Item 257(F) of the 2025 Appropriation Act (House Bill 1600, Chapter 725) requires the Department of Taxation ("the Department") to convene a workgroup to study the treatment of net operating losses ("NOLs") in Virginia when compared to other states and to make recommendations to simplify such treatment in Virginia (See Appendix A, Item 257 of the 2025 Appropriations Act).

The Department contacted those stakeholders identified in the legislation and other relevant stakeholders to notify them of the meeting and to request that each stakeholder appoint two representatives to participate in the meeting. The workgroup meeting was held on July 1, 2025. Following the meeting, the Department solicited written comments to be provided by July 15, 2025. All comments received from the workgroup are attached.

The workgroup generally agreed that a post-apportionment NOL calculation (used by a majority of states) would likely result in a simpler and easier to track Virginia NOL than a pre-apportionment NOL calculation (used by Virginia and a minority of other states). The workgroup also agreed that Virginia's calculation for NOLs is unique, even among the minority of states that calculate NOLs on a pre-apportionment basis. The workgroup concluded that Virginia's NOL calculation is overly complicated and creates a burden on taxpayers attempting to comply with the complexity of Virginia's unique NOL rules. Based on these findings, the workgroup has drafted recommended legislation to transition Virginia from its current pre-apportion NOL calculation to a less complex post-apportionment NOL calculation (See Appendix B, Workgroup's Recommended Draft Legislation).