Construction corporation; apportionment

# A.

If a construction corporation used the completed contract method of accounting for its federal income tax return it is required by § 58.1-440 of the Code of Virginia to use the same method for computing Virginia taxable income.

# B.

If a construction corporation is required to allocate and apportion income by § 58.1-405 of the Code of Virginia, it shall apportion income (other than dividend income allocable under § 58.1-407 of the Code of Virginia) within and without this Commonwealth in the ratio that the business within this Commonwealth is to the total business of the corporation.

# C.

If a corporation does not use the completed contract method, it shall use the three factor apportionment formula in § 58.1-408 et seq. of the Code of Virginia.

# D.

If a portion of a construction corporation's income is reported under the completed contract method and a portion is reported under a percentage of completion method or some other accounting method, the applicable apportionment formula is determined by the method used to report a majority (more than 50%) of the total business (measured by gross revenue) conducted by the taxpayer for the taxable year. If no one method is used to report a majority of the taxpayer's total business, the three factor apportionment formula in § 58.1-408 et seq. of the Code of Virginia shall be used.

# E.

An example follows:

A construction corporation's total business is $500,000 for the taxable year ended December 31, 1991: $275,000 is reported on the completed contract basis, $150,000 is reported under a percentage of completion method, and the remainder is reported on a cash basis. Because a majority of the total business was reported using the completed contract method of accounting, the taxpayer is required to apportion income using the single factor of business within Virginia over total business of the corporation.