Why this confusing-sounding tax term deserves your attention Sponsored
Those words may sound like terms only your Certified Public Accountant (CPA) should know. But believe it or not, they have a significant impact on Virginia businesses and when they can pay their taxes.
In short, right now there’s a lot of confusion. But with the business community’s support, we can make it easier.
What is tax conformity anyway? Every year, the Virginia General Assembly must pass legislation as quickly as possible to make Virginia’s definitions of income match federal definitions. (That’s called fixed-date conformity.) The longer it takes to pass, the longer it takes for taxpayers to be able to file their state taxes without having to amend them later. We promise — this creates angst for taxpayers and tax preparers across the Commonwealth.
Why do we do it this way? Tackling conformity each year allows lawmakers to choose any provisions with which they do NOT want to conform. (Usually it’s just a few.) These “deconforming” provisions are ones that may negatively affect taxpayers or the state’s bottom line. The Commonwealth didn’t used to do it this way; fixed-date conformity in Virginia only started in 2003.
Okay, that sounds annoying. But what’s the alternative? Legislators can pass new legislation that makes Virginia automatically conform each year with the federal tax code — that’s called rolling tax conformity. There are still ways to address the occasional need to deconform, too, like passing other bills if necessary to tackle just those narrow issues. Approximately 20+ other states use this model, so it’s not uncommon.
Who would benefit from rolling tax conformity? Everyone! Taxpayers, companies, and their accountants wouldn’t have to wait to file taxes until the General Assembly passes a bill. Legislators wouldn’t need to write, discuss and pass the same bill every single year. Filing software would be streamlined, with less complexity and opportunity for mistakes. With taxes being filed earlier, tax payments would follow — and the government would more quickly generate revenue.
This sounds like a win-win. What can we do to make it happen? CPAs across the state are advocating for rolling tax conformity to be on the table this year. The Virginia Society of CPAs is having ongoing discussions with legislators and their staff. But we need the business community and Virginia taxpayers on board! Contact your legislator and lend your support to tax conformity today. (We’ve even got talking points and a whole Tax Conformity Resource Center to help.)