Tax Reform Friday: California, New Jersey, Virginia Release Further Guidance Related to Federal Tax Reform

Three states, California, New Jersey, and Virginia have released guidance regarding their responses to the changes included in Pub. L. No. 115-97 for various provisions.

California Releases Revised Preliminary Report on Impact of Federal Tax Reform

While California has yet to pass legislation updating its Revenue and Taxation Code, the state had previously released a preliminary report on the impact of three specific provisions of federal tax reform on Feb. 12. On March 20, the state released a revised edition of the report. The revised edition contains further information on the effective dates of the limitation on the deduction for state and local income taxes, as well new modeling that reflects the estimated impact of the expansion of the Child Tax Credit.

New Jersey Releases Notice on Treatment of Deemed Repatriation Dividends

New Jersey has released a notice regarding the states treatment of deemed repatriation dividends under I.R.C. § 965 for purposes of both its Corporation Business Tax and its Gross Income Tax. For purposes of the Corporation Business Tax, deemed repatriation dividends will be excluded from entire net income unless a corporation does not meet the ownership thresholds under N.J. Rev. Stat. § 54:10A-4(k)(5). However, deemed repatriation dividends must be included in income in the same tax year and amount as federally reported for purposes of the New Jersey Gross Income Tax.

Virginia Releases Worksheet on Computation of Medical Expenses Addition

As noted in last week’s Tax Reform Friday, Virginia enacted H.B. 154, updating its conformity date to Feb. 9, 2018. However, Virginia has released further guidance on the issue in a notice titled “Virginia's Fixed Date Conformity with the Internal Revenue Code,” stating, “[w]hile Virginia will continue to allow the federal itemized deduction for medical expenses, Virginia will not conform to the TCJA provision that temporarily increases the medical expenses deduction.” The notice contains a worksheet that walks taxpayers through the calculation of the addition modification required when computing medical expenses for Virginia.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: How should states approach changes to their conformity law in light of federal tax reform?

For more information on the impact of Pub. L. No. 115-97, examine Bloomberg Tax’s Tax Reform Roadmap, showing detailed comparisons between pre-reform law and impending changes, with pertinent cites attached.

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