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

You may qualify for this credit if

You make a qualified investment in a qualified business. The investment should be in the form of:

  • equity – purchasing the company’s stock or another form of ownership interest; or
  • subordinated debt – making a certain kind of loan to the business.

We’ll discuss equity and subordinated debt in more detail below. 

What is it?

An income tax credit equal to 50% of the qualified investments you made to qualified businesses during the year. You can claim a credit of up to $50,000 on your return, not to exceed your tax liability. Carry forward any unused credits for 15 years. 

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

  • individual income tax
  • fiduciary income tax
What is a qualified investment?

A cash investment in a qualified business by buying their stock or other ownership interest, or in the form of subordinated debt. 

If you, your family members (spouse, children, grandchildren, parents, spouse’s parents, or grandparents), or an entity that you’re affiliated with received compensation from the business within 1 year of the investment (before or after), your investment isn’t qualified. For the purpose of this credit, we don’t consider reimbursement for reasonable expenses as compensation.

What is a qualified business?

  • 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 in:
    • 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.

Businesses must apply to be qualified annually. To apply, complete Form QBA and send it to us by December 31 of the year that you request qualification.

What is “equity”?

Equity means an ownership interest in the business:

  • For corporations, it’s their common or preferred stock. 
  • For a limited partnership, it’s a partner interest.
  • For an LLC, it’s a member interest.

When you make an equity investment, you’re buying 1 of these types of interests.

You must hold your equity investment for at least 3 calendar years after the year you were granted the credit. If the investment requires you to redeem it before 3 years have passed, or if it is subject to an option to redeem it before 3 years, it isn’t eligible for this credit.

What is “subordinated debt”?

A loan to the business that isn’t secured by any of the business’ assets, or guaranteed by anyone. This type of loan is repaid after the business’ other debts are satisfied. 

For the purpose of this credit, the terms of the loan can’t require repayment of the principal for 3 years after the loan is issued. 

Is there a cap?

Yes. We can issue no more than $5 million in qualified equity and subordinated debt credits per year. 50% of this cap is set aside for “commercialization investments” (investments in qualified businesses who take research developed at or with an institution of higher education and bring it to market).  If the total “commercialized” credit requests are less than $2.5 million, the unused portion of the cap will be allocated to the “uncommercialized” credit requests.

If the amount of applications exceeds $5 million, we’ll prorate the credit.

To apply for the credit:

Investors should complete Form EDC and send it to us. From EDC is due by April 1 of the year following the year of the investment. Late applications are not eligible for the credit. We will notify you of the amount of your authorized credit by June 30.

Businesses who wish to become qualified businesses should complete Form QBA by December 31 of the year that you request qualification.

Using the credit

Complete Schedule CR and attach it to your individual or fiduciary income tax return. 

We don’t finish authorization of these credits until June 30, after the usual income tax filing deadline. Most taxpayers will need to file during the extension period (see our When to File page for information about Virginia’s automatic filing extension). Or, you can file an amended return to claim the credit.

For more information, see 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.