Administrative Code

Virginia Administrative Code
10/26/2021

Part III. Procedures for Qualifying for Zone Real Property Investment Tax Credit

13VAC5-112-110. Effective dates.

Beginning on July 1, 2005, a qualified large zone resident shall be allowed a real property investment tax credit against taxes imposed by Articles 2 (Individuals; § 58.1-320 et seq.) and 10 (Corporations; § 58.1-400 et seq.) of Chapter 3; Chapter 12 (Bank Franchise; § 58.1-1200 et. seq.); Article 1 (Insurance Companies; § 58.1-2500 et seq.) of Chapter 25, or Article 2 (Telegraph, Telephone, Water, Heat, Light, Power and Pipeline Companies; § 58.1-2620 et seq.) of Chapter 26 of Title 58.1 of the Code of Virginia, as provided in this chapter.

The provisions of this section shall apply only as follows:

1. To those large qualified zone residents that have initiated use of enterprise zone tax credits pursuant to § 59.1-280.1 of the Code of Virginia on or before July 1, 2005;

2. To those large qualified zone residents that have signed agreements with the Commonwealth regarding the use of enterprise zone tax credits in accordance with § 59.1-280.1 of the Code of Virginia on or before July 1, 2005.

Statutory Authority

§ 59.1-541 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 23, Issue 12, eff. March 21, 2007.

13VAC5-112-120. Computation of credit.

A. A large qualified zone resident shall be eligible for a credit in an amount of up to 5.0% of the qualified zone investments. The zone real property investment tax credit provided by this subsection shall not exceed the tax imposed for such taxable year, but any tax credit not usable for the taxable year generated may be carried over until the full amount of such credit has been utilized. However, this incentive period shall not last beyond 2019 as specified in § 59.1-280 I of the Code of Virginia.

B. The percentage amount of the zone real property investment tax credit granted to a large qualified zone resident must have been determined by agreement between the department and the large qualified zone resident, provided such percentage amount does not exceed 5.0%.

C. The percentage amounts of the business income tax credit provided in 13VAC5-112-30 C that may be granted to a large qualified business firm are also subject to agreement between the department in the event that a large qualified zone resident is also a large qualified business firm, provided such percentage amounts shall not exceed the percentage amounts otherwise provided in 13VAC5-112-30 C.

D. Qualified zone improvements shall not include the basis of any property: (i) for which a credit under this section was previously granted; (ii) that was previously placed in service in Virginia by the taxpayer, a related party, or a trade or business under common control; or (iii) that was previously in service in Virginia and has a basis in the hands of the person acquiring it, determined in whole or in part by reference to the basis of such property in the hands of the person from whom acquired, or § 1014(a) of the Internal Revenue Code.

Statutory Authority

§ 59.1-541 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 23, Issue 12, eff. March 21, 2007.

13VAC5-112-130. Annual fiscal limitations.

A. The total amount of tax credits awarded to small and large qualified business firms in 13VAC5-112-20 and qualified large zone residents under this section shall not exceed $7.5 million annually until the end of fiscal year 2019 as provided for in §§ 59.1-280 and 59.1-280.1 of the Code of Virginia.

B. Upon receiving applications for tax credits under this section and 13VAC-5-112-20, the department shall determine the amount of the tax credit to be allocated to each eligible business firm. In the event that the amount of tax credits to which all applicants qualifying under §§ 59.1-280 and 59.1-280.1 of the Code of Virginia are eligible, exceeds $7.5 million annually, the tax credits shall be apportioned among eligible applicants pro rata, based upon the amount of the tax credits to which an applicant is eligible and the amount of tax credits available for allocation.

Statutory Authority

§ 59.1-541 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 23, Issue 12, eff. March 21, 2007.

13VAC5-112-140. Eligibility.

A. The use of zone real property investment tax credits may be initiated in accordance with 13VAC5-112-120 C once the job creation and investment identified in the negotiation have been completed.

B. The business firm must certify to the department on the prescribed form or forms, and other documents as prescribed by the department, that the firm has met the criteria for qualification prescribed in this section. The form or forms referred to in this subsection must be prepared by an independent certified public accountant licensed by the Commonwealth and shall serve as prima facie evidence that the business firm met the qualifications, but the evidence of eligibility shall be subject to rebuttal. The department or the Department of Taxation or State Corporation Commission, as applicable, may at its discretion require any business firm to provide supplemental information regarding the firm's eligibility (i) as a qualified business firm or (ii) for a tax credit claimed pursuant to 13VAC5-112-120 A.

Statutory Authority

§ 59.1-541 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 23, Issue 12, eff. March 21, 2007.

13VAC5-112-150. Qualification in zones whose designation period is ending.

Large qualified zone residents located in a zone whose designation period is ending that have a documented negotiation agreement with the department and that have qualified by or before that the zone expiration date may continue receive the tax credits until the negotiated tax credit amount is reached, provided they continue to qualify under 13VAC5-112-110. This incentive period shall not last beyond 2019 as specified in § 59.1-280 I of the Code of Virginia.

Statutory Authority

§ 59.1-541 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 23, Issue 12, eff. March 21, 2007.

13VAC5-112-160. Anti-churning.

