- Major Business Facility Tax Credit
- Major Research and Development Tax Credit
- Qualified Equity and Subordinated Debt Investments Credit
- Research and Development Tax Credit (Refundable)
- Worker Training Tax Credit
You may qualify for this credit if:
- You’re a company operating in Virginia, and
- You establish a new facility, or expand an existing facility, and
- This expansion or creation of a new facility creates:
- Tier 1 - at least 51 new jobs anywhere in Virginia.
- Tier 2 - at least 26 new full-time jobs if located in designated Enterprise Zones, or areas the Virginia Economic Development Authority has identified as economically distressed.
Retail businesses are not eligible for this credit.
What is it?
A credit of $1,000 per new job created in excess of the qualifying threshold amount (minimum number of jobs created by the expansion or establishment, see above) The credit is earned over a 2 year period and the employment level must be maintained for a minimum of 6 years. You can claim the credit for only 1 tier per facility.
Claim the credit against the following taxes administered by Virginia Tax:
- individual income tax
- fiduciary income tax
- corporation income tax
- bank franchise tax
- insurance premiums license tax
You can also claim the credit against certain utilities taxes administered by the State Corporation Commission. Please visit the SCC website for more information.
If you claim this credit, you can’t also claim the:
- Coalfield Employment Enhancement Tax Credit,
- Clean Fuel Vehicle and Advanced Cellulosic Biofuels Job Credit, or
- Green Job Creation Tax Credit.
You can claim the Major Business Facility Job Credit and receive an Enterprise Zone grant for the same facility. However, you can’t use the same jobs to qualify for the grant and receive the credit.
To apply for this credit:
Complete Form 304 and send it to us at least 90 days before you file your return. We will send you a letter certifying your credit. Form 304 must be filed with us for a total of 6 years to earn and determine if your credit is subject to recapture. If your employment level at the facility declines during the “recapture” period (any of the 5 years after you first earned the credit), your credit amount will be adjusted and/or you’ll have to pay a portion of the credit back. The “recapture” amount is determined by the number of jobs lost.
Using the credit:
Your credit can’t exceed your tax liability. Carry forward any unused credits for 10 years.
Complete the following and attach it to your Virginia tax return:
- Schedule CR, for individual and fiduciary returns
- Form 500CR, for corporate returns
- Schedule 800CR, for insurance premiums license tax returns
For more information, see Va. Code § 58.1-439.
For taxable years beginning on or after Jan. 1, 2016, but before Jan. 1, 2022, a taxpayer with Virginia qualified research and development expenses for the taxable year in excess of $5 million will be allowed a nonrefundable tax credit against the tax levied as stated in Va. Code § 58.1-320 or 58.1-400 in an amount equal to 10% of the difference between the Virginia qualified research and development expenses paid or incurred by the taxpayer during the taxable year and 50% of the average Virginia qualified research and development expenses paid or incurred by the taxpayer for the 3 taxable years immediately preceding the taxable year for which the credit is being determined. If the taxpayer didn't pay or incur Virginia qualified research and development expenses in any 1 of the 3 taxable years immediately preceding the taxable year for which the credit is being determined, the tax credit will equal 5% of the Virginia qualified research and development expenses paid or incurred by the taxpayer during the relevant taxable year.
No more than $20 million in tax credits can be issued in any fiscal year. If the approved applications for the tax credits allowed under this section exceed $20 million for any taxable year, Virginia Tax will apportion the credits by dividing $20 million by the total amount of tax credits approved, to determine the percentage of allowed tax credits each taxpayer will receive.
The amount of the credit claimed for the taxable year will not exceed 75% of the total amount of tax imposed by this chapter upon the taxpayer for the taxable year. Any credit not usable for the taxable year for which the credit was first allowed may be carried over for credit against the income taxes of the taxpayer in the next 10 succeeding taxable years or until the total amount of the tax credit has been taken, whichever is sooner.
Any taxpayer who claims the tax credit for Virginia qualified research and development expenses in keeping with this section can't use the expenses as the basis for claiming any other credit provided under the Code of Virginia.
How to apply
We must receive applications for the tax credit no later than July 1 of the calendar year following the close of the taxable year in which the expenses were paid or incurred.
Submitting a late application will disqualify you from the credit.
Send your application to:
Tax Credit Unit
PO Box 715
Richmond, VA 23218-0715.
This credit requires certification from the Tax Credit Unit to be claimed on your tax return. We will send you a letter to certify the credit.
