                                 CODE OF VIRGINIA

CREDITS FOR TAXES PAID OTHER STATES (§ 58.1-332)

A. Whenever a Virginia resident has become liable to another state for income
tax on any earned or business income or any gain on the sale of a capital asset
(within the meaning of &#xA7; 1221 of the Internal Revenue Code), not including
an asset used in a trade or business, to the extent that such gain is included
in federal adjusted gross income, for the taxable year, derived from sources
outside the Commonwealth and subject to taxation under this chapter, the amount
of such tax payable by him shall, upon proof of such payment, be credited on the
taxpayer&#8217;s return with the income tax so paid to the other state.
			However, no franchise tax, license tax, excise tax, unincorporated business
tax, occupation tax or any tax characterized as such by the taxing jurisdiction,
although applied to earned or business income, shall qualify for a credit under
this section, nor shall any tax which, if characterized as an income tax or a
commuter tax, would be illegal and unauthorized under such other state&#8217;s
controlling or enabling legislation qualify for a credit under this section.
			The credit allowable under this section shall not exceed: (i) such proportion
of the income tax otherwise payable by him under this chapter as his income upon
which the tax imposed by the other state was computed bears to his Virginia
taxable income upon which the tax imposed by this Commonwealth was computed or
(ii) the income tax otherwise payable under this chapter in the event that the
income upon which the tax imposed by the other state is computed is less than
the Virginia taxable income upon which the tax imposed by this Commonwealth is
computed and all income derived from sources outside the Commonwealth and
subject to taxation under this chapter is earned income or business income
reported on federal form Schedule C from a single state contiguous to Virginia.
The credit provided for by this section shall not be granted to a resident
individual when the laws of another state, under which the income in question is
subject to tax assessment, provide a credit to such resident individual
substantially similar to that granted by subsection B of this section.

B. Whenever a nonresident individual of this Commonwealth has become liable to
the state where he resides for income tax upon his Virginia taxable income for
the taxable year, derived from Virginia sources and subject to taxation under
this chapter, the amount of such tax payable under this chapter shall be
credited with such proportion of the tax so payable by him to the state where he
resides, upon proof of such payment, as his income subject to taxation under
this chapter bears to his entire income upon which the tax so payable to such
other state was imposed. The credit, however, shall be allowed only if the laws
of such state: (i) grant a substantially similar credit to residents of Virginia
subject to income tax under such laws or (ii) impose a tax upon the income of
its residents derived from Virginia sources and exempt from taxation the income
of residents of this Commonwealth. No credit shall be allowed against the amount
of the tax on any income taxable under this chapter which is exempt from
taxation under the laws of such other state.

C. 1. For purposes of this section, the amount of any state income tax paid by
an electing small business corporation (S corporation) shall be deemed to have
been paid by its individual shareholders in proportion to their ownership of the
stock of such corporation.

   2. For taxable years beginning on and after January 1, 2021, but before
   January 1, 2026, for purposes of this section, the amount of any state income
   tax paid by a pass-through entity under a law of another state substantially
   similar to &#xA7; 58.1-390.3 shall be deemed to have been paid by its
   individual owners in proportion to their ownership.

HISTORY: Code 1950, § 58-151.015; 1971, Ex. Sess., c. 171; 1972, c. 827; 1984,
c. 675; 1985, c. 466; 1991, cc. 362, 456; 1992, c. 317; 1994, c. 195; 1998, c.
291; 1999, c. 317; 2022, cc. 689, 690.