                                 CODE OF VIRGINIA

VIRGINIA TAXABLE INCOME; SUBTRACTIONS (§ 58.1-322.02)

In computing Virginia taxable income pursuant to § 58.1-322, to the extent
included in federal adjusted gross income, there shall be subtracted:

1. Income derived from obligations, or on the sale or exchange of obligations,
of the United States and on obligations or securities of any authority,
commission, or instrumentality of the United States to the extent exempt from
state income taxes under the laws of the United States, including, but not
limited to, stocks, bonds, treasury bills, and treasury notes but not including
interest on refunds of federal taxes, interest on equipment purchase contracts,
or interest on other normal business transactions.

2. Income derived from obligations, or on the sale or exchange of obligations,
of the Commonwealth or of any political subdivision or instrumentality of the
Commonwealth.

3. Benefits received under Title II of the Social Security Act and other
benefits subject to federal income taxation solely pursuant to &#xA7; 86 of the
Internal Revenue Code.

4. Up to $20,000 of disability income, as defined in &#xA7; 22(c)(2)(B)(iii) of
the Internal Revenue Code; however, any person who claims a deduction under
subdivision 5 of &#xA7; 58.1-322.03 may not also claim a subtraction under this
subdivision.

5. The amount of any refund or credit for overpayment of income taxes imposed by
the Commonwealth or any other taxing jurisdiction.

6. The amount of wages or salaries eligible for the federal Work Opportunity
Credit which was not deducted for federal purposes on account of the provisions
of &#xA7; 280C(a) of the Internal Revenue Code.

7. Any amount included therein less than $600 from a prize awarded by the
Virginia Lottery.

8. The wages or salaries received by any person for active and inactive service
in the National Guard of the Commonwealth of Virginia, (i) for taxable years
beginning before January 1, 2023, not to exceed the amount of income derived
from 39 calendar days of such service or $3,000, whichever amount is less;
however, only those persons in the ranks of O3 and below shall be entitled to
the subtractions specified in this clause, and (ii) for taxable years beginning
on or after January 1, 2023, not to exceed the amount of income derived from 39
calendar days of such service or $5,500, whichever amount is less; however, only
those persons in the ranks of O6 and below shall be entitled to the subtractions
specified in this clause.

9. Amounts received by an individual, not to exceed $1,000 for taxable years
beginning on or before December 31, 2019, and $5,000 for taxable years beginning
on or after January 1, 2020, as a reward for information provided to a
law-enforcement official or agency, or to a nonprofit corporation created
exclusively to assist such law-enforcement official or agency, in the
apprehension and conviction of perpetrators of crimes. This subdivision shall
not apply to the following: an individual who is an employee of, or under
contract with, a law-enforcement agency, a victim or the perpetrator of the
crime for which the reward was paid, or any person who is compensated for the
investigation of crimes or accidents.

10. The amount of &#8220;qualified research expenses&#8221; or &#8220;basic
research expenses&#8221; eligible for deduction for federal purposes, but which
were not deducted, on account of the provisions of &#xA7; 280C(c) of the
Internal Revenue Code and which shall be available to partners, shareholders of
S corporations, and members of limited liability companies to the extent and in
the same manner as other deductions may pass through to such partners,
shareholders, and members.

11. Any income received during the taxable year derived from a qualified
pension, profit-sharing, or stock bonus plan as described by &#xA7; 401 of the
Internal Revenue Code, an individual retirement account or annuity established
under &#xA7; 408 of the Internal Revenue Code, a deferred compensation plan as
defined by &#xA7; 457 of the Internal Revenue Code, or any federal government
retirement program, the contributions to which were deductible from the
taxpayer&#8217;s federal adjusted gross income, but only to the extent the
contributions to such plan or program were subject to taxation under the income
tax in another state.

12. Any income attributable to a distribution of benefits or a refund from a
prepaid tuition contract or savings trust account with the Commonwealth Savers
Plan, created pursuant to Chapter 7 (&#xA7; 23.1-700 et seq.) of Title 23.1. The
subtraction for any income attributable to a refund shall be limited to income
attributable to a refund in the event of a beneficiary&#8217;s death,
disability, or receipt of a scholarship.

13. All military pay and allowances, to the extent included in federal adjusted
gross income and not otherwise subtracted, deducted, or exempted under this
section, earned by military personnel while serving by order of the President of
the United States with the consent of Congress in a combat zone or qualified
hazardous duty area that is treated as a combat zone for federal tax purposes
pursuant to &#xA7; 112 of the Internal Revenue Code.

