CHAPTER 442

An Act to amend and reenact 8§ 58-128, 58-129, 58-131, 58-131.1, 58-134,
§8-148, 58-151 and 58-418 of the Code of Virginia, relating to tn-
come taxes; and to amend the Code of Virginia by adding sections
numbered 58-131.2 through 58-131.18, providing for the allocation
and apportionment of net income from corporate business activity
taxable both within and without this State; and to repeal § 58-18 of
the Code of Virginia, relating to taxation of corporations doing no
business in Virginia.

[S 2231

Approved March 31, 1960

Be it enacted by the General Assembly of Virginia:

1. That §§ 58-128, 58-129, 58-131, 58-131.1, 58-134, 58-148, 58-151 and
58-418 of the Code of Virginia be amended and reenacted, and that the
Code of Virginia be amended by adding sections numbered 58-131.2 through
5§8-131.18, as follows:

§ 58-128. What corporations liable for tax; levy.—Every domestic
corporation organized under the laws of this State, and every foreign
corporation * having income from sources in this State (except public
service corporations which are subject to a State franchise tax or license
tax upon gross receipts, insurance companies which pay a State license tax
on gross premiums and reciprocal or interinsurance exchanges which pay
a premium tax to the State as provided by law, and State and national
banks, banking associations and trust companies, building and loan associa-
tions or companies which do business on a purely mutual plan and make
loans only to their stockholders or members, credit unions organized and
conducted as such under the laws of this State, or under the laws of the
United States, and religious, educational, benevolent and other corpora-
tions not organized or conducted for pecuniary profit) shall pay for each
taxable year a tax to be computed by the Department of Taxation upon
the entire net income, as herein defined, of such corporation, derived from
business done, property located, or other sources in this State; and such
tax is hereby annually levied for each taxable year.

This section, as hereby amended, shall apply with respect to taxable
years beginning after December $1, 1959.

§ 58-129. Effect of dissolution or withdrawal, etc., of corporation or
partnership on income taxes.—If any corporation or partnership shall
dissolve or withdraw from the State, * or if any corporation shall in any
manner surrender or lose its charter, * such dissolution, withdrawal or
loss or surrender of charter shall not defeat the filing of returns and the
assessment and collection of income tax for such period * or periods as
such corporation or partnership may have had * income from sources in
this State.

This section, as hereby amended, shall apply with respect to taxable
year beginning after December $1, 1959.

§ 58-131. Corporations transacting or conducting entire business
within the State.—If the entire business of the corporation be transacted
or conducted within the State, the tax imposed by this chapter shall be
upon the entire net income of such corporation for each taxable year. *
The entire business of the corporation shall be deemed to have been trans-
acted or conducted within this State if such corporation is not subject to
a net income tax or a franchise tax measured by net income in any other
State of the United States, the District of Columbia, the Commonwealth
of Puerto Rico, any territory or possession of the United States, or any
foreign country, or would not be subject to a net income tax in any other
such taxing jurisdiction if such other taxing jurisdiction adopted the net
income tax law of this State.

This section, as hereby amended, shall apply with respect to taxable
years beginning after December 31, 1961.

§ 58-131.1. * Meaning of “compensation”, ‘“‘sales” and “State”, as used
in §§ 58-181.1 through 58-131.17—As used tn §§ 58-181.1 through
58-1381.17, unless the context otherwise requires:

(a) “Compensation” means wages, salaries, commissions and any
other form of remuneration paid or accrued to employees for personal
services, other than compensation to general executive officers having
company-wide authority.

(b) “Sales” means all gross receipts of the corporation not allocated
under §§ 58-1381.4 through 58-181.7.

(c) “State” means any State of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, any territory or possession
of the United States, and any foreign country.

§ 58-131.2. Allocation and apportionment of income applicable
when.—Any corporation having income from business activity which is
taxable both within and without this State, shall allocate and apportion
iis net income as provided in §§ 58-131.1 through 58-131.17.

§ 58-181.8. Corporation taxable in another State if, ete—For pur-
poses of allocation and apportionment of income under 8§ 58-131.1 through
58-181.17, a corporation is taxable in another State if (1) in that State
it is subject to a net income tax or a franchise tax measured by net
income, or (2) would, be subject to a net income tax in any other such:
taxing jurisdiction if such other taxing jurisdiction adopted the net income
tax law of this State.

§ 58-131.4. What items allocated as provided in §§ 58-131.5 through
58-131.7.—Kents and royalties from real or tangible personal property,
cayntal gains or losses from the sale or other disposition of real estate or
tangible and intangible personal property, interest and dividends shall be
allocated as provided in §§ 58-131.5 through 58-131.7.

§ 58-131.5 Net rents and royalties—(a) Net rents and royalties
from real property located in this State are allocable to this State.

