Example 1. Telecommunications Company (TC) operates as a partnership with two corporate partners. TC is a calendar year filer for federal income tax purposes. For calendar year 1990, TC has $200,000 in gross receipts. Computing its taxable income as if a corporation, TC has a Virginia taxable income equal to $35,000. TC's minimum tax liability is $2,400 ($200,000 X 1.2%) and its Virginia income tax is $2,100 ($35,000 X 6.0%). Since TC's minimum tax liability exceeds its income tax liability, it is subject to the minimum tax and must pay $300 ($2,400 - 2,100). Because TC is a partnership, its income tax liability is deemed to be paid by its partners.
Example 2. Telecommunications Company (TC) operates as a partnership with two corporate partners. Corp A owns 60% of TC and Corp B owns 40% of TC. TC is a calendar year filer for federal income tax purposes. For calendar year 1990, TC has $200,000 in gross receipts. Computing its taxable income as if a corporation, TC has a Virginia taxable income equal to $50,000. TC's minimum tax liability is $2,400 ($200,000 X 1.2%) and its Virginia income tax is $3,000 ($50,000 X 6.0%). Since TC's income tax liability exceeds its minimum tax liability, it must determine the amount of income tax credit that would be allowable against the tax, if it paid the tax.
The credit is computed as follows:
Corporate Income Tax (deemed paid by partners) | $3,000 |
1.3% of Gross Receipts | 2,600 |
Credit Base | 400 |
Credit Percentage for 1990 | x 70% |
Corporate Income Tax Credit | $280 |
TC would pay no tax and Corp A would be allowed a credit of $168 ($280 X 60%) against its separate tax liability and Corp B would be allowed a credit of $112 ($280 X 40%) against its separate tax liability.
23 Va. Admin. Code § 10-120-89
Statutory Authority
§§ 58.1-203 and 58.1-400.1 of the Code of Virginia.