Virginia addback exception broadly interpreted

April 2012


On March 29, 2012, a Virginia Circuit Court concluded that the related-party addback exception requiring licensors to derive at least one-third of their gross revenues from the licensing of intangible property to unrelated members does not mandate that the royalty income be derived directly from unrelated members. The fact that the licensor received the revenue from a related-party conduit does not disqualify the licensor from the exception. (Wendy's Int'l, Inc. v. Virginia Dep't of Taxation, Case No. CL09-3757 (Cir. Ct. of the City of Richmond).

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