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Virginia Administrative Code
Title 23. Taxation
Agency 10. Department of Taxation
Chapter 120. Corporation Income Tax
1/30/2023

23VAC10-120-89. Noncorporate telecommunications companies.

A. Generally. Unless specifically exempt under § 58.1-401 of the Code of Virginia, every telecommunications company certified as such by the SCC is subject to the minimum tax even though it may be exempt from, or not subject to, the corporate income tax under § 58.1-400 of the Code of Virginia. To the extent that the income of a noncorporate telecommunications company is subject to Virginia income tax at the entity level or in the hands of a partner or other person for whom the income retains its character, the telecommunications company will be deemed to have paid corporate income tax for purposes of computing the minimum tax and credit under subsection B.

B. Computation of minimum tax and credit. A noncorporate telecommunications company must calculate its minimum tax liability as provided in 23VAC10-120-83. If the income of the noncorporate telecommunications company is deemed to be subject to Virginia income tax under subsection A, the minimum tax liability shall be compared to the income tax liability of the entity computed as if it were a corporation. The minimum tax, income tax, and credit provisions shall be applied as follows:

1. Minimum tax. If the income of the entity is not deemed to be subject to Virginia income tax under subsection A, the entity shall pay the minimum tax. If the income of the entity is deemed to be subject to Virginia income tax under subsection A, and if the minimum tax exceeds the entity's income tax computed as if it were a corporation, the entity must pay an amount equal to the difference between the minimum tax and the corporate income tax.

2. Income tax. If the income of the entity is deemed to be subject to Virginia income tax under subsection A, and if the minimum tax does not exceed the entity's income tax computed as if it were a corporation, the entity shall not be required to pay the corporate income tax under § 58.1-400 merely because it computes such a tax for comparison with the minimum tax liability.

3. Telecommunications company income tax credit. If the income of the entity is deemed to be subject to Virginia income tax under subsection A, and if the entity's income tax computed as if it were a corporation exceeds 1.3% of its gross receipts, then the entity is eligible for a credit under § 58.1-434. The credit shall be computed by the entity as if it were a corporation but shall be claimed by the entity, partner, or other person, as the case may be, in proportion to the portion of the entity's income included in each taxpayer's taxable income. In no case shall the credit allowable exceed the income tax liability of the entity, partner, or other person.

C. Return preparation. If the income of a telecommunications company is deemed to be subject to Virginia income tax under the provisions of subsection A, it must file a return, marked "RETURN BY NONCORPORATE TELECOMMUNICATIONS COMPANY," each taxable year which contains the following information:

1. The gross receipts for such taxable year;

2. The total amount of minimum tax for such taxable year;

3. The taxable income and income tax computed as if it were a corporation subject to the corporate income tax under § 58.1-400 of the Code of Virginia;

4. The amount of the telecommunications company's income tax credit; and

5. A schedule which includes the name, address, tax identification number and proportionate share of the telecommunications company's income and credit taxable to each entity, partner or other person under Virginia law.

Example 1. Telecommunications Company (TC) operates as a partnership with two corporate partners. TC is a calendar year filer for federal income tax purposes. For calendar year 1990, TC has $200,000 in gross receipts. Computing its taxable income as if a corporation, TC has a Virginia taxable income equal to $35,000. TC's minimum tax liability is $2,400 ($200,000 X 1.2%) and its Virginia income tax is $2,100 ($35,000 X 6.0%). Since TC's minimum tax liability exceeds its income tax liability, it is subject to the minimum tax and must pay $300 ($2,400 - 2,100). Because TC is a partnership, its income tax liability is deemed to be paid by its partners.

Example 2. Telecommunications Company (TC) operates as a partnership with two corporate partners. Corp A owns 60% of TC and Corp B owns 40% of TC. TC is a calendar year filer for federal income tax purposes. For calendar year 1990, TC has $200,000 in gross receipts. Computing its taxable income as if a corporation, TC has a Virginia taxable income equal to $50,000. TC's minimum tax liability is $2,400 ($200,000 X 1.2%) and its Virginia income tax is $3,000 ($50,000 X 6.0%). Since TC's income tax liability exceeds its minimum tax liability, it must determine the amount of income tax credit that would be allowable against the tax, if it paid the tax.

The credit is computed as follows:

Corporate Income Tax (deemed paid by partners)

$3,000

1.3% of Gross Receipts

2,600

Credit Base

400

Credit Percentage for 1990

x 70%

Corporate Income Tax Credit

$280

TC would pay no tax and Corp A would be allowed a credit of $168 ($280 X 60%) against its separate tax liability and Corp B would be allowed a credit of $112 ($280 X 40%) against its separate tax liability.

Statutory Authority

§§ 58.1-203 and 58.1-400.1 of the Code of Virginia.

Historical Notes

Derived from VR630-3-400.1 § 10, eff. January 3, 1990.

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