58.1-439 - Major business facility job tax credit.
§ 58.1-439. Major business facility job tax credit.
A. For taxable years beginning on and after January 1, 1995, but beforeJanuary 1, 2020, a taxpayer shall be allowed a credit against the taxesimposed by Articles 2 (§ 58.1-320 et seq.), 6 (§ 58.1-360 et seq.), and 10 (§58.1-400 et seq.) of Chapter 3; Chapter 12 (§ 58.1-1200 et seq.); Article 1(§ 58.1-2500 et seq.) of Chapter 25; or Article 2 (§ 58.1-2620 et seq.) ofChapter 26 of this title as set forth in this section.
B. For purposes of this section, the amount of any credit attributable to apartnership, electing small business corporation (S corporation), or limitedliability company shall be allocated to the individual partners,shareholders, or members, respectively, in proportion to their ownership orinterest in such business entities.
C. A "major business facility" is a company that satisfies the followingcriteria:
1. Subject to the provisions of subsections K or L, the establishment orexpansion of the company shall result in the creation of at least 50 jobs forqualified full-time employees; the first such 50 jobs shall be referred to asthe "threshold amount"; and
2. The company is engaged in any business in the Commonwealth, except aretail trade business if such trade is the principal activity of anindividual facility in the Commonwealth. Examples of types of major businessfacilities that are eligible for the credit provided under this sectioninclude, but are not limited to, a headquarters, or portion of such afacility, where company employees are physically employed, and where themajority of the company's financial, personnel, legal or planning functionsare handled either on a regional or national basis. A company primarilyengaged in the Commonwealth in the business of manufacturing or mining;agriculture, forestry or fishing; transportation or communications; or apublic utility subject to the corporation income tax shall be deemed to haveestablished or expanded a major business facility in the Commonwealth if itmeets the requirements of subdivision 1 during a single taxable year and suchfacilities are not retail establishments. A major business facility shallalso include facilities that perform central management or administrativeactivities, whether operated as a separate trade or business, or as aseparate support operation of another business. Central management oradministrative activities include, but are not limited to, generalmanagement; accounting; computing; tabulating; purchasing; transportation orshipping; engineering and systems planning; advertising; technical sales andsupport operations; central administrative offices and warehouses; research,development and testing laboratories; computer-programming, data-processingand other computer-related services facilities; and legal, financial,insurance, and real estate services. The terms used in this subdivision torefer to various types of businesses shall have the same meanings as thoseterms are commonly defined in the Standard Industrial Classification Manual.
D. For purposes of this section, the "credit year" is the first taxableyear following the taxable year in which the major business facilitycommenced or expanded operations.
E. The Department of Taxation shall make all determinations as to theclassification of a major business facility in accordance with the provisionsof this section.
F. A "qualified full-time employee" means an employee filling a new,permanent full-time position in a major business facility in theCommonwealth. A "new, permanent full-time position" is a job of anindefinite duration, created by the company as a result of the establishmentor expansion of a major business facility in the Commonwealth, requiring aminimum of 35 hours of an employee's time a week for the entire normal yearof the company's operations, which "normal year" shall consist of at least48 weeks, or a position of indefinite duration which requires a minimum of 35hours of an employee's time a week for the portion of the taxable year inwhich the employee was initially hired for, or transferred to, the majorbusiness facility in the Commonwealth. Seasonal or temporary positions, or ajob created when a job function is shifted from an existing location in theCommonwealth to the new major business facility and positions in building andgrounds maintenance, security, and other such positions which are ancillaryto the principal activities performed by the employees at a major businessfacility shall not qualify as new, permanent full-time positions.
G. For any major business facility, the amount of credit earned pursuant tothis section shall be equal to $1,000 per qualified full-time employee, overthe threshold amount, employed during the credit year. The credit shall beallowed ratably, with one-third of the credit amount allowed annually forthree years beginning with the credit year. However, for taxable yearsbeginning January 1, 2009, through December 31, 2012, one-half of the creditamount shall be allowed each year for two years. The portion of the $1,000credit earned with respect to any qualified full-time employee who isemployed in the Commonwealth for less than 12 full months during the credityear will be determined by multiplying the credit amount by a fraction, thenumerator of which is the number of full months that the qualified full-timeemployee worked for the major business facility in the Commonwealth duringthe credit year, and the denominator of which is 12. A separate credit yearand a three-year allowance period shall exist for each distinct majorbusiness facility of a single taxpayer, except for credits allowed fortaxable years beginning January 1, 2009, through December 31, 2012, when atwo-year allowance period shall exist for each distinct major businessfacility of a single taxpayer.
H. The amount of credit allowed pursuant to this section shall not exceed thetax imposed for such taxable year. Any credit not usable for the taxable yearthe credit was allowed may be, to the extent usable, carried over for thenext 10 succeeding taxable years. No credit shall be carried back to apreceding taxable year. In the event that a taxpayer who is subject to thetax limitation imposed pursuant to this subsection is allowed another creditpursuant to any other section of the Code of Virginia, or has a creditcarryover from a preceding taxable year, such taxpayer shall be considered tohave first utilized any credit allowed which does not have a carryoverprovision, and then any credit which is carried forward from a precedingtaxable year, prior to the utilization of any credit allowed pursuant to thissection.
I. No credit shall be earned pursuant to this section for any employee (i)for whom a credit under this section was previously earned by a related partyas defined by Internal Revenue Code § 267(b) or a trade or business undercommon control as defined by Internal Revenue Code § 52(b); (ii) who waspreviously employed in the same job function in Virginia by a related partyas defined by Internal Revenue Code § 267(b) or a trade or business undercommon control as defined by Internal Revenue Code § 52(b); (iii) whose jobfunction was previously performed at a different location in Virginia by anemployee of the taxpayer, a related party as defined by Internal Revenue Code§ 267(b), or a trade or business under common control as defined by InternalRevenue Code § 52(b); or (iv) whose job function previously qualified for acredit under this section at a different major business facility on behalf ofthe taxpayer, a related party as defined by Internal Revenue Code § 267(b),or a trade or business under common control as defined by Internal RevenueCode § 52(b).
