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    Document Summary
    - Report Published -

    House Document No. 3

    Document Title
    Review of Virginia's Corporate Income Tax Structure

    Joint Legislative Audit and Review Commission

    Enabling Authority
    HJR 681 (Regular Session, 2009)

    Executive Summary
    * The Executive Summary was replaced in its entirety by the Joint Legislative Audit and Review Commission on January 28, 2011.

    House Joint Resolution 681 (2009) directed JLARC staff to perform a comprehensive review of the State’s corporate income tax (CIT) system.

    JLARC staff found that Virginia’s CIT is largely consistent with the corporate income tax systems in other states. Further, the CIT does not appear to be a major detraction from economic development efforts, particularly in light of the State’s favorable business environment.

    Still, several targeted changes could be made to the State’s CIT system to improve its alignment with principles of sound tax policy and address concerns raised by tax professionals and corporate representatives. In particular, the State could consider adopting market-based sourcing for sales of services and intangible goods while taxing out-of-state providers of such items to the full extent permissible under federal law.

    While major restructuring initiatives could be considered, most carry significant risks that may outweigh potential benefits and would likely disrupt the stability of Virginia’s CIT system. Implementing extensive changes may also be a disproportionate response to the narrowly focused concerns described in this report.