Tax Type
Corporation Income Tax
Description
Virginia Major Business Facility Job Tax Credit
Topic
Allocation and Apportionment
Credits
Date Issued
08-23-2000
August 23, 2000
Re: Ruling Request: Major Business Facility Job Tax Credit
Dear *****
This will reply to your letter in which you request a ruling concerning the eligibility of certain jobs performed by employees of your client, ***** (the "Taxpayer"), to be included in the computation of the Virginia Major Business Facility Job Tax Credit ("MBFJTC").
FACTS
The Taxpayer created a number of jobs in Virginia between January 1, 1994, and December 31, 1998. The majority of the Taxpayer's new jobs require services from full-time employees that are performed entirely in Virginia. However, due to the nature of the Taxpayer's business, a number of Virginia-based employees may travel outside of Virginia in the course of performing their duties.
The Taxpayer is interested in claiming the MBFJTC on its Virginia corporate income tax return. However, because the Taxpayer was unclear as to whether the traveling employees qualified for the MBFJTC, you are requesting a ruling with respect to these jobs prior to claiming credit for them on an amended return.
DETERMINATION
Code of Virginia § 58.1-439 provides that the MBFJTC is allowed to a company that expands or establishes a major business facility within Virginia. A major business facility can be established by any business, where certain employment criteria have been satisfied, with the exception of facilities primarily engaged in the retail trade, park mutual betting establishments, or coal mining companies claiming the Virginia Coalfield Employment Enhancement Tax Credit. Examples of the types of industries eligible for the MBFJTC, as embodied in the statute, include manufacturing, mining, agriculture, forestry, fishing, transportation, communications or a public utility subject to the corporate income tax.
Pursuant to Code of Virginia § 58.1-439, a "qualified full-time employee" is an employee that fills a new permanent full-time position in a major business facility in Virginia. In order to qualify for the credit, a taxpayer must create at least 100 or more jobs for qualified full-time employees within a qualifying year.
The statute does not define when a qualified full-time employee is considered to be in Virginia for purposes of claiming the credit. However, the underlying purpose of the MBFJTC is to create an incentive to increase an entity's employees at facilities in Virginia. As a result, an increased portion of entity's income will be attributable to Virginia. For a multistate corporation, income is attributed to Virginia is based on an apportionment factor that includes property, payroll and sales. A qualified full-time employee would be considered to be in Virginia if that employee's compensation is included in the numerator of the payroll factor for the purposes of apportioning income to Virginia. This same criteria would be attributable to entities, other than corporations, that also apportion income.
It should be noted that the MBFJTC does include a recapture provision. If in any one of the five taxable years succeeding the credit year, the average number of qualified full-time employees decreases below the number of qualified full-time employees used to claim the credit, all or a portion of the MBFJTC must be recaptured. The average number of qualified full-time employees is determined from quarterly employment tax reports make to the Virginia Unemployment Commission.
As such, if the Virginia-based employees that travel outside of Virginia are required to be included on Virginia Employment Commission reports, their compensation is included in the numerator of the Virginia payroll factor, and if they otherwise meet the definition of a qualified full-time employee, the employee is eligible to be counted for the purposes of claiming the MBFJTC. I trust this will answer your questions. If you have any questions regarding this ruling, please contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/233490
Re: Ruling Request: Major Business Facility Job Tax Credit
Dear *****
This will reply to your letter in which you request a ruling concerning the eligibility of certain jobs performed by employees of your client, ***** (the "Taxpayer"), to be included in the computation of the Virginia Major Business Facility Job Tax Credit ("MBFJTC").
FACTS
The Taxpayer created a number of jobs in Virginia between January 1, 1994, and December 31, 1998. The majority of the Taxpayer's new jobs require services from full-time employees that are performed entirely in Virginia. However, due to the nature of the Taxpayer's business, a number of Virginia-based employees may travel outside of Virginia in the course of performing their duties.
The Taxpayer is interested in claiming the MBFJTC on its Virginia corporate income tax return. However, because the Taxpayer was unclear as to whether the traveling employees qualified for the MBFJTC, you are requesting a ruling with respect to these jobs prior to claiming credit for them on an amended return.
DETERMINATION
Code of Virginia § 58.1-439 provides that the MBFJTC is allowed to a company that expands or establishes a major business facility within Virginia. A major business facility can be established by any business, where certain employment criteria have been satisfied, with the exception of facilities primarily engaged in the retail trade, park mutual betting establishments, or coal mining companies claiming the Virginia Coalfield Employment Enhancement Tax Credit. Examples of the types of industries eligible for the MBFJTC, as embodied in the statute, include manufacturing, mining, agriculture, forestry, fishing, transportation, communications or a public utility subject to the corporate income tax.
Pursuant to Code of Virginia § 58.1-439, a "qualified full-time employee" is an employee that fills a new permanent full-time position in a major business facility in Virginia. In order to qualify for the credit, a taxpayer must create at least 100 or more jobs for qualified full-time employees within a qualifying year.
The statute does not define when a qualified full-time employee is considered to be in Virginia for purposes of claiming the credit. However, the underlying purpose of the MBFJTC is to create an incentive to increase an entity's employees at facilities in Virginia. As a result, an increased portion of entity's income will be attributable to Virginia. For a multistate corporation, income is attributed to Virginia is based on an apportionment factor that includes property, payroll and sales. A qualified full-time employee would be considered to be in Virginia if that employee's compensation is included in the numerator of the payroll factor for the purposes of apportioning income to Virginia. This same criteria would be attributable to entities, other than corporations, that also apportion income.
It should be noted that the MBFJTC does include a recapture provision. If in any one of the five taxable years succeeding the credit year, the average number of qualified full-time employees decreases below the number of qualified full-time employees used to claim the credit, all or a portion of the MBFJTC must be recaptured. The average number of qualified full-time employees is determined from quarterly employment tax reports make to the Virginia Unemployment Commission.
As such, if the Virginia-based employees that travel outside of Virginia are required to be included on Virginia Employment Commission reports, their compensation is included in the numerator of the Virginia payroll factor, and if they otherwise meet the definition of a qualified full-time employee, the employee is eligible to be counted for the purposes of claiming the MBFJTC. I trust this will answer your questions. If you have any questions regarding this ruling, please contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/233490
Rulings of the Tax Commissioner