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Virginia Administrative Code
Title 23. Taxation
Agency 10. Department of Taxation
Chapter 120. Corporation Income Tax
11/21/2024

23VAC10-120-140. How dividends allocated.

A. In general. If a corporation is subject to tax in Virginia and at least one other state, as defined in § 58.1-405 of the Code of Virginia, it must allocate and apportion its Virginia taxable income. Dividends are allocated to the commercial domicile of the corporation. All other income is apportioned.

B. Definition of dividend. A distribution to the taxpaying corporation from another corporation shall be allocated if such distribution is treated as a dividend under IRC § 316.

C. Amount allocated. Dividends are allocated only to the extent that they are included in Virginia taxable income. Allocable dividends are gross dividends received reduced by the following:

1. Any dividends exempt from taxation under federal law.

2. The dividends received deduction allowed by federal law.

3. Dividends which are subtracted from federal taxable income in computing Virginia taxable income (e.g. 50% owned corporations, foreign source income, foreign dividend gross up, subpart F income). See 23VAC10-120-102 for details.

D. Commercial domicile. Commercial domicile means the state in which is located the principal office from which the business affairs of the corporation are normally directed or managed. The commercial domicile will normally be the location of the headquarters office of the corporation. If the corporation has no office then the commercial domicile may be where the officers, directors and shareholders regularly meet or where the principal officer or majority shareholder/officer conducts the affairs of the corporation, depending upon the facts and circumstances.

Statutory Authority

§§ 58.1-203 and 58.1-407 of the Code of Virginia.

Historical Notes

Derived from VR630-3-407, eff. January 1, 1985.

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