedule 500CR and enclose it with your return • Green Job Creation Tax Credit
when claiming a credit(s). See the instructions below for • Farm Wineries and Vineyards Tax Credit
additional requirements. When claiming a credit(s) that • International Trade Facility Tax Credit
requires documentation, you will need to attach a PDF of the • Port Volume Increase Tax Credit
documentation when filing electronically. If you are filing by
paper and claiming a credit(s) that requires documentation, • Barge and Rail Usage Tax Credit
the information must be enclosed. Missing enclosures may • Livable Home Tax Credit
cause delays in processing the return and may cause a credit • Research and Development Expenses Tax Credit
to be disallowed. • Major Research and Development Expenses Tax
The following rules apply when claiming credits on Schedule Credit
500CR. • Education Improvement Scholarships Tax Credit
• Nonrefundable credits without a carryover provision • Food Crop Donation Tax Credit
are claimed first. • Virginia Housing Opportunity Tax Credit
• Carryover credits must be fully used before any 2022 • Worker Training Tax Credit
credits (current year credits) are allowed.
• Coalfield Employment Enhancement Tax Credit
• To maximize allowable credit, carryover credits may • Motion Picture Production Tax Credits
be claimed in their order of expiration, regardless of
the order shown on Schedule 500CR. • Agricultural Best Management Practices Tax Credit
• Conservation Tillage and Precision Agriculture
Many of the credits may not be claimed on your return until
Equipment Tax Credit
after you have submitted an application and have been
notified in writing that you are allowed to claim the credit. If For detailed credit descriptions and information on how to
your return is due and you have not yet been notified, you claim tax credits, refer to the Instructions for Schedule 500CR.
have the option to either:
• Pay at least 90% of your tax liability by the return due Donations to the General Fund
date and file your return on extension after receiving
You may make donations directly to Virginia’s General
notification, or
Fund by writing a check payable to the State Treasurer
• File your return by the due date without claiming the and designating it as a donation to the Commonwealth’s
credit, and file an amended return after you have General Fund. To ensure proper accounting for these
received notification. donations, you must enclose your payment with Form
GFD. Visit www.tax.virginia.gov or call (804) 367-8037
to obtain this form.
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