CODE OF VIRGINIA

ENTERPRISE ZONE BUSINESS TAX CREDIT (§ 59.1-280)

A. As used in this section:”Business tax credit” means a credit
against any tax due under Articles 2 (§ 58.1-320 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.) of Chapter
26 of Title 58.1 due from a business firm.”Large qualified business
firm” means a qualified business firm making qualified zone investments in
excess of $ 15 million when such qualified zone investments result in the
creation of at least 50 permanent full-time positions. “Qualified zone
investment” and “permanent full-time position” shall have the
meanings provided in subsection A of § 59.1-280.1.”Small qualified
business firm” means any qualified business firm other than a large
qualified business firm.

B. The Department shall certify annually to the Commissioner of the Department
of Taxation, or in the case of business firms subject to tax under Article 2 (§
58.1-2620 et seq.) of Chapter 26 of Title 58.1 to the Director of Public Service
Taxation for the State Corporation Commission, the applicability of the business
tax credit provided herein for a qualified business firm. 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 State Corporation Commission shall
notify the Department in writing upon determining that a business firm is
ineligible for such tax credit.

C. Small qualified business firms shall be allowed a business tax credit in an
amount equal to 80 percent of the tax due to the Commonwealth for the first tax
year and 60 percent of the tax due the Commonwealth for the second tax year
through the tenth tax year.

D. Large qualified business firms shall be allowed a business tax credit in a
percentage amount determined by agreement between the Department and the large
qualified business firm, provided such percentage amounts shall not exceed the
percentages provided for small qualified business firms as set forth in
subsection C.

E. Any business tax credit not usable may not be applied to future tax years.

F. When a partnership or a small business corporation making an election
pursuant to Subchapter S of the Internal Revenue Code is eligible for a tax
credit under this section, each partner or shareholder shall be eligible for the
tax credit provided for in this section on his individual income tax in
proportion to the amount of income received by that partner from the
partnership, or shareholder from his corporation, respectively.

G. Tax credits provided for in this section shall only apply to taxable income
of a qualified business firm attributable to the conduct of business within the
enterprise zone. Any qualified business firm having taxable income from business
activity both within and without the enterprise zone shall allocate and
apportion its Virginia taxable income attributable to the conduct of business as
follows:

   1.  The portion of a qualified business firm’s Virginia taxable income
   allocated and apportioned to business activities within an enterprise zone
   shall be determined by multiplying its Virginia taxable income by a fraction,
   the numerator of which is the sum of the property factor and the payroll
   factor, and the denominator of which is two.
               
            

      a.  The property factor is a fraction. The numerator is the average value of
      real and tangible personal property of the business firm which is used in
      the enterprise zone. The denominator is the average value of real and
      tangible personal property of the business firm used everywhere in the
      Commonwealth.

      b.  The payroll factor is a fraction. The numerator is the total amount paid
      or accrued within the enterprise zone during the taxable period by the
      business firm for compensation. The denominator is the total compensation
      paid or accrued everywhere in the Commonwealth during the taxable period by
      the business firm for compensation.

   2.  The property factor and the payroll factor shall be determined in
   accordance with the procedures established in §§ 58.1-409 through 58.1-413
   for determining the Virginia taxable income of a corporation having income
   from business activities which is taxable both within and without the
   Commonwealth, mutatis mutandis.

   3.  If a qualified business firm believes that the method of allocation and
   apportionment hereinbefore prescribed as administered has operated or will
   operate to allocate or apportion to an enterprise zone a lesser portion of its
   Virginia taxable income than is reasonably attributable to business conducted
   within the enterprise zone, it shall be entitled to file with the Department
   of Taxation a statement of its objections and of such alternative method of
   allocation or apportionment as it believes to be appropriate under the
   circumstances with such detail and proof and within such time as the
   Department of Taxation may reasonably prescribe. If the Department of Taxation
   concludes that the method of allocation or apportionment employed is in fact
   inequitable or inapplicable, it shall redetermine the taxable income by such
   other method of allocation or apportionment as best seems calculated to assign
   to an enterprise zone the portion of the qualified business firm’s
   Virginia taxable income reasonably attributable to business conducted within
   the enterprise zone.

H. Tax credits awarded under this section and under § 59.1-280.1 shall not
exceed $ 7.5 million annually until the end of fiscal year 2019.

I. The provisions of this section shall apply only as follows:

   1.  To those qualified business firms that have initiated use of enterprise
   zone tax credits pursuant to this section on or before July 1, 2005;

   2.  To those small qualified business firms and large qualified business firms
   that have signed agreements with the Commonwealth regarding the use of
   enterprise zone tax credits in accordance with this section on or before July
   1, 2005; provided that in the case of small qualified business firms, the
   signed agreements must be based on proposals developed by the Commonwealth
   prior to November 1, 2004.

HISTORY: 1982, c. 275; 1983, c. 572; 1988, c. 236; 1992, c. 301; 1995, c. 792;
1996, c. 77; 1997, c. 517; 1998, c. 759; 2003, c. 676; 2005, cc. 863, 884; 2009,
cc. 207, 271; 2011, c. 850.