A BILL to amend and reenact § 58.1-390.3 of the Code of Virginia, relating to income tax; pass-through entities; sunset.
HB33 amends Virginia’s elective pass-through entity income tax statute, § 58.1-390.3, to extend the current entity-level tax election for pass-through entities through taxable years beginning before January 1, 2027. Under existing law, eligible partnerships, S corporations, and similar entities may elect to pay Virginia income tax at the entity level rather than having the tax flow through to individual owners. The bill preserves that structure and the 5.75 percent tax rate, while keeping the related rules for calculating Virginia taxable income, sourcing nonresident owners’ income to Virginia, and applying credits and deductions.
The bill also retains the mechanism that gives eligible owners a credit for their share of tax paid by the pass-through entity, with any excess credit treated as a refundable overpayment. It directs the Department of Taxation to continue treating collection, interest, and penalties as if the tax were a corporate income tax and to publish implementing guidance. In practical terms, the bill prevents the current elective pass-through entity tax from expiring at the end of 2026 and keeps the tax option available for another year.
HB33 would amend § 58.1-390.3 of the Code of Virginia by extending the sunset date for the elective pass-through entity tax from taxable years beginning before January 1, 2027 to continue through that date, thereby preserving the existing entity-level tax election for eligible pass-through businesses. It would continue to affect partnerships, S corporations, and their owners by allowing the entity to pay Virginia income tax on behalf of owners and by preserving the owner-level credit and refund provisions tied to that election. The bill does not change the tax rate or the basic computation rules, but it extends the availability of the election and the Department of Taxation’s related administrative authority.
The available context suggests a neutral to mildly supportive posture, with the bill introduced and referred to the Finance Committee but no recorded votes or committee transcript indicating opposition or debate. Because the measure simply extends an existing tax election rather than creating a new tax structure, it appears to be a maintenance or continuation bill rather than a controversial policy change. The lack of recorded floor action or committee discussion indicates that sentiment cannot be measured directly from the provided materials, but there is no evidence of strong public disagreement in the record supplied.
The main policy issue is the continuation of the elective pass-through entity tax itself, which can be viewed differently by affected taxpayers. Supporters are likely to see the extension as preserving a tax-planning option that can reduce federal tax burdens for owners of pass-through businesses, while critics may view it as extending a tax preference or as adding complexity to the tax code. Any contention would center on whether Virginia should continue offering this entity-level election and whether the sunset should be allowed to take effect, but the provided record contains no specific objections, amendments, or recorded opposition.