Bill > HB33

This bill removes the sunset provision for an existing elective entity-level tax on pass-through entities, which currently is set to expire after the 2026 tax year. The law allows pass-through entities (such as partnerships and S corporations) to voluntarily pay state income tax at the entity level, rather than having individual owners pay taxes on their share of business income. The tax rate is set at 5.75% and applies only to the Virginia taxable income of eligible owners. Nonresident owners' tax liability is limited to income from Virginia sources, and owners can receive a tax credit for the entity-level taxes paid, which can be refundable if the credit exceeds their individual tax liability. The bill essentially makes permanent a tax mechanism that was originally intended to be temporary, providing a continuing option for pass-through entities to manage their state tax obligations. By removing the sunset date, the bill ensures that businesses can continue to use this tax election beyond 2026 without the uncertainty of the provision expiring.

Budget and Finance

https://lis.virginia.gov/bill-details/20261/HB33