Where’s the “Beef”? Sublicensing Qualifies for Virginia Addback Exception


On March 29, 2012, the Circuit Court of the City of Richmond held that an exception to Virginia’s related party addback statute applied to licensing arrangements that included a sublicensor. Wendy’s International, Inc. v. Virginia Department of Revenue, No. CL09-3757 (Va. Cir. Ct. 2012). This decision is one of only a handful throughout the United States addressing the application of an exception to state “addback” statutes that requires the denial of deductions of intangible expenses paid to a related party.


For purposes of calculating Virginia taxable income, Virginia law requires taxpayers to make certain adjustments to federal taxable income. Va. Code Ann. § 58.1-402.A. In 2004, the Virginia legislature passed House Bill 5018, Sp. Sess. 1 (2004), which included an addback provision for intangible expenses and costs paid to related members that were excluded from federal taxable income. Specifically, Virginia’s addback statute provides, in relevant part:

[T]he amount of any intangible expenses and costs directly or indirectly paid, accrued, or incurred to, or in connection directly or indirectly with one or more direct or indirect transactions with one or more related members to the extent such expenses and costs were deductible or deducted in computing federal taxable income for Virginia purposes.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Eversheds Sutherland (US) LLP | Attorney Advertising

Written by:


Eversheds Sutherland (US) LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.