CHAPTER 305

An Act to amend the Code of Virginia by adding a section numbered
§8-81.2, relating to net operating loss carryover for manufacturing
businesses for income tax purposes.

[S 84]

Approved March 30, 1962

Be it enacted by the General Assembly of Virginia:

1. That the Code of Virginia be amended by adding a section numbered
58-81.2, as follows:

§ 58-81.2. Net operating loss carryover for manufacturing businesses.—
A taxpayer who, after December 31, 1963, is engaged in operating a manu-
facturing business in this State and who, for any taxable year beginning
after December 31, 1963, sustains a net operating loss, shall be allowed as
a deduction from gross income a net operating loss carryover under the
following rules:

(a) As used in this section the term “net operating loss’? means (for
any taxable year beginning after December 31, 1963) the excess of the
deductions allowed by other sections of this chapter over the gross income
for the taxable year arising from the operation of such manufacturing
business. Deductions not attributable to the operation of such manufac-
turing business shall be eliminated in computing the net operating loss.

(b) The net income of the taxable period to which the net operating
loss deduction as adjusted is carried shall be the net income before the
deduction of personal exemptions, in the case of an individual, and such
exemptions shall not be used to increase the net operating loss which may
be carried to any other taxable period.

(c) The net operating loss as herein defined for any taxable year begin-
ning after December 31, 1963 may be carried forward to the next succeed-
ing taxable year and annually thereafter for a total period of three years
next succeeding the year of such net operating loss or until, in such total
period of three years, such net operating loss has been exhausted or
absorbed by the taxable income of a succeeding taxable year; provided,
however, that a taxpayer who is required to apportion to this State his
apportionable income shall be allowed to deduct from income taxable in
this State, only such proportionate part of the net operating loss of a prior
year as would be determined by the use of the apportionment fraction
computed under §§ 58-131.8 through 58-131.17 of this chapter for the year
of such loss.

(d) Notwithstanding any other provision of law, if the Department of
Taxation discovers that the income of any taxpayer or any portion thereof
for any taxable year has not been assessed with respect to which a net
operating loss is sustained or is claimed as a deduction, in whole or in part,
it may at any time within five years from the date of the return which
finally absorbs the net operating loss deduction is filed, assess such Income
and give notice to the taxpayer of such assessment and the taxpayer shall
thereupon have an opportunity within thirty days to confer with the State
Tax Commissioner as to the proposed assessment. After the expiration of
thirty days from such notification, the Department of Taxation shall assess
the income of such taxpayer or any portion thereof which it believes has
not theretofore been assessed and shall give notice to the taxpayer so
assessed of the amount of the tax and interest and penalty, if any, and the
amount thereof shall be due and payable within thirty days from the date
of such notice.

(e) A taxpayer who claims that he has sustained a net operating loss
for any taxable year on account of the operation of such manufacturing
business shall accompany his claim by a detailed written statement in
support thereof; and if, in the opinion of the State Tax Commissioner, the
evidence initially submitted is inadequate to prove the claim, the taxpayer
shall be permitted to submit in writing such additional facts and figures as
he may be able to submit, and the claim shall then be disposed of according
to the law and the evidence.