14. For taxable years beginning before January 1, 2015, the gain derived from
the sale or exchange of real property or the sale or exchange of an easement to
real property which results in the real property or the easement thereto being
devoted to open-space use, as that term is defined in &#xA7; 58.1-3230, for a
period of time not less than 30 years. To the extent that a subtraction is taken
in accordance with this subdivision, no tax credit under this chapter for
donating land for its preservation shall be allowed for three years following
the year in which the subtraction is taken.

15. Fifteen thousand dollars of military basic pay for military service
personnel on extended active duty for periods in excess of 90 days; however, the
subtraction amount shall be reduced dollar-for-dollar by the amount by which the
taxpayer&#8217;s military basic pay exceeds $15,000 and shall be reduced to zero
if such military basic pay amount is equal to or exceeds $30,000.

16. The first $15,000 of salary for each federal and state employee whose total
annual salary from all employment for the taxable year is $15,000 or less.

17. Unemployment benefits taxable pursuant to &#xA7; 85 of the Internal Revenue
Code.

18. a. Any amount received as military retirement income by an individual
awarded the Congressional Medal of Honor.
			b. For taxable years beginning on and after January 1, 2022, but before
January 1, 2023, up to $10,000 of military benefits; and for taxable years
beginning on and after January 1, 2023, but before January 1, 2024, up to
$20,000 of military benefits.
			c. For taxable years beginning on and after January 1, 2024, but before
January 1, 2025, up to $30,000 of military benefits; and for taxable years
beginning on and after January 1, 2025, up to $40,000 of military benefits.
			d. For purposes of subdivisions b and c, &#8220;military benefits&#8221;
means any (i) military retirement income received for service in the Armed
Forces of the United States, (ii) qualified military benefits received pursuant
to &#xA7; 134 of the Internal Revenue Code, (iii) benefits paid to the surviving
spouse of a veteran of the Armed Forces of the United States under the Survivor
Benefit Plan program established by the U.S. Department of Defense, and (iv)
military benefits paid to the surviving spouse of a veteran of the Armed Forces
of the United States. The subtraction allowed by subdivision b shall be allowed
only for military benefits received by an individual age 55 or older. The
subtraction allowed by subdivision c shall be allowed for military benefits
received by an individual of any age. No subtraction shall be allowed pursuant
to subdivisions b and c if a credit, exemption, subtraction, or deduction is
claimed for the same income pursuant to subdivision a or any other provision of
Virginia or federal law.

19. Items of income attributable to, derived from, or in any way related to (i)
assets stolen from, hidden from, or otherwise lost by an individual who was a
victim or target of Nazi persecution or (ii) damages, reparations, or other
consideration received by a victim or target of Nazi persecution to compensate
such individual for performing labor against his will under the threat of death,
during World War II and its prelude and direct aftermath. This subtraction shall
not apply to assets acquired with such items of income or with the proceeds from
the sale of assets stolen from, hidden from, or otherwise lost to, during World
War II and its prelude and direct aftermath, a victim or target of Nazi
persecution. The provisions of this subdivision shall only apply to an
individual who was the first recipient of such items of income and who was a
victim or target of Nazi persecution, or a spouse, surviving spouse, or child or
stepchild of such victim.
			As used in this subdivision:
			&#8220;Nazi regime&#8221; means the country of Nazi Germany, areas occupied
by Nazi Germany, those European countries allied with Nazi Germany, or any other
neutral European country or area in Europe under the influence or threat of Nazi
invasion.
			&#8220;Victim or target of Nazi persecution&#8221; means any individual
persecuted or targeted for persecution by the Nazi regime who had assets stolen
from, hidden from, or otherwise lost as a result of any act or omission in any
way relating to (i) the Holocaust, (ii) World War II and its prelude and direct
aftermath, (iii) transactions with or actions of the Nazi regime, (iv) treatment
of refugees fleeing Nazi persecution, or (v) the holding of such assets by
entities or persons in the Swiss Confederation during World War II and its
prelude and aftermath. A &#8220;victim or target of Nazi persecution&#8221; also
includes any individual forced into labor against his will, under the threat of
death, during World War II and its prelude and direct aftermath.