The following shall not be included in the calculation of permanent full-time positions:

1. An employee for whom a credit under this chapter was previously earned by a related party, as defined by the Internal Revenue Code § 267(b) or a trade or business under common control;

2. A position in which an employee filling that position was previously employed in the same job function in Virginia by a related party, or a trade or business under common control;

3. A job function that was previously performed at a different location in Virginia by an employee of the taxpayer, a related party, or a trade or business under common control;

4. A position that previously qualified for a credit in connection with a different enterprise zone locality on behalf of the taxpayer, a related party, or a trade or business under common control; or

5. A position that was filled in the Commonwealth of Virginia and the trade or business where that position was located was purchased by another taxpayer.

Statutory Authority

§ 59.1-541 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 23, Issue 12, eff. March 21, 2007.

13VAC5-112-170. Pass through entities.

The amount of any credit attributable to a partnership, S corporation, or limited liability company shall be allocated to the individual partners, shareholders, or members, respectively. The credit will be allocated in the manner in which income is allocated for federal income tax purposes.

Statutory Authority

§ 59.1-541 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 23, Issue 12, eff. March 21, 2007.

13VAC5-112-180. Application submittal and processing.

A. For tax years that end on or before December 31, or for businesses with tax years in accordance with § 441(f) of the Internal Revenue Code on or before January 7 of the subsequent year, applications requesting zone real property investment tax credits shall be submitted to the department by no later than May 1 of the subsequent calendar year. If the May 1 due date falls on a weekend or holiday, applications are due the next business day. These applications must be signed by independent certified public accountant licensed by the Commonwealth.

B. The department shall review all applications for completeness and notify business firms of any errors by no later than June 1. Business firms must respond to any unresolved issues by no later than June 15. If the department does not meet its June 1 date for notification, then businesses must respond to any unresolved issues within 10 calendar days of the actual notification. The department shall notify all applicants by June 30 as to the amount of applicable credit it is eligible for in the taxable year the request was made.

C. Applications must be made on forms prescribed by the department, and either hand-delivered by the date specified in this section or sent by certified mail with a return receipt requested and postmarked no later than the date specified in this section.

D. Applicants may only apply for credits that they are otherwise eligible to claim for such taxable year, subject to the limitations provided by 13VAC5-112-40 and 13VAC5-112-130.

Statutory Authority

§ 59.1-541 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 23, Issue 12, eff. March 21, 2007.

13VAC5-112-190. Certification to Tax Commissioner in accordance with § 59.1-280 B of the Code of Virginia.

A. The department shall certify to the Commissioner of the Virginia Department of Taxation, or in the case of public service companies to the Director of Public Service Taxation for the State Corporation Commission, the applicability of the tax credits requested by the firm; and forward the certification to the firm, which should make a copy for its records and file original with the applicable state tax return or returns or notify the firm that it fails to qualify for state tax incentives under Part II (13VAC5-112-20 et seq.) of this chapter.

B. Submission of state tax returns. A business firm, upon receipt from the department of the certificate of its qualification to receive state tax incentives, may file the applicable state tax returns. In order for the Virginia Department of Taxation or the State Corporation Commission to grant the incentive or incentives requested, the appropriate copy of the certificate of qualification must be attached to the firm's tax return.

When a partnership or small business corporation electing to be taxed under Subchapter S of the federal Internal Revenue Code requests a credit or credits against state individual income tax on behalf of its partners or shareholders, each partner or shareholder must attach to its state individual income tax return a photocopy of the appropriate certificate of qualification received by the firm.

C. Any certification by the department pursuant to this section shall not impair the authority of the Department of Taxation or State Corporation Commission to deny in whole or in part any claimed tax credit if the Department of Taxation or State Corporation Commission determines that the qualified business firm is not entitled to such tax credit. The Department of Taxation or the State Corporation Commission shall notify the department in writing upon determining that a business firm is ineligible for such a tax credit.

Statutory Authority

§ 59.1-541 of the Code of Virginia.

Historical Notes

Derived from Virginia Register Volume 23, Issue 12, eff. March 21, 2007.

13VAC5-112-200. (Repealed.)

Historical Notes

Derived from Virginia Register Volume 23, Issue 12, eff. March 21, 2007; repealed, Virginia Register Volume 26, Issue 1, eff. October 14, 2009.

13VAC5-112-210. (Repealed.)

Historical Notes

Derived from Virginia Register Volume 23, Issue 12, eff. March 21, 2007; repealed, Virginia Register Volume 26, Issue 1, eff. October 14, 2009.

13VAC5-112-220. (Repealed.)

Historical Notes

Derived from Virginia Register Volume 23, Issue 12, eff. March 21, 2007; repealed, Virginia Register Volume 26, Issue 1, eff. October 14, 2009.

13VAC5-112-230. (Repealed.)

Historical Notes

Derived from Virginia Register Volume 23, Issue 12, eff. March 21, 2007; repealed, Virginia Register Volume 26, Issue 1, eff. October 14, 2009.

13VAC5-112-240. (Repealed.)

Historical Notes

Derived from Virginia Register Volume 23, Issue 12, eff. March 21, 2007; repealed, Virginia Register Volume 26, Issue 1, eff. October 14, 2009.

13VAC5-112-250. (Repealed.)

Historical Notes

Derived from Virginia Register Volume 23, Issue 12, eff. March 21, 2007; repealed, Virginia Register Volume 26, Issue 1, eff. October 14, 2009.

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