J. Subject to the provisions of subsections K or L, recapture of this credit,under the following circumstances, shall be accomplished by increasing thetax in any of the five years succeeding the taxable year in which a credithas been earned pursuant to this section if the number of qualified full-timeemployees decreases below the average number of qualified full-time employeesemployed during the credit year. Such tax increase amount shall be determinedby (i) recomputing the credit which would have been earned for the originalcredit year using the decreased number of qualified full-time employees and(ii) subtracting such recomputed credit from the amount of credit previouslyearned. In the event that the average number of qualifying full-timeemployees employed at a major business facility falls below the thresholdamount in any of the five taxable years succeeding the credit year, allcredits earned with respect to such major business facility shall berecaptured. No credit amount will be recaptured more than once pursuant tothis subsection. Any recapture pursuant to this section shall reduce creditsearned but not yet allowed, and credits allowed but carried forward, beforethe taxpayer's tax liability may be increased.
K. In the event that a major business facility is located in an economicallydistressed area or in an enterprise zone as defined in Chapter 49 (§ 59.1-538et seq.) of Title 59.1 during a credit year, the threshold amount required toqualify for a credit pursuant to this section and to avoid full recaptureshall be reduced from 50 to 25 for purposes of subdivision C 1 and subsectionJ. An area shall qualify as economically distressed if it is a city or countywith an unemployment rate for the preceding year of at least 0.5 percenthigher than the average statewide unemployment rate for such year. TheVirginia Economic Development Partnership shall identify and publish a listof all economically distressed areas at least annually.
L. For taxable years beginning on or after January 1, 2004, but beforeJanuary 1, 2006, in the event that a major business facility is located in aseverely economically distressed area, the threshold amount required toqualify for a credit pursuant to this section and to avoid full recaptureshall be reduced from 100 to 25 for purposes of subdivision C 1 andsubsection J. However, the total amount of credit allowable under thissubsection shall not exceed $100,000 in aggregate. An area shall qualify asseverely economically distressed if it is a city or county with anunemployment rate for the preceding year of at least twice the averagestatewide unemployment rate for such year. The Virginia Economic DevelopmentPartnership shall identify and publish a list of all severely economicallydistressed areas at least annually.
M. The Tax Commissioner shall promulgate regulations, in accordance with theAdministrative Process Act (§ 2.2-4000 et seq.), relating to (i) thecomputation, carryover, and recapture of the credit provided under thissection; (ii) defining criteria for (a) a major business facility, (b)qualifying full-time employees at such facility, and (c) economicallydistressed areas; and (iii) the computation, carryover, recapture, andredemption of the credit by affiliated companies pursuant to subsection S.
N. The provisions of this section shall apply only in instances where anannouncement of intent to establish or expand a major business facility ismade on or after January 1, 1994. An announcement of intent to establish orexpand a major business facility includes, but is not limited to, a pressconference or extensive press coverage, providing information with respect tothe impact of the project on the economy of the area where the major businessfacility is to be established or expanded and the Commonwealth as a whole.
O. The credit allowed pursuant to this section shall be granted to the personwho pays taxes for the qualified full-time employees pursuant to Chapter 5 (§60.2-500 et seq.) of Title 60.2.
P. No person shall claim a credit allowed pursuant to this section and thecredit allowed pursuant to § 58.1-439.2.
Q. No person operating a business in the Commonwealth pursuant to Chapter 29(§ 59.1-364 et seq.) of Title 59.1 shall claim a credit pursuant to thissection.
R. Notwithstanding subsection O, a taxpayer may, for the purpose ofdetermining the number of qualified full-time employees at a major businessfacility, include the employees of a contractor or a subcontractor if suchemployees are permanently assigned to the taxpayer's major business facility.If the taxpayer includes the employees of a contractor or subcontractor inits total of qualified full-time employees, it shall enter into a contractualagreement with the contractor or subcontractor prohibiting the contractor orsubcontractor from also claiming these employees in order to receive a creditgiven under this section. The taxpayer shall provide evidence satisfactory tothe Department of Taxation that it has entered into such a contract.
S. For purposes of satisfying the criteria of subdivision C 1, two or moreaffiliated companies may elect to aggregate the number of jobs created forqualified full-time employees as the result of the establishment or expansionby the individual companies in order to qualify for the credit allowedpursuant to this section. For purposes of this subsection, "affiliatedcompanies" means two or more companies related to each other such that (i)one company owns at least 80 percent of the voting power of the other orothers or (ii) at least 80 percent of the voting power of two or morecompanies is owned by the same interests.
T. The General Assembly of Virginia finds that modern business infrastructureallows businesses to locate their administrative or manufacturing facilitieswith minimal regard to the location of markets or the transportation of rawmaterials and finished goods, and that the economic vitality of theCommonwealth would be enhanced if such facilities were established inVirginia. Accordingly, the provisions of this section targeting the credit tomajor business facilities and limiting the credit to those companies whichestablish a major business facility in Virginia are integral to the purposeof the credit earned pursuant to this section and shall not be deemedseverable.
(1994, cc. 750, 768; 1995, c. 365; 1996, c. 874; 1997, cc. 786, 852; 1998, c.367; 2004, cc. 170, 619; 2005, cc. 863, 884; 2009, c. 753; 2010, cc. 363,469.)