Nareit Alert: Virginia taxpayers allowed to deduct certain REIT dividends from Virginia taxable income

Virginia Taxpayers Allowed to Deduct Certain REIT Dividends from Virginia Taxable Income

On April 18, 2018, the Virginia legislature enacted H.B. 365, which allows Virginia resident and corporate taxpayers to deduct income attributable to a “Virginia REIT.” A Virginia REIT is defined as a REIT that has been registered with the Virginia Department of Taxation prior to Dec. 31, 2024, indicating that it intends to invest at least 90% of its funds in Virginia localities that are “distressed” or “double distressed.” A distressed locality is one where the unemployment rate or the poverty rate exceeds the statewide average. A “double distressed locality” is one where both the unemployment rate and the poverty rate exceed the statewide average. This deduction would be available for investments made on or after January 1, 2019, but before December 31, 2024.

Note that this legislation is not relevant to the section 199A deduction for qualified REIT dividends which was part of the Tax Cuts and Jobs Act. Because Virginia’s starting point for the calculation of an individual’s taxable income is adjusted gross income, rather than taxable income, Virginia does not conform to the section 199A deduction.

Contact

Nareit's Senior Vice President & Tax Counsel, Dara Bernstein, at dbernstein@nareit.com