Credits granted to a partnership, limited liability company, or electing small business corporation (S corporation) will be allocated to the individual partners, members, or shareholders, respectively, in proportion to their ownership interests in these entities or in accordance with a written agreement entered into by the individual partners, members, or shareholders using Form PTE within 30 days after the credit is granted unless the partnership, limited liability company, or electing small business corporation (S corporation) elects for the credits not to be allocated but to be received and claimed at the entity level by the partnership, limited liability company, or electing small business corporation (S corporation).
No tax credit will be allowed for any expenses that are paid for or incurred by a taxpayer for research conducted in Virginia on human cells or tissue derived from induced abortions or from stem cells obtained from human embryos. This provision does not apply to research conducted using stem cells other than embryonic stem cells.
Reference: Va. Code § 58.1-439.12:11.
How to qualify
This credit is available to individual and fiduciary taxpayers making a qualified investment in the form of equity or subordinated debt in a pre-qualified small business venture. Businesses must file Form QBA by Dec. 31 of the year that they request qualification. The business must reapply each year to maintain qualification. Investors must file Form EDC by April 1 of the year following the investment to apply for their credit. Submitting a late application will disqualify you for the credit. Send your application to Virginia Tax, Tax Credit Unit, PO Box 715, Richmond, VA 23218 - 0715. We will notify investors of the amount of their authorized credit by June 30.
Qualified investment means a cash investment in a qualified business in the form of equity or subordinated debt; however, an investment will not be qualified if the taxpayer who holds an investment, or any of the taxpayer's family members, or any entity affiliated with the taxpayer, receives or has received compensation from the qualified business in exchange for services provided to the business as an employee, officer, director, manager, or independent contractor within 1 year before or after the date of the investment. Reimbursement of reasonable expenses incurred will not be deemed as compensation.
Commercialization investment means a qualified investment in a qualified business that was created to commercialize research developed at or in partnership with an institution of higher education.
Equity means common stock or preferred stock, regardless of class or series, of a corporation; a partnership interest in a limited partnership; or a membership interest in a limited liability company, which is not required or subject to an option on the part of the taxpayer to be redeemed by the issuer within 3 years from the date of issuance. No equity investment will qualify for this credit if it is required to be redeemed or subject to an option to be redeemed by the issuer within 5 years of the date of issuance.
Subordinated debt means indebtedness of a corporation, general or limited partnership, or limited liability company that by its terms required no repayment of principal for the first 3 years after issuance; is not guaranteed by any other person or secured by any assets of the issuer or any other person; and is subordinated to all indebtedness and obligations of the issuer to national or state-chartered banking or savings and loan institutions.
Effective Jan. 1, 2009, a qualified business means a business which:
- has annual gross revenues of no more than $3 million in its most recent fiscal year
- has its principal office or facility in Virginia
- is engaged in business primarily in or does substantially all of its production in Virginia
- has not obtained during its existence more than $3 million in aggregate gross cash proceeds from the issuance of its equity or debt investments (not including commercial loans from chartered banking or savings and loan institutions)
- is primarily engaged, or is primarily organized to engage, in the fields of advanced computing, advanced materials, advanced manufacturing, agricultural technologies, biotechnology, electronic device technology, energy, environmental technology, information technology, medical device technology, nanotechnology, or any similar technology-related field determined by regulation by Virginia Tax to fall under the purview of this section.
How much is the credit?
The credit is equal to 50% of the qualified business investments made during the taxable year. If total annual requests for the credit exceed $5 million for the tax year, we will prorate the credit for each taxpayer.
The credit a taxpayer may claim per taxable year may not exceed the credit authorized by Virginia Tax, $50,000, or the income tax liability on that year's return, whichever is less. The credit is nonrefundable. Unused credits may be carried forward up to 15 years.
This credit may be allocated among owners in proportion to each owner's percentage of ownership or interest in the pass-through entity, or as the owners mutually agree, or as provided in the partnership agreement or other entity document using Form PTE within 30 days after the credit is granted but at least 90 days before filing an income tax return.
How to claim the credit
Complete Schedule CR, Part XV, to claim this credit. Note: Since we do not complete authorization of these credits until June 30 each year, taxpayers with a May 1 due date will need to file for an extension or file an amended return to claim this credit.
Reference: Va. Code § 58.1-339.4
Allows a refundable income tax credit for individuals and businesses for qualified research and development expenses for taxable years beginning on or after Jan. 1, 2011, but before Jan. 1, 2022.