20. The military death gratuity payment made after September 11, 2001, to the
survivor of deceased military personnel killed in the line of duty, pursuant to
10 U.S.C. Chapter 75; however, the subtraction amount shall be reduced
dollar-for-dollar by the amount that the survivor may exclude from his federal
gross income in accordance with &#xA7; 134 of the Internal Revenue Code.

21. The death benefit payments from an annuity contract that are received by a
beneficiary of such contract, provided that (i) the death benefit payment is
made pursuant to an annuity contract with an insurance company and (ii) the
death benefit payment is paid solely by lump sum. The subtraction under this
subdivision shall be allowed only for that portion of the death benefit payment
that is included in federal adjusted gross income.

22. Any gain recognized from the sale of launch services to space flight
participants, as defined in 49 U.S.C. &#xA7; 70102, or launch services intended
to provide individuals with the training or experience of a launch, without
performing an actual launch. To qualify for a deduction under this subdivision,
launch services must be performed in Virginia or originate from an airport or
spaceport in Virginia.

23. Any gain recognized as a result of resupply services contracts for
delivering payload, as defined in 49 U.S.C. &#xA7; 70102, entered into with the
Commercial Orbital Transportation Services division of the National Aeronautics
and Space Administration or other space flight entity, as defined in &#xA7;
8.01-227.8, and launched from an airport or spaceport in Virginia.

24. Any income taxed as a long-term capital gain for federal income tax
purposes, or any income taxed as investment services partnership interest income
(otherwise known as investment partnership carried interest income) for federal
income tax purposes. To qualify for a subtraction under this subdivision, such
income shall be attributable to an investment in a &#8220;qualified
business,&#8221; as defined in &#xA7; 58.1-339.4, or in any other technology
business approved by the Secretary of Administration, provided that the business
has its principal office or facility in the Commonwealth and less than $3
million in annual revenues in the fiscal year prior to the investment. To
qualify for a subtraction under this subdivision, the investment shall be made
between the dates of April 1, 2010, and June 30, 2020. No taxpayer who has
claimed a tax credit for an investment in a &#8220;qualified business&#8221;
under &#xA7; 58.1-339.4 shall be eligible for the subtraction under this
subdivision for an investment in the same business.

25. For taxable years beginning on and after January 1, 2014, any income of an
account holder for the taxable year taxed as (i) a capital gain for federal
income tax purposes attributable to such person&#8217;s first-time home buyer
savings account established pursuant to Chapter 12 (&#xA7; 36-171 et seq.) of
Title 36 and (ii) interest income or other income for federal income tax
purposes attributable to such person&#8217;s first-time home buyer savings
account.
			Notwithstanding the statute of limitations on assessments contained in &#xA7;
58.1-312, any subtraction taken under this subdivision shall be subject to
recapture in the taxable year or years in which moneys or funds withdrawn from
the first-time home buyer savings account were used for any purpose other than
the payment of eligible costs by or on behalf of a qualified beneficiary, as
provided under &#xA7; 36-174. The amount subject to recapture shall be a portion
of the amount withdrawn in the taxable year that was used for other than the
payment of eligible costs, computed by multiplying the amount withdrawn and used
for other than the payment of eligible costs by the ratio of the aggregate
earnings in the account at the time of the withdrawal to the total balance in
the account at such time.
			However, recapture shall not apply to the extent of moneys or funds withdrawn
that were (i) withdrawn by reason of the qualified beneficiary&#8217;s death or
disability; (ii) a disbursement of assets of the account pursuant to a filing
for protection under the United States Bankruptcy Code, 11 U.S.C. &#xA7;&#xA7;
101 through 1330; or (iii) transferred from an account established pursuant to
Chapter 12 (&#xA7; 36-171 et seq.) of Title 36 into another account established
pursuant to such chapter for the benefit of another qualified beneficiary.
			For purposes of this subdivision, &#8220;account holder,&#8221;
&#8220;eligible costs,&#8221; &#8220;first-time home buyer savings
account,&#8221; and &#8220;qualified beneficiary&#8221; mean the same as those
terms are defined in &#xA7; 36-171.

26. For taxable years beginning on and after January 1, 2015, any income for the
taxable year attributable to the discharge of a student loan solely by reason of
the student&#8217;s death. For purposes of this subdivision, &#8220;student
loan&#8221; means the same as that term is defined under &#xA7; 108(f) of the
Internal Revenue Code.

