{"formats":[{"name":"JSON","format":"json","url":"\/downloads\/2025\/code-json\/58.1-439.12_08.json"},{"name":"Plain Text","format":"text","url":"\/downloads\/2025\/code-text\/58.1-439.12_08.txt"},{"name":"XML","format":"xml","url":"\/downloads\/2025\/code-xml\/58.1-439.12_08.xml"},{"name":"HTML","format":"html","url":"\/downloads\/2025\/code-html\/58.1-439.12_08.html"}],"law_id":84261,"edition_id":1,"section_id":84261,"structure_id":13153,"section_number":"58.1-439.12:08","catch_line":"Research and development expenses tax credit","history":"2011, cc. 742, 745; 2014, cc. 227, 306; 2016, cc. 300, 433, 661; 2020, cc. 469, 470; 2021, Sp. Sess. I, cc. 47, 48; 2024, c. 661.","full_text":"A\n\nAs used in this section, unless the context requires a different meaning:\n\t\t\t“Virginia base amount” means the base amount as defined in \u00a7 41(c) of the Internal Revenue Code, as amended, that is attributable to Virginia, determined by (i) substituting “Virginia qualified research and development expense” for “qualified research expense”; (ii) substituting “Virginia qualified research” for “qualified research”; and (iii) instead of “fixed base percentage,” using:1\n\nThe percentage that the Virginia qualified research and development expense for the three taxable years immediately preceding the current taxable year in which the expense is incurred is of the taxpayer’s total gross receipts for such years; or2\n\nThe percentage that the Virginia qualified research and development expense for the applicable number of taxable years immediately preceding the current taxable year in which the expense is incurred is of the taxpayer’s total gross receipts for such years, for the taxpayer that has fewer than three but at least one prior taxable year.\n\t\t\t\t“Virginia gross receipts” means the same as “gross receipts” as defined in § 58.1-3700.1.\n\t\t\t\t“Virginia qualified research” means qualified research, as defined in § 41(d) of the Internal Revenue Code, as amended, that is conducted in the Commonwealth.\n\t\t\t\t“Virginia qualified research and development expenses” means qualified research expenses, as defined in § 41(b) of the Internal Revenue Code, as amended, incurred for Virginia qualified research.B\n\n1. For taxable years beginning on or after January 1, 2011, but before January 1, 2021, a taxpayer shall be allowed a credit against the tax levied pursuant to \u00a7 58.1-320 or 58.1-400 in an amount equal to (i) 15 percent of the first $300,000 in Virginia qualified research and development expenses paid or incurred by the taxpayer during the taxable year or (ii) 20 percent of the first $300,000 in Virginia qualified research and development expenses paid or incurred by the taxpayer during the taxable year if the Virginia qualified research was conducted in conjunction with a public or private institution of higher education in the Commonwealth, to the extent the expenses exceed the Virginia base amount for the taxpayer.2\n\nFor taxable years beginning on or after January 1, 2021, but before January 1, 2025, a taxpayer shall be allowed a credit against the tax levied pursuant to § 58.1-320, 58.1-400, or 58.1-1202 in an amount equal to (i) 15 percent of the first $300,000 in Virginia qualified research and development expenses paid or incurred by the taxpayer during the taxable year or (ii) 20 percent of the first $300,000 in Virginia qualified research and development expenses paid or incurred by the taxpayer during the taxable year if the Virginia qualified research was conducted in conjunction with a public or private institution of higher education in the Commonwealth, to the extent the expenses exceed the Virginia base amount for the taxpayer.C\n\n1. Effective for taxable years beginning on or after January 1, 2016, at the election of the taxpayer, the credit otherwise allowed under this section shall be computed under this subsection and shall equal 10 percent of the difference of (i) the Virginia qualified research and development expenses paid or incurred by the taxpayer during the taxable year and (ii) 50 percent of the average Virginia qualified research and development expenses paid or incurred by the taxpayer for the three taxable years immediately preceding the taxable year for which the credit is being determined. If the taxpayer did not pay or incur Virginia qualified research and development expenses in any one of the three taxable years immediately preceding the taxable year for which the credit is being determined, the tax credit shall equal five percent of the Virginia qualified research and development expenses paid or incurred by the taxpayer during the relevant taxable year.2\n\nThe aggregate amount of credits allowed to each taxpayer under this subsection shall not exceed $45,000 for the taxable year, except that the aggregate amount of credits allowed to each taxpayer shall not exceed $60,000 for the taxable year if the Virginia qualified research was conducted in conjunction with a public institution of higher education in the Commonwealth or a private institution of higher education in the Commonwealth.D\n\nThe aggregate amount of credits available under this section for each fiscal year of the Commonwealth shall be as follows:1\n\nFor taxable years beginning on and after January 1, 2014, but before January 1, 2016, the total amount of credits granted for each of fiscal