(b) Net rents and royalties from tangible personal property are
allocable to this State: (1) if and to the extent that the property is utilized
in this State, or (2) in their entirety if the principal place from which
the trade or business of the corporation is directed or managed 1s in this
State and the corporation is not organized under the laws of or taxable
in the State in which the property is utilized.

(c) The extent of utilization of tangible personal property in a State
1s determined by multiplying the rents and royalties by a fraction, the
numerator of which is the number of days of physical location of the
property in the State during the rental or royalty period in the taxable
year and the denominator of which is the number of days of physical
location of the property everywhere during all rental or royalty periods
in the taxable year. If the physical location of the property during the
rental or royalty period is unknown or unascertainable by the corporation
tangible personal property is utilized in the State in which the property.
was located at the time the rental or royalty payer obtained possession.

§ 58-131.6. Capital gains and losses—(a) Capital gains and losses
from sales or other disposition of real property located in this State are
allocable to this State.

(b) Capital gains and losses from sales or other disposition of tangi-
ble personal property are allocable to this State tf (1) the property had
a situs in this State at the tume of the sale or other disposition, or (2)
the principal place from which the trade or business of the corporation
is directed or managed is in this State and the corporation is not taxable
in the State in which the property had a situs.

(c) Capital gains and losses from sales or other disposition of intangi-
ble personal property are allocable to this State if the principal place from
which the trade or business of the corporation is directed or managed its
in this State; provided, however, that capital gains and losses from sales
or other disposition of stock or other securities of a subsidiary corporation
of the selling or disposing corporation shall not be allocable under this
section but shall be apportionable under § 58-131.8.

§ 58-131.7. Interest and dividends.—Interest and dividends are allo-
cable to this State if the principal place from which the trade or business
of the corporation is directed or managed ts in this State; provided, how-
ever, that interest and dividends derived from investments in a subsidiary
corporation of the recipient corporation shall not be allocable under this
section but shall be apportionable under § 58-131.8. For the purposes of
this section and § 58-131.6, a corporation shall be considered to be a sub-
sidiary of another corporation if the latter owns more than 50% of the
voting stock of such corporation.

§ 58-131.8. What income apportioned and how.—All income of the
corporation except the classes of income allocable under §§ 58-181.4 through
58-181.7 shall be apportioned to this State by multiplying the income by
a fraction, the numerator of which ts the property factor plus the payroll
factor plus the sales factor, and the denominator of which is three, reduced
by the number of factors, if any, having no denominator.

§ 58-1381.9. Property factor.—The property factor is a fraction, the
numerator of which is the average value of the real and tangible personal
property owned by or rented to the corporation in this State during the
tax period and the denominator of which is the average value of all the
real and tangible personal property owned by or rented to the corporation
during the tax period; provided, however, that there shall be excluded
from such numerator and denominator the average value of real and tangi-
ble personal property owned by the corporation to the extent that rents
and royalties therefrom have been allocated under § 58-181.5.

§ 58-131.10. Valuation of property owned or rented.—Property
owned by the corporation is valued at its original cost plus the cost of ad-
ditions and improvements. Property rented by the corporation is valued at
eight times the net annual rental rate. Net annual rate is the annual rental
rate paid by the corporation less any annual rental rate received by the
corporation from sub-rentals.

§ 58-181.11. Average value of property determined how.—The aver-
age value of property shall be determined by averaging the value at the
beginning and ending of the tax period, but the Department of Taxation
may require the averaging of monthly values during the tax period tf rea-
sonably required to reflect properly the average value of the corporation’s
property.

§ 58-181.12. Payroll factor—The payroll factor is a fraction, the

numerator of which is the total amount paid or accrued in this State during
the tax period by the corporation for compensation, and the denominator
of which is the total compensation paid or accrued everywhere during the
tax period. Compensation to general executive officers having company-
wide authority, however, shall be excluded from the numerator and the
denominator, and all compensation in connection with income allocated
under §§ 58-181.4 through 58-131.7 shall be excluded from the numerator
and the denominator.
§ 58-131.13. Compensation is in this State, if, etc—Compensation
is paid or accrued in this State if: (a) the employee’s service is performed
entirely within the State; or (b) the employee’s service is performed
both within and without the State, but the service performed without
the State is incidental to the employee’s service within the State; or (c)
some of the service is performed in the State and (1) the base of opera-
tions or, if there is no base of operations, the place from which the serv-
ice 1s directed or controlled is in the State, or (2) the base of operations
or the place from which the service is directed or controlled 1s not in any
State in which some part of the service is performed, but the employee’s
residence is in this State.

§ 58-181.14. Sales factor.—The sales factor is a fraction, the numer-
ator of which is the total sales of the corporation in this State during the
tax period, and the denominator of which ts the total sales of the corpora-
tion everywhere during the tax period.

