How much state income tax MUST be paid by a Virginia corporation that has $30,000 of Federal taxable income, deducted $2,000 of state and local taxes on the Federal return, and had $2,000 of qualified worker retraining expenses, with operations only in Virginia?

How much state income tax MUST be paid by a Virginia corporation that has $30,000 of Federal taxable income, deducted $2,000 of state and local taxes on the Federal return, and had $2,000 of qualified worker retraining expenses, with operations only in Virginia?

• A. $1,080
• B. $1,680
• C. $2,400
• D. $2,700

Answer: (A)

Virginia taxes start from federal taxable income and then add or subtract state-specific adjustments. In this case, you begin with federal taxable income of 30,000. The state disallows the deduction for state and local taxes on the federal return, so you add back 2,000. At the same time, qualified worker retraining expenses are deductible for Virginia purposes, so you subtract 2,000. These adjustments cancel each other, leaving Virginia taxable income still 30,000. Applying the Virginia corporate tax rate of 3.6% gives 30,000 × 0.036 = 1,080. Since the corporation operates only in Virginia, there’s no apportionment beyond 100%.

Virginia taxes start from federal taxable income and then add or subtract state-specific adjustments. In this case, you begin with federal taxable income of 30,000. The state disallows the deduction for state and local taxes on the federal return, so you add back 2,000. At the same time, qualified worker retraining expenses are deductible for Virginia purposes, so you subtract 2,000. These adjustments cancel each other, leaving Virginia taxable income still 30,000. Applying the Virginia corporate tax rate of 3.6% gives 30,000 × 0.036 = 1,080. Since the corporation operates only in Virginia, there’s no apportionment beyond 100%.