Effective for taxable years beginning on or after Jan. 1, 2016, the tax credit amounts are:
- 15% of the first $300,000 in Virginia qualified research and development expenses, or
- 20% of the first $300,000 of Virginia qualified research and development expenses if the research was conducted in conjunction with a Virginia public or private college or university, to the extent the expenses exceed a base amount.
There is a $7 million cap on the total amount of credits allowed in any fiscal year.
Virginia Tax will require taxpayers applying for the credit to provide information including:
- The number of full-time employees employed by the taxpayer in the Commonwealth during the taxable year for which the credit is sought;
- The taxpayer's sector or sectors according to the 2012 edition of the North American Industry Classification System (NAICS) as published by the United States Census Bureau;
- A brief description of the area, discipline, or field of Virginia qualified research performed by the taxpayer;
- The total gross receipts or anticipated total gross receipts of the taxpayer for the taxable year for which the credit is sought;
- Whether the Virginia qualified research was conducted in conjunction with a Virginia public or private college or university.
Credit applications are due July 1. Submitting a late application will disqualify you for the credit.
Businesses use Form RDC to apply.
There are 2 options to calculate the credit - use the spreadsheets below to calculate the Virginia Base Amount for the credit:
All applications must be sent to:
Virginia Department of Taxation
Tax Credit Unit
P.O. Box 715
Richmond, VA 23218-0715
This credit requires certification from the Tax Credit Unit to be claimed on your tax return. After reviewing the application, we will send a letter certifying the credit.
This credit may be allocated among owners in proportion to each owner's percentage of ownership or interest in the pass-through entity, or as the owners mutually agree, or as provided in the partnership agreement or other entity document using Form PTE within 30 days after the credit is granted but at least 90 days before filing an income tax return. Effective for tax year 2014, pass-through entities may elect to claim the entire granted amount at the entity level.
Any taxpayer who claims the tax credit for Virginia qualified research and development expenses pursuant to this section shall not use such expenses as the basis for claiming any other credit provided under the Code of Virginia. Additionally, the taxpayer will not be eligible if research is conducted in the Commonwealth on human cells or tissue derived from induced abortions or from stem cells obtained from human embryos. The foregoing provision shall not apply to research conducted using stem cells other than embryonic stem cells.
If the total qualified expenses are in excess of $5,000,000 you must apply for the Major Research and Development Tax Credit.
Reference: Virginia Code 58.1-439.12:08
What is it?
A tax credit equal to:
- 35% of the costs of providing eligible training to qualified workers. Claim this credit against your individual income tax, fiduciary income tax, corporation income tax, bank franchise tax, and taxes imposed on insurance companies and utilities, or
- 35% of the direct costs of providing manufacturing training or instruction to middle and high school students. Claim this credit against your individual or corporation income tax.
This credit is effective beginning taxable year 2019.
What is eligible training?
- Training courses that are part of programs from providers listed on the Commonwealth’s Eligible Training Provider list. Virginia’s Workforce Innovation Opportunity Act Title I Administrator maintains this list.
- Instruction or training that is part of an apprenticeship agreement approved by the Commissioner of Labor and Industry. For information on pre-approved apprenticeship programs, contact your Virginia Department of Labor and Industry apprenticeship representative.
What is manufacturing training or instruction for middle and high school students?
Programs offered by manufacturers that:
- provide orientation, instruction, or training in the type of manufacturing the business in engaged in,
- are for students in grades 6 through 12,
- are coordinated with the local school district,
- are held at the business’s plant or facility, or a public middle or high school, and
- are certified by the Virginia Department of Education (VDOE).
These programs qualify for this credit beginning in taxable year 2018.
How much is the credit, and is there a cap?
Eligible worker training: 35% of all classroom training costs. The credit is limited to $500 per qualified employee per year, or $1,000 if the employee is considered a non-highly compensated worker. “Non-highly compensated” workers are those whose income was below Virginia’s median wage amount for the year prior to applying for the credit.
Manufacturing training for middle and high school students: 35% of direct costs associated with the training. No one manufacturer can claim more than $2,000 credit per year.
We are authorized to issue up to $1,000,000 of training credits. If total requested credits exceed this amount, we will prorate the authorized credits.
Is this credit refundable?
No. Your credit cannot be greater than your tax liability. You may carry forward any unused credits for 3 years.
How to claim the credit
The amount of the credit attributable to a partnership, electing small business corporation (S corporation), or limited liability company must be allocated to the individual partners, shareholders, or members in proportion to their ownership or interest within the business entity using Form PTE within 30 days after the credit is granted.