Virginia Tax Commissioner Grants Add-Back Exception for Intercompany Interest

The Virginia Tax Commissioner issued a decision concluding that a corporate taxpayer may exclude intercompany interest expense from the add-back requirement for corporate income tax purposes after demonstrating a valid business purpose. Taxpayer paid interest on intercompany loans and initially added back the expense under Virginia law. Taxpayer then applied for relief from the add-back on the basis that the intercompany loans served a valid business purpose. The Commissioner determined that, although intercompany interest related to intangible property generally must be added back, the taxpayer provided clear and convincing evidence that the arrangement improved efficiency, reduced costs, and increased profitability. ...