years 2015 and 2016 shall not exceed $6 million.2\n\nFor taxable years beginning on and after January 1, 2016, but before January 1, 2021, the total amount of credits granted for each fiscal year of the Commonwealth beginning with fiscal year 2017 shall not exceed $7 million.3\n\nFor taxable years beginning on and after January 1, 2021, but before January 1, 2023, the total amount of credits granted for each fiscal year of the Commonwealth beginning with fiscal year 2022 shall not exceed $7.77 million.4\n\nFor taxable years beginning on and after January 1, 2023, the total amount of credits granted for each fiscal year of the Commonwealth beginning with fiscal year 2024 shall not exceed $15.77 million.E\n\nA taxpayer meeting the requirements of this section shall be eligible to receive a tax credit as provided herein. The Department shall develop and publish guidelines for applications and such guidelines shall be exempt from the Administrative Process Act (\u00a7 2.2-4000 et seq.). Applications must be received by the Department no later than September 1 of the calendar year following the close of the taxable year in which the expenses were paid or incurred. In the event that approved applications for the tax credits allowed under this section exceed the amount of credits specified in subsection D for the taxable year, the Department shall apportion the credits by dividing the amount of credits specified in subsection D by the total amount of tax credits approved, to determine the percentage of allowed tax credits each taxpayer shall receive. In the event that the total amount of approved tax credits under this section for all applications for any taxable year is less than the maximum amount of credits for the year as specified in subsection D, the Department shall allocate credits up to the maximum amount as specified in subsection D, on a pro rata basis, to taxpayers who are already approved for the tax credit for the taxable year, in the following amounts:1\n\nIf the taxpayer computed the credit pursuant to subsection B, in an amount equal to 15 percent of the second $300,000 in qualified research expenses during the taxable year or 20 percent of the second $300,000 in qualified research expenses if the Virginia qualified research was conducted in conjunction with a public institution of higher education in the Commonwealth or a private institution of higher education in the Commonwealth; or2\n\nIf the taxpayer computed the credit under subdivision C 1, in an amount equal to the excess of the limitation set forth in subdivision C 2, up to an additional $45,000 per taxpayer, or $60,000 per taxpayer if the Virginia qualified research was conducted in conjunction with a public institution of higher education in the Commonwealth or a private institution of higher education in the Commonwealth.F\n\nIf the amount of the credit allowed exceeds the taxpayer’s tax liability for the taxable year, the amount that exceeds the tax liability shall be refunded to the taxpayer, subject to the limitations set forth in the guidelines developed by the Department.G\n\nAny taxpayer who claims the tax credit for Virginia qualified research and development expenses pursuant to this section shall not use such expenses as the basis for claiming any other credit provided under the Code of Virginia.H\n\nEffective for taxable years beginning on or after January 1, 2016, no taxpayer with Virginia qualified research and development expenses in excess of $5 million for the taxable year shall claim both the credit allowed pursuant to this section and the credit allowed under § 58.1-439.12:11 for such year.I\n\nCredits granted to a partnership, limited liability company, or electing small business corporation (S corporation) shall be allocated to the individual partners, members, or shareholders, respectively, in proportion to their ownership interests in such entities or in accordance with a written agreement entered into by such individual partners, members, or shareholders, unless the partnership, limited liability company, or electing small business corporation (S corporation) elects for such credits not to be so allocated but to be received and claimed at the entity level by the partnership, limited liability company, or electing small business corporation (S corporation) pursuant to guidelines that shall be issued by the Department for purposes of such election.J\n\nThe Department shall adopt guidelines to prescribe standards for determining when research and development is considered conducted in the Commonwealth for purposes of allowing the credit under this section. In adopting guidelines, the Department may consider (i) the location where the research and development is performed; (ii) the residence or business location of the taxpayer or taxpayers conducting the research and development; (iii) the location where supplies used in the research and development are consumed; and (iv) any other factors that the Department deems to be relevant.K\n\nThe Tax Commissioner’s annual report to the Governor on revenue collections by tax source shall include (i) the total number of applicants approved for tax credits pursuant to this section for the applicable tax year and (ii) the total amount of such tax credits approved for the applicable tax year.L\n\nThe Department shall require taxpayers applying for the credit to provide