News Release-Virginia Manufacturers-Tax Increase to Manufacturers
March 17, 2010
RICHMOND, VA – The General Assembly adjourned the 2010 Regular Session on Sunday (March 14, 2010) after only a one day extension. Budget Conferees and House Leadership claimed victory
News Release For Immediate Release
Phone: (804) 643-7489, ext. 10 March 17, 2010
Legislature Fixes Budget Deficit Without a Tax Increase?
~Virginia Domestic Production Coalition Appeals to Governor McDonnell for Relief ~
RICHMOND, VA – The General Assembly adjourned the 2010 Regular Session on Sunday (March 14, 2010) after only a one day extension. Budget Conferees and House Leadership claimed victory with a vote on HB 30 that passed the House 73-23 and the Senate 34-6. The adopted budget closed the $4.2 billion revenue shortfall facing the Commonwealth. Unfortunately, buried deep in HB 30 is an income tax increase on industrial businesses valued at an estimated $10 million in 2010, $20 million in 2011, $20 million in 2012, $25 million in 2013 and $30 million in 2014 and each year after.
Businesses affected by this tax increase will be in manufacturing, construction, engineering or architectural services, software development, mining, film production and similar industries. The income tax increase will apply to C corporations, S corporations, partnerships and individuals. The VMA estimates that this income tax increase will cost 6,400 Virginia jobs over the biennium.
David Gum, President & CEO, National Fruit Product Co., stated, “To pay any tax increase, I will have to take money from my capital budget, which will delay my ability to reinvest in my facility, secure jobs and compete during this economic recovery.�
HB 30 freezes the Section 199 Domestic Production Deduction (DPD) for qualified income at 2/3 of the Federal allowance in 2010 for purposes of conforming to the Internal Revenue Code (IRC). The effect of this language is to freeze the DPD at 6% for 2010 only. The DPD has been Virginia law since 2005 when Congress enacted the tax statute to remedy a World Trade Organization dispute regarding extraterritorial income taxation for domestic companies. The intent of the DPD is to keep domestic production activities in this country and make U.S. industry more competitive against OECD trading partners, where U.S. companies pay the second highest income tax among the competing countries. A point of contention is that the DPD was scheduled to increase to 9% in 2010; therefore, some have argued that the 2/3 allowable deduction in 2010, as proscribed in HB 30, does not technically represent a tax increase in tax year 2010 only.
