Tax Type
Corporation Income Tax
Description
Major business facility job tax credit; Qualifications
Topic
Credits
Date Issued
11-09-1995
November 9, 1995
Re: Ruling Request; Major Business Facility Job Tax Credit
Dear****************:
This will reply to your inquiry to one of our staff, whereby you have requested guidance with respect to the Major Business Facility Job Tax Credit (the "Credit").
In connection with the establishment of a new manufacturing facility in Virginia, a taxpayer creates new, permanent full-time positions for qualified full-time employees. Prior to the creation of the facility, the taxpayer's activities in Virginia were limited to the sale of property and services (i.e. no manufacturing was conducted in Virginia.
The facility will be constructed and finished over a period of several years. Employees will be hired for the manufacturing process as the facility is completed. It is expected that there may be a significant period of time between the date upon which the facility is physically completed, and when product is ready for sale. This period of time may be necessary in order to perfect the product and manufacturing process for ultimate sale. You have requested guidance as to when such taxpayer would claim the Credit, and which jobs would be deemed to qualify for the credit.
Companies primarily engaged in a qualified industry are not required to establish or expand a major business facility; rather, they are deemed to have established a major business facility if they create at least 100 new jobs for qualified full-time employees within a continuous twelve-month period ending within their taxable year.
In order to answer your question, the first issue is to determine when the taxpayer is deemed to be engaged in a qualified industry, and thus eligible to qualify for the credit. Prior to establishing the facility, the taxpayer is clearly not engaged in manufacturing. Once the taxpayer has produced product from its manufacturing facility ready for sale (or for use in another process at a different facility or by another taxpayer), the taxpayer clearly is engaged in manufacturing.
There are obviously various events which could occur between the start of construction of a manufacturing facility, and the ultimate sale of product, at which time a taxpayer could fairly be considered to be engaged in the manufacturing process. Such events may include the beginning of operation of a manufacturing line, the production of product (whether or not ready for sale), the employment of a significant percentage of employees for the manufacturing process, or other reasonable indicators that the manufacturing process has begun.
After applying the aforementioned standards for determining when the manufacturing process has begun, the next issue is to determine that 100 or more full-time positions are created for qualified full-time employees during a single twelve-month period ending in the Taxpayer's taxable year. Pursuant to regulations being promulgated by the department, taxpayers will be permitted to utilize any consecutive twelve-month period they choose to elect to measure such employment increases.
The answer to your question will therefore depend on the facts and circumstances surrounding the taxpayer's activities. If during a 12-month period ending within a taxable year when the taxpayer is deemed to be engaged in manufacturing (determined in accordance with the standards described herein), the taxpayer creates 100 or more full-time positions for qualified full-time employees, then the taxpayer will be deemed to qualify for the credit. The credit will be calculated and claimed beginning the taxable year following the taxable year in which qualification occurs, defined by the legislation as the "credit year."
As to which jobs shall qualify for the credit, Code of Virginia § 58.1-439 defines "qualified full-time employee" as:
Qualifying jobs will therefore include all jobs at the facility created by the taxpayer as the result of the establishment of the facility through the "credit year," that otherwise meet the definition of qualified full-time employee. (See Code of Virginia § 58.1-439, copy attached.)
I hope that the above adequately addresses your concerns. If you have any additional questions, please call ********** at ***********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10292M
Re: Ruling Request; Major Business Facility Job Tax Credit
Dear****************:
This will reply to your inquiry to one of our staff, whereby you have requested guidance with respect to the Major Business Facility Job Tax Credit (the "Credit").
FACTS
In connection with the establishment of a new manufacturing facility in Virginia, a taxpayer creates new, permanent full-time positions for qualified full-time employees. Prior to the creation of the facility, the taxpayer's activities in Virginia were limited to the sale of property and services (i.e. no manufacturing was conducted in Virginia.
The facility will be constructed and finished over a period of several years. Employees will be hired for the manufacturing process as the facility is completed. It is expected that there may be a significant period of time between the date upon which the facility is physically completed, and when product is ready for sale. This period of time may be necessary in order to perfect the product and manufacturing process for ultimate sale. You have requested guidance as to when such taxpayer would claim the Credit, and which jobs would be deemed to qualify for the credit.
RULING
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- Code of Virginia § 58.1-439 provides, in relevant part:
-
- C. A "qualified company" is a company that satisfies the following criteria:
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- 1. [the] company has established or expanded a major business facility in this Commonwealth...;
2. [the] establishment or expansion of the major business facility shall result in the creation of at least 100 jobs for qualified full-time employees; the first such 100 jobs shall be referred to as the "threshold amount"; and
3. The company is primarily engaged in the Commonwealth in the business of (i) manufacturing or mining; ... In addition, the following activities, whether operated as a separate trade or business, or as a separate support operation of another business, shall satisfy the requirements of this subdivision regardless of what industry the taxpayer is engaged in: (i) central administrative offices and warehouses; (ii) research, development and testing laboratories; (iii) computer programming, data-processing and other computer-related services facilities; and (iv) financial, insurance, and real estate services.
D. For purposes of this section, the "credit year" is the first taxable year following the taxable year in which the major business facility commenced or expanded operations.
E. "Major business facility" includes, but is not limited to, 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 or mining; ... 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.)
- 1. [the] company has established or expanded a major business facility in this Commonwealth...;
Companies primarily engaged in a qualified industry are not required to establish or expand a major business facility; rather, they are deemed to have established a major business facility if they create at least 100 new jobs for qualified full-time employees within a continuous twelve-month period ending within their taxable year.
In order to answer your question, the first issue is to determine when the taxpayer is deemed to be engaged in a qualified industry, and thus eligible to qualify for the credit. Prior to establishing the facility, the taxpayer is clearly not engaged in manufacturing. Once the taxpayer has produced product from its manufacturing facility ready for sale (or for use in another process at a different facility or by another taxpayer), the taxpayer clearly is engaged in manufacturing.
There are obviously various events which could occur between the start of construction of a manufacturing facility, and the ultimate sale of product, at which time a taxpayer could fairly be considered to be engaged in the manufacturing process. Such events may include the beginning of operation of a manufacturing line, the production of product (whether or not ready for sale), the employment of a significant percentage of employees for the manufacturing process, or other reasonable indicators that the manufacturing process has begun.
After applying the aforementioned standards for determining when the manufacturing process has begun, the next issue is to determine that 100 or more full-time positions are created for qualified full-time employees during a single twelve-month period ending in the Taxpayer's taxable year. Pursuant to regulations being promulgated by the department, taxpayers will be permitted to utilize any consecutive twelve-month period they choose to elect to measure such employment increases.
The answer to your question will therefore depend on the facts and circumstances surrounding the taxpayer's activities. If during a 12-month period ending within a taxable year when the taxpayer is deemed to be engaged in manufacturing (determined in accordance with the standards described herein), the taxpayer creates 100 or more full-time positions for qualified full-time employees, then the taxpayer will be deemed to qualify for the credit. The credit will be calculated and claimed beginning the taxable year following the taxable year in which qualification occurs, defined by the legislation as the "credit year."
As to which jobs shall qualify for the credit, Code of Virginia § 58.1-439 defines "qualified full-time employee" as:
-
- [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, ...(Emphasis added .)
Qualifying jobs will therefore include all jobs at the facility created by the taxpayer as the result of the establishment of the facility through the "credit year," that otherwise meet the definition of qualified full-time employee. (See Code of Virginia § 58.1-439, copy attached.)
I hope that the above adequately addresses your concerns. If you have any additional questions, please call ********** at ***********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10292M
Rulings of the Tax Commissioner