2006 Code of Virginia § 59.1-280.1 - Enterprise zone real property investment tax credit

59.1-280.1. Enterprise zone real property investment tax credit.

A. As used in this section:

"Large qualified zone resident" means a qualified zone resident makingqualified zone investments in excess of $100 million when such qualified zoneinvestments result in the creation of at least 200 permanent full-timepositions.

"Permanent full-time position" means a job of an indefinite duration at abusiness firm located within an enterprise zone requiring the employee toreport for work within the enterprise zone, and requiring either (i) aminimum of 35 hours of an employee's time a week for the entire normal yearof the business firm's operations, which "normal year" must consist of atleast 48 weeks, (ii) a minimum of 35 hours of an employee's time a week forthe portion of the taxable year in which the employee was initially hiredfor, or transferred to, the business firm, or (iii) a minimum of 1,680 hoursper year if the standard fringe benefits are paid by the business firm forthe employee. Seasonal or temporary positions, or a position created when ajob function is shifted from an existing location in the Commonwealth to abusiness firm located within an enterprise zone shall not qualify aspermanent full-time positions.

"Qualified zone improvements" means the amount properly chargeable to acapital account for improvements to rehabilitate or expand depreciable realproperty placed in service during the taxable year within an enterprise zone,provided that the total amount of such improvements equals or exceeds (i)$50,000 and (ii) the assessed value of the original facility immediatelyprior to the rehabilitation or expansion. Qualified zone improvements includeexpenditures associated with any exterior, structural, mechanical, orelectrical improvements necessary to expand or rehabilitate a building forcommercial or industrial use and excavations, grading, paving, driveways,roads, sidewalks, landscaping, or other land improvements. Qualified zoneimprovements shall include, but not be limited to, costs associated withdemolition, carpentry, sheetrock, plaster, painting, ceilings, fixtures,doors, windows, fire suppression systems, roofing and flashing, exteriorrepair, cleaning, and cleanup.

Qualified zone improvements shall not include:

1. The cost of acquiring any real property or building; however, the cost ofany newly constructed depreciable nonresidential real property (excludingland, land improvements, paving, grading, driveways, and interest) shall beconsidered to be a qualified zone improvement eligible for the credit if thetotal amount of such expenditure is at least $250,000 with respect to asingle facility.

2. (i) The cost of furnishings; (ii) any expenditure associated withappraisal, architectural, engineering and interior design fees; (iii) loanfees, points, or capitalized interest; (iv) legal, accounting, realtor, salesand marketing, or other professional fees; (v) closing costs, permits, userfees, zoning fees, impact fees, and inspection fees; (vi) bids, insurance,signage, utilities, bonding, copying, rent loss, or temporary facilitiesincurred during construction; (vii) utility hook-up or access fees; (viii)outbuildings; or (ix) the cost of any well or septic or sewer system.

3. The basis of any property: (i) for which a credit under this section waspreviously granted; (ii) which was previously placed in service in Virginiaby 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 (iii) which was previously in service in Virginiaand has a basis in the hands of the person acquiring it, determined in wholeor in part by reference to the basis of such property in the hands of theperson from whom acquired or Internal Revenue Code 1014 (a).

"Qualified zone investments" means the sum of qualified zone improvementsand the cost of machinery, tools and equipment used in manufacturing tangiblepersonal property within an enterprise zone. For purposes of this section,machinery, tools and equipment shall only be deemed to include the cost ofsuch property which is placed in service in the enterprise zone on or afterJuly 1, 1995. Machinery, tools and equipment shall not include the basis ofany property: (i) for which a credit under this section was previouslygranted; (ii) which was previously placed in service in Virginia by thetaxpayer, a related party as defined by Internal Revenue Code 267 (b), or atrade or business under common control as defined by Internal Revenue Code 52 (b); or (iii) which was previously in service in Virginia and has a basisin the hands of the person acquiring it, determined in whole or part byreference to the basis of such property in the hands of the person from whomacquired, or Internal Revenue Code 1014 (a).

"Qualified zone resident" means an owner or tenant of real property locatedin an enterprise zone who expands or rehabilitates such real property tofacilitate the conduct of a trade or business within the enterprise zone.

"Real property investment tax credit" means a credit against the taxesimposed by Articles 2 ( 58.1-320 et seq.) and 10 ( 58.1-400 et seq.) ofChapter 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.

"Small qualified zone resident" means any qualified zone resident otherthan a large qualified zone resident.

B. For all taxable years beginning on and after July 1, 1995, but before July1, 2005, a qualified zone resident shall be allowed a real propertyinvestment tax credit as set forth in this section.

C. For any small qualified zone resident, a real property investment taxcredit shall be allowed in an amount equaling 30 percent of the qualifiedzone improvements. Any tax credit granted pursuant to this subsection isrefundable; however, in no event shall the cumulative credit allowed to asmall qualified zone resident pursuant to this subsection exceed $125,000 inany five-year period.

D. For any large qualified zone resident, a real property investment taxcredit shall be allowed in an amount of up to five percent of such qualifiedzone investments. The percentage amount of the real property investment taxcredit granted to a large qualified zone resident shall be determined byagreement between the Department and the large qualified zone resident,provided such percentage amount shall not exceed five percent. The realproperty investment tax credit provided by this subsection shall not exceedthe tax imposed for such taxable year, but any credit not usable for thetaxable year generated may be carried over until the full amount of suchcredit has been utilized.

E. The Department shall certify the nature and amount of qualified zoneimprovements and qualified zone investments eligible for a real propertyinvestment tax credit in any taxable year. Only qualified zone improvementsand qualified zone investments that have been properly certified shall beeligible for the credit. Any form filed with the Department of Taxation orState Corporation Commission for the purpose of claiming the credit shall beaccompanied by a copy of the certification furnished to the taxpayer by theDepartment. Any certification by the Department pursuant to this sectionshall not impair the authority of the Department of Taxation or StateCorporation Commission to deny in whole or in part any claimed tax credit ifthe Department of Taxation or State Corporation Commission determines thatthe taxpayer is not entitled to such tax credit. The Department of Taxationor State Corporation Commission shall notify the Department in writing upondetermining that a taxpayer is ineligible for such tax credit.

F. In the case of a partnership, limited liability company or S corporation,the term "qualified zone resident" as used in this section means thepartnership, limited liability company or S corporation. Credits granted to apartnership, limited liability company or S corporation shall be passedthrough to the partners, members or shareholders, respectively.

G. The Tax Commissioner shall have the authority to issue regulationsrelating to the computation and carryover of the credit provided under thissection.

H. In the first taxable year only, the credit provided in this section shallbe prorated equally against the taxpayer's estimated payments made in thethird and fourth quarters and the final payment, if such taxpayer is requiredto make quarterly payments.

I. Tax credits awarded under this section and under 59.1-280 shall notexceed $7.5 million annually until the end of fiscal year 2019.

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

1. To those large qualified zone residents that have initiated use ofenterprise zone tax credits pursuant to this section on or before July 1,2005;

2. To those large qualified zone residents that have signed agreements withthe Commonwealth regarding the use of enterprise zone tax credits inaccordance with this section on or before July 1, 2005.

(1995, c. 792; 1997, cc. 517, 634, 669; 1998, c. 759; 2005, cc. 863, 884.)