Virginia Administrative Code
Title 23 - TAXATION
Agency 10 - DEPARTMENT OF TAXATION
Chapter 120 - Corporation Income Tax
Section 23VAC10-120-89 - Noncorporate telecommunications companies

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.T he 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.

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:

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.