information including (i) the number of full-time employees employed by the taxpayer in the Commonwealth during the taxable year for which the credit is sought; (ii) the taxpayer’s sector or sectors according to the 2012 edition of the North American Industry Classification System (NAICS) as published by the United States Census Bureau; (iii) a brief description of the area, discipline, or field of Virginia qualified research performed by the taxpayer; (iv) the total gross receipts or anticipated total gross receipts of the taxpayer for the taxable year for which the credit is sought; and (v) whether the Virginia qualified research was conducted in conjunction with a Virginia public or private college or university. The Department shall aggregate and summarize the information collected and make it available to the Governor and any member of the General Assembly upon request, regardless of the number of taxpayers applying for the credit.M\n\nNo tax credit shall be allowed pursuant to this section if the otherwise qualified research and development expenses are paid for or incurred by a taxpayer for research conducted in the Commonwealth on human cells or tissue derived from induced abortions or from stem cells obtained from human embryos. The foregoing provision shall not apply to research conducted using stem cells other than embryonic stem cells.","order_by":null,"text":{"0":{"id":302041,"text":"As used in this section, unless the context requires a different meaning:\n\t\t\t“Virginia base amount” means the base amount as defined in \u00a7 41(c) of the Internal Revenue Code, as amended, that is attributable to Virginia, determined by (i) substituting “Virginia qualified research and development expense” for “qualified research expense”; (ii) substituting “Virginia qualified research” for “qualified research”; and (iii) instead of “fixed base percentage,” using:","type":"section","prefixes":["A"],"prefix":"A","entire_prefix":"A","prefix_anchor":"A","level":1,"next_prefix":"A1"},"1":{"id":302042,"text":"The percentage that the Virginia qualified research and development expense for the three taxable years immediately preceding the current taxable year in which the expense is incurred is of the taxpayer’s total gross receipts for such years; or","type":"section","prefixes":["A","1"],"prefix":"1","entire_prefix":"A1","prefix_anchor":"A1","level":2,"prior_prefix":"A","next_prefix":"A2"},"2":{"id":302043,"text":"The percentage that the Virginia qualified research and development expense for the applicable number of taxable years immediately preceding the current taxable year in which the expense is incurred is of the taxpayer’s total gross receipts for such years, for the taxpayer that has fewer than three but at least one prior taxable year.\n\t\t\t\t“Virginia gross receipts” means the same as “gross receipts” as defined in § 58.1-3700.1.\n\t\t\t\t“Virginia qualified research” means qualified research, as defined in § 41(d) of the Internal Revenue Code, as amended, that is conducted in the Commonwealth.\n\t\t\t\t“Virginia qualified research and development expenses” means qualified research expenses, as defined in § 41(b) of the Internal Revenue Code, as amended, incurred for Virginia qualified research.","type":"section","prefixes":["A","2"],"prefix":"2","entire_prefix":"A2","prefix_anchor":"A2","level":2,"prior_prefix":"A1","next_prefix":"B"},"3":{"id":302044,"text":"1. For taxable years beginning on or after January 1, 2011, but before January 1, 2021, a taxpayer shall be allowed a credit against the tax levied pursuant to \u00a7 58.1-320 or 58.1-400 in an amount equal to (i) 15 percent of the first $300,000 in Virginia qualified research and development expenses paid or incurred by the taxpayer during the taxable year or (ii) 20 percent of the first $300,000 in Virginia qualified research and development expenses paid or incurred by the taxpayer during the taxable year if the Virginia qualified research was conducted in conjunction with a public or private institution of higher education in the Commonwealth, to the extent the expenses exceed the Virginia base amount for the taxpayer.","type":"section","prefixes":["B"],"prefix":"B","entire_prefix":"B","prefix_anchor":"B","level":1,"prior_prefix":"A2","next_prefix":"B2"},"4":{"id":302045,"text":"For taxable years beginning on or after January 1, 2021, but before January 1, 2025, a taxpayer shall be allowed a credit against the tax levied pursuant to § 58.1-320, 58.1-400, or 58.1-1202 in an amount equal to (i) 15 percent of the first $300,000 in Virginia qualified research and development expenses paid or incurred by the taxpayer during the taxable year or (ii) 20 percent of the first $300,000 in Virginia qualified research and development expenses paid or incurred by the taxpayer during the taxable year if the Virginia qualified research was conducted in conjunction with a public or private institution of higher education in the Commonwealth, to the extent the expenses exceed the Virginia base amount for the taxpayer.","type":"section","prefixes":["B","2"],"prefix":"2","entire_prefix":"B2","prefix_anchor":"B2","level":2,"prior_prefix":"B","next_prefix":"C"},"5":{"id":302046,"text":"1. Effective for taxable years beginning on or after January 1, 2016, at the election of the taxpayer, the credit otherwise allowed under this section shall be computed