§ 58-131.15. Sales of tangible personal property are in this State,
if, etc.—Sales of tangible personal property are in this State if: (a) the
property is delivered or shipped to a purchaser or for his account within
this State regardless of the f. 0. 6. point or other conditions of the sale;
or (b) the property is shipped from an office, store, warehouse, factory,
or other place in this State and the corporation is not taxable with respect
thereto in the State of the purchaser by reason of the fact that such sale
is not attributable or assignable to the State of the purchaser under the
apportionment formula of such State, or would not be so attributable
ot amine if such State had adopted the net income tax law of this

tate.

§ 58-181.16. Sales, other than sales of tangible personal property,
are in this State, tf, etc.—Sales, other than sales of tangible personal
property, are in this State if: (a) the income-producing activity 1s per-
formed in this State; or (b) the income-producing activity is performed
both in and outside this State and a greater proportion of the wmcome-
producing activity is performed in this State than in any other State,
based on costs of performance.

§ 58-131.17. Motor carriers; apportionment of net apportionable in-
come.—Motor carriers of property or passengers shall apportion their
net apportionable income to this State by the use of the ratio of vehicle
miles in this State to total vehicle miles of the corporation everywhere.
For the purposes of this section the words “vehicle miles” in the case of
motor carriers of property shall mean miles traveled by vehicles (whether
owned or operated by the corporation) hauling property for a charge or
traveling on a scheduled route; and in the case of motor carriers of
passengers the same shall mean miles traveled by vehicles (whether owned
or operated by the corporation) carrying passengers for a fare or travel-
ing on a scheduled route.

§ 58-131.18. Taxable years to which §§ 58-131.1 through 58-131.17
applicable—The foregoing §§ 58-131.1 through 58-181.17 shall apply with
respect to taxable years beginning after December 31, 1961.

§ 58-134. Reports by corporations and partnerships.—Every corpora-
tion and partnership organized under the laws of this State, or * having
income from sources in this State, shall on or before April fifteenth of
each year make a report to the Department of Taxation; provided, that
corporations and partnerships, whose accounting period is a fiscal year,
as herein defined, shall make a return on or before the fifteenth day of
the fourth month following the close of such fiscal year. Such reports
shall be made on forms prescribed by the Department of Taxation and
shall contain such information as may be necessary for the proper en-
forcement of this chapter.

Receivers, trustees in dissolution, trustees in bankruptcy, and as-
signees, operating the property or business of corporations must make
returns of income for such corporations. If a receiver has full custody
of and control over the business or property of a corporation, he shall be
deemed to be operating such business or property, whether he is engaged
in carrying on the business for which the corporation was organized or
ony in marshaling, selling, or disposing of its assets for purposes of liqui-

ation.

This section, as hereby amended, shall apply with respect to taxable
years beginning after December $1, 1959.

§ 58-148. Revision of assessments against corporations.—If any ap-
plication for revision be filed with the Department of Taxation by a cor-
poration against which taxes have been assessed under this chapter within
three years from December thirty-first of the year in which such taxes
shall have been assessed and if it shall be made to appear to the Department
by evidence submitted to it or otherwise that any such amount included
taxes or other charges which could not have been lawfully demanded or
that payment has been illegally made or exacted of any such amount or if
it appears that the tax as originally assessed was less than should have
been exacted, the Department shall resettle the same according to law and
the facts by increasing or diminishing the taxes and other charges and
adjust the accounts accordingly and may, in its discretion, release or
modify the penalty imposed for failure to report as provided in this
chapter, if any penalty was imposed, and shall send notice of its determina-
tion thereon to the corporation forthwith. If it appears from such reas-
sessment that such corporation shall have paid an excess of tax under
this chapter for the year for which such reassessment is made, the De-
partment shall credit such corporation with such amount, which shall be
refunded out of the State treasury on the order of the State Tax Commis-
sioner upon the Comptroller.

§ 58-151. Time of payment of corporation income taxes; penalties for
nonpayment.—The tax hereby imposed on corporations shall be paid to
the State Treasurer within thirty days after notice of the tax has been
given as provided in this chapter; but no tax on a calendar year return
shall be deemed to be due hereunder before June first of each year. If
such tax be not so paid or, in the case of additional taxes, if not paid within
thirty days after notice of such additional tax has been given as provided
herein, the corporation liable to such tax shall pay, in addition to the
amount of such tax, or additional tax, five per centum of such amount
plus one per centum for each month the tax or additional tax remains un-
paid. But the Department of Taxation, upon submission to it of satis-
factory proof that the failure to pay such taxes, or additional taxes, within
the time prescribed in this chapter, was not wilful or evasive, may modify
the exaction to not less than one per centum for each month following
the due date of the tax.

§ 58-418. On all capital as defined by * §§ 58-410 through 58-417, there
is hereby annually levied a tax of * sixty-five cents on every one hundred
dollars of the actual value thereof.

This section, as hereby amended, shall apply to the tax year beginning
January first, nineteen hundred sixty-three, and to every tax year there-
after until otherwise provided by law.

2. That § 58-18 of the Code of Virginia is repealed.