To support business growth and encourage the creation of start-ups, the state of Virginia offers numerous incentives for qualifying businesses. In addition to local incentive programs and a stable corporate income tax rate of 6% since 1972, Virginia state business incentives include financial assistance, facilities development grants, and tax credits and exemptions. Here are eight Virginia business development credits and incentives:
Corporate income tax credit of $1,000 per full-time new job created by companies locating or expanding in Virginia beyond 50 jobs; or beyond 25 jobs for companies locating in an Enterprise Zone or economically distressed area.
Complete the following forms, attach them to your Virginia tax return, and send to the Virginia Department of Taxation:
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. Only expenses related to research conducted in Virginia are eligible for the credit (see: 26 US Code § 41 – Credit for increasing research activities).
If a taxpayer did not pay or incur Virginia qualified research and development (R&D) expenses in any one of the three taxable years immediately preceding the taxable year for which the credit is being determined, the credit is equal to 5% of Virginia qualified R&D expenses paid or incurred by the taxpayer during the relevant taxable year.
The credit is allowed for the same calendar year in which qualified R&D expenses are reported on the federal income tax return, in accordance with the taxpayer’s accounting method.
An income tax credit equal to 50% of qualified business investments made during the taxable year. A “qualified investment” is a cash investment in a qualified business by buying their stock or other ownership interest, or in the form of subordinated debt. An investment cannot be qualified if the taxpayer, or any of the taxpayer’s family members or affiliated entities, has received compensation from the qualified business in exchange for services within one year before or after the date of such investment.
If total annual requests for the credit exceed $5 million for the tax year, the Department of Taxation will prorate the credit for each taxpayer.
The credit a taxpayer may claim per taxable year may not exceed the credit authorized by the Department of Taxation, $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.
Investors should complete Form EDC by April 1 of the year following the year of the investment. You will be notified 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.
A refundable tax credit equal to: 15% of the first $300,000 in qualified expenses (or up to $45,000); or. 20% of the first $300,000 in qualified expenses (or up to $60,000) if the research was conducted in conjunction with a Virginia public or private college or university.
The credit is allowed for the same calendar year in which qualified research and development expenses are reported on the federal income tax return.
Employers can receive tax credits for 35% of all classroom training costs for eligible worker training. Eligible worker training includes credit or noncredit courses that result in the employee receiving a workforce credential, or instruction that is part of an apprenticeship.
Beginning July 1, 2022, courses provided by any Virginia college, community college, or other higher learning public institution are also considered eligible training.
For eligible worker training, the credit is limited to $500 per qualified employee per year, or $1,000, and capped at $1 million in a taxable year.
An annual tax credit of $500 for each new green job with a salary of $50,000 or more for up to 350 jobs. The credit is allowed in the first taxable year after the job has been filled for at least one year and in each of the four succeeding years provided the job is continuously filled during the respective taxable year.
Eligible companies interested in establishing a new presence in the State of Virginia are exempt from paying corporate income tax and have potential access to a grant or loan from the Commonwealth’s Opportunity Fund (COF) for up to $2,000 per new job created for six years. To be eligible, after January 1, 2018 but before January 1, 2025, a company must either: 1) spend at least $5M in new real property capital investment in a qualified locality and create at least 10 new jobs, or 2) create at least 50 new jobs in a qualified locality. Each new job must pay 150% or more than the Virginia minimum wage.
The Virginia Economic Development Incentive Grant (VEDIG) is a cash-bassed discretionary performance incentive used to assist and encourage companies to invest and create new employment opportunities by locating significant headquarters, administrative, or service sector operations in Virginia. The amount of each grant is determined by the Secretary of Commerce and Trade and is subject to approval of the Governor. There are no restrictions on how the grant proceeds are allocated.
We’re happy to discuss how your Virginia-based business may take advantage of Virginia State tax credits and incentives. To set up a consultation, please click on the button below to schedule a time that works best for you.