Tax Type
Corporation Income Tax
Description
Major business facility job tax credit; Facility with outsourced employees
Topic
Credits
Date Issued
09-22-1995
September 22, 1995
Re: Ruling Request: Major Business Facility Jobs Tax Credit
Dear********************
This will reply to your letters of April 27, 1995, and August 15, 1995, regarding the application of the Major Business Facility Job Tax Credit to********************(the "Taxpayer").
FACTS
The Taxpayer will establish a facility in Virginia which provides a central administrative function for the Taxpayer's business. The building and equipment will be owned by the Taxpayer. However, the vast majority of the employees will actually work for an unrelated third party (the "Management Firm") which has been chosen to manage the facility. You have asked the department to rule whether the Taxpayer or the Management Firm may claim the Major Business Facility Job Tax Credit provided by Code of Virginia § 58.1439.
RULING
Based on the information provided to the department, the Management Firm will be considered to be the employer of the subject employees at the facility. The employees involved will provide services pursuant to a contract negotiated between the Taxpayer and the Management Firm, but will be under the direction and control of the Management Firm. The Taxpayer has in effect outsourced the services to be provided at the facility.
Code of Virginia § 58.1-439 provides a tax credit where a company has established or expanded a major business facility in Virginia resulting in the creation of at least 100 jobs for qualified full-time employees.
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- A major business facility as is defined in Code of Virginia § 58.1-439 as:
... a headquarters, or portion of such a facility, 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 shall also include facilities that perform a central management or administrative function for other establishments of the same enterprise such as general management, accounting, computing, tabulating, data processing, purchasing, transportation or shipping, engineering and systems planning, advertising, legal, financial, and research and development if it otherwise meets the staffing requirements. An enterprise engaged in the Commonwealth in the business of (i) manufacturing... (iii) transportation... shall be deemed to have established or expanded a major business facility in this Commonwealth if it meets the requirements of subdivision C 2 during a single taxable year. (Emphasis added).
- A major business facility as is defined in Code of Virginia § 58.1-439 as:
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- ...an employee filling a new, permanent full-time position in a major business facility in this Commonwealth. A "new permanent full-time position" is a job of an indefinite duration, created by the company as a result of the establishment or expansion of a major business facility in this Commonwealth, requiring a minimum of thirty-five hours of an employee's time a week for the entire normal year of the company's operations, which "normal year" must consist of at least 48 weeks, or a position of indefinite duration which requires a minimum of thirty-five hours of an employee's time a week for the portion of the taxable year in which the employee was initially hired for, or transferred to, the major business facility in this commonwealth...( Emphasis added).
- ...an employee filling a new, permanent full-time position in a major business facility in this Commonwealth. A "new permanent full-time position" is a job of an indefinite duration, created by the company as a result of the establishment or expansion of a major business facility in this Commonwealth, requiring a minimum of thirty-five hours of an employee's time a week for the entire normal year of the company's operations, which "normal year" must consist of at least 48 weeks, or a position of indefinite duration which requires a minimum of thirty-five hours of an employee's time a week for the portion of the taxable year in which the employee was initially hired for, or transferred to, the major business facility in this commonwealth...( Emphasis added).
With respect to the Management Firm, the department must consider whether or not it has established or expanded a major business facility. The subject facility is not the Management Firm's headquarters, and the employees there will not perform a central administrative function on behalf of the Management Firm. Although the Management Firm will create more than 100 jobs, the department is unable to conclude that the Management Firm has established a major business facility. Because both criteria must be satisfied, the department is also unable to conclude that the Management Firm will qualify for the credit.
Although the department is sympathetic to your situation, we are simply unable to conclude that the plain language of the law provides a credit where jobs have been outsourced to another employer.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9828M
Rulings of the Tax Commissioner