Major Business Facility Job 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:

For more information, see Va. Code § 58.1-439

Major Research and Development Tax Credit

You may qualify for this credit if:

You had more than $5 million in qualified research and development expenses during the year.

What is it?

An income tax credit equal to 10% of the difference between this year’s qualifying expenses and 50% of the average amount of the qualifying expenses for the 3 previous years.

If you didn’t have any qualifying expenses in at least 1 of the previous 3 years, the amount of credit equals 5% of the expenses paid this year. 

You can’t use the same expenses to apply for any other Virginia tax credit.

Claim the credit against the following taxes administered by Virginia Tax:

  • individual income tax
  • corporation income tax

The total amount of credit claimed can’t be greater than 75% of your tax liability. Carry forward any unused credits for 10 years.

What are “qualified research and development expenses”?

These are defined in IRC § 41(b), as amended. Only expenses related to research conducted in Virginia are eligible for the credit.

No credit is allowed for expenses relating to research involving cells or tissues derived from induced abortions or embryonic stem cells. However, research involving other types of stem cells does qualify for the credit.

Is there a cap?

Yes. We can’t issue more than $20 million in major research and development credits per year. If the amount of eligible applications exceeds $20 million, we’ll prorate the credit among the eligible applicants. 

To apply for this credit

Complete Form MRD and send it to us. Use our spreadsheet (Excel) to calculate the Adjusted Research and Development Expenses. Applications are due July 1 of the year following the year you incurred the expenses. Late applications will not be eligible for the credit.

Our Tax Credit Unit must certify the credit before you can claim it on your tax return. We will send you a letter to certify the credit by September 30. 

Using the credit

To claim the credit, complete the following and attach it to your return:

For more information, see Va. Code § 58.1-439.12:11. 

Qualified Equity and Subordinated Debt Investments Credit

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

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

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

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

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.

Qualified business

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   

Research and Development Tax Credit (Refundable)

You may qualify for this credit if:

You had $5 million or less in qualified research and development expenses during the year. If you had more than $5 million in qualified expenses, apply for the major research and development tax credit.

What is it?

A refundable tax credit equal to:

  • 15% of the first $300,000 in qualified expenses; or
  • 20% of the first $300,000 in qualified expenses if the research was conducted in conjunction with a Virginia public or private college or university. 

In either case, the credit is based upon the amount of qualified expenses that exceed the Virginia base amount. 

You can’t use the same expenses to apply for any other Virginia tax credit.

Claim the credit against the following taxes administered by Virginia Tax:

  • individual income tax
  • corporation income tax.

What are “qualified research and development expenses”?

These are defined in IRC § 41(b), as amended. Only expenses related to research conducted in Virginia are eligible for the credit.

No credit is allowed for expenses relating to research involving cells or tissues derived from induced abortions or embryonic stem cells. However, research involving other types of stem cells does qualify for the credit.

What is the “Virginia base amount”?

The base amount is the minimum amount of expenses you have to incur before you’re eligible to claim this credit. You calculate the credit on the first $300,000 of qualified expenses above the base amount. 

There are 2 options to calculate the credit - use the spreadsheets below to calculate the Virginia Base Amount for the credit: 

Is there a cap?

Yes. We can’t issue more than $7 million in research and development credits per year. 

To apply for this credit:

Complete Form RDC and send it to us. Applications are due July 1 of the year following the year you incurred the expenses. Late applications will not be eligible for the credit.

Our Tax Credit Unit must certify the credit before you can claim it on your tax return. We will send you a letter to certify the credit by September 30.

Using the credit

To claim the credit, complete the following and attach it to your return:

For more information, see Va. Code § 58.1-439.12:08

Worker Training Tax Credit

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
Other information

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.