Tax Type
Corporation Income Tax
Description
Major business facility job tax credit; General application
Topic
Credits
Date Issued
06-02-1995
June 2, 1995
Re: Ruling Request; Major Business Facility Job Tax Credit
Dear*************
This will reply to your letter of May 8, 1995, in which you have requested guidance with respect to several issues regarding the Major Business Facility Job Tax Credit (the "Credit"). Your questions shall be addressed individually.
Can a company only qualify for the credit if the jobs added are related to a corporate headquarters or to administrative functions which increase employment in Virginia?
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- Any company, regardless of industry, may qualify for the credit if it adds jobs in connection with the establishment or expansion of a major business facility. A major business facility is defined as a headquarters, or portion of such a facility located in Virginia, where company staff employees are physically employed, and where the majority of the company's financial, personnel, legal, or planning functions are handled either on a regional or national basis. A major business facility also includes facilities located in Virginia that perform a central management or administrative function for other establishments of the same enterprise such as general management, accounting, computing, tabulating, data processing, order filling, customer service, purchasing, transportation or shipping, engineering and systems planning, advertising, legal, financial, and research and development.
Any company primarily engaged in a qualified industry in Virginia may qualify for the credit if it creates at least 100 new jobs for qualified full-time employees within a continuous twelve month period ending within the company's taxable year.
- Any company, regardless of industry, may qualify for the credit if it adds jobs in connection with the establishment or expansion of a major business facility. A major business facility is defined as a headquarters, or portion of such a facility located in Virginia, where company staff employees are physically employed, and where the majority of the company's financial, personnel, legal, or planning functions are handled either on a regional or national basis. A major business facility also includes facilities located in Virginia that perform a central management or administrative function for other establishments of the same enterprise such as general management, accounting, computing, tabulating, data processing, order filling, customer service, purchasing, transportation or shipping, engineering and systems planning, advertising, legal, financial, and research and development.
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- Companies primarily engaged in a qualified industry are not required to establish or expand a major business facility; rather, they simply must satisfy the 100 new jobs criteria. However, the establishment or expansion of a major business facility by a taxpayer engaged in a qualified industry shall not result in multiple credits for the same qualified, full-time employees. A qualified industry is defined as (i) manufacturing or mining; (ii) agriculture, forestry or fishing; (iii) transportation or communications; or (iv) a public utility which is subject to the corporation income tax.
If a company added 150 full-time manufacturing jobs at a manufacturing facility In Virginia that did not employ any new administrative staff other than those needed for the facility itself and did not serve as headquarters or other administrative functions outside of the needs of that plant, would the 150 positions be qualified full-time employees enabling the business to take a credit of $50,000.
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- Companies engaged in qualified industries (defined above) are eligible for the credit if they add 100 qualified full-time employees, as defined in Code of Virginia §58.1-439, within a continuous 12 month period ending within their taxable year. The jobs do not have to be administrative in nature; rather they need only be engaged in the qualifying industry (i.e. manufacturing, mining, etc). Accordingly, assuming the 100 job threshold applies, the company would be eligible for a credit of $50,000 ($1,000 X (150-100)).
It a planned expansion takes 2 years to complete, and by the end of the second year 200 new employees were added, 100 being added in the first year and 100 In the second year, would the company qualify for a credit of $100,000? It so, in which year?
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- Assuming the company creates 100 jobs for qualified full-time employees within a single 12 month period ending within its taxable year, the company would calculate its credit in the following taxable year (defined as the "credit year'). The credit is based on the number of qualified full-time employees employed in the credit year. Thus, the maximum credit which could be earned under your example would be $100,000 ($1,000 X (200-100)). However, the portion of the $1,000 credit earned with respect to any qualified full-time employee who is employed in Virginia for less than 12 full months during the credit year will be determined by multiplying the $1,000 credit amount by a fraction, the numerator of which is the number of full months that the qualified full-time employee worked for the qualified company in Virginia during the credit year, and the denominator of which is 12. Thus, the credit amount may have to be prorated for the employees hired in the second year.
To whom must the announcement of intent to create additional jobs be made. Would an announcement to the employees of the plant at a plant wide meeting suffice?, a local news release?, announcement In coordination with the State of Virginia's Department of Taxation? When does the announcement need to be made?, before the project Is started?, before the expansion Is completed?, or after completion?
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- It is not necessary to actually make an announcement of the intention to create additional jobs or establish or expand a facility. However, if an announcement was made prior to January 1, 1994, such jobs or facility would not qualify for the credit. (The intent of this provision was to avoid granting a credit for activity that was already scheduled to occur.)
What forms are prescribed to notify the Department of Taxation of the date on which a qualified job expansion was deemed to have occurred. Does a company need to keep documentation or have some State agency certify our new jobs?
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- At this time, forms have not been finalized for reporting or claiming the credit. Such forms should be available in late 1995 for use in completing 1995 tax returns.
The Virginia Department of Economic Development has the authority to certify an establishment or expansion as qualifying for the credit. It is our understanding that such procedures have not been finalized at this time.
- At this time, forms have not been finalized for reporting or claiming the credit. Such forms should be available in late 1995 for use in completing 1995 tax returns.
I hope that the above adequately addresses your concerns. If you have any additional questions, please call****************.
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- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
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Rulings of the Tax Commissioner