27. a. Income, including investment services partnership interest income
(otherwise known as investment partnership carried interest income),
attributable to an investment in a Virginia venture capital account. To qualify
for a subtraction under this subdivision, the investment shall be made on or
after January 1, 2018, but before December 31, 2023. No subtraction shall be
allowed under this subdivision for an investment in a company that is owned or
operated by a family member or an affiliate of the taxpayer. No subtraction
shall be allowed under this subdivision for a taxpayer who has claimed a
subtraction under subdivision 24 or a tax credit under &#xA7; 58.1-339.4 for the
same investment.
			b. As used in this subdivision 27:
			&#8220;Qualified portfolio company&#8221; means a company that (i) has its
principal place of business in the Commonwealth; (ii) has a primary purpose of
production, sale, research, or development of a product or service other than
the management or investment of capital; and (iii) provides equity in the
company to the Virginia venture capital account in exchange for a capital
investment. &#8220;Qualified portfolio company&#8221; does not include a company
that is an individual or sole proprietorship.
			&#8220;Virginia venture capital account&#8221; means an investment fund that
has been certified by the Department as a Virginia venture capital account. In
order to be certified as a Virginia venture capital account, the operator of the
investment fund shall register the investment fund with the Department prior to
December 31, 2023, (i) indicating that it intends to invest at least 50 percent
of the capital committed to its fund in qualified portfolio companies and (ii)
providing documentation that it employs at least one investor who has at least
four years of professional experience in venture capital investment or
substantially equivalent experience. &#8220;Substantially equivalent
experience&#8221; includes, but is not limited to, an undergraduate degree from
an accredited college or university in economics, finance, or a similar field of
study. The Department may require an investment fund to provide documentation of
the investor&#8217;s training, education, or experience as deemed necessary by
the Department to determine substantial equivalency. If the Department
determines that the investment fund employs at least one investor with the
experience set forth herein, the Department shall certify the investment fund as
a Virginia venture capital account at such time as the investment fund actually
invests at least 50 percent of the capital committed to its fund in qualified
portfolio companies.

28. a. Income attributable to an investment in a Virginia real estate investment
trust. To qualify for a subtraction under this subdivision, the investment shall
be made on or after January 1, 2019, but before December 31, 2024. No
subtraction shall be allowed for an investment in a trust that is managed by a
family member or an affiliate of the taxpayer. No subtraction shall be allowed
under this subdivision for a taxpayer who has claimed a subtraction under
subdivision 24 or 27 or a tax credit under &#xA7; 58.1-339.4 for the same
investment.
			b. As used in this subdivision 28:
			&#8220;Distressed&#8221; means satisfying the criteria applicable to a
locality described in subdivision E 2 of &#xA7; 2.2-115.
			&#8220;Double distressed&#8221; means satisfying the criteria applicable to a
locality described in subdivision E 3 of &#xA7; 2.2-115.
			&#8220;Virginia real estate investment trust&#8221; means a real estate
investment trust, as defined in 26 U.S.C. &#xA7; 856, that has been certified by
the Department as a Virginia real estate investment trust. In order to be
certified as a Virginia real estate investment trust, the trustee shall register
the trust with the Department prior to December 31, 2024, indicating that it
intends to invest at least 90 percent of trust funds in Virginia and at least 40
percent of trust funds in real estate in localities that are distressed or
double distressed. If the Department determines that the trust satisfies the
preceding criteria, the Department shall certify the trust as a Virginia real
estate investment trust at such time as the trust actually invests at least 90
percent of trust funds in Virginia and at least 40 percent of trust funds in
real estate in localities that are distressed or double distressed.

29. For taxable years beginning on and after January 1, 2019, any gain
recognized from the taking of real property by condemnation proceedings.

30. For taxable years beginning before January 1, 2021, up to $100,000 of all
grant funds received by the taxpayer under the Rebuild Virginia program
established by the Governor and administered by the Department of Small Business
and Supplier Diversity.

31. For taxable years beginning on and after January 1, 2022, any compensation
for wrongful incarceration awarded pursuant to the procedures established under
Article 18.2 (&#xA7; 8.01-195.10 et seq.) of Chapter 3 of Title 8.01.

HISTORY: 2017, cc. 444, 762; 2018, c. 821; 2019, c. 270; 2020, cc. 324, 375,
738, 900; 2021, Sp. Sess. I, cc. 117, 118, 552; 2022, cc. 3, 19, 572, 573; 2022,
Sp. Sess. I, cc. 1, 2, 14, 15; 2023, cc. 584, 585; 2023, Sp. Sess. I, c. 1;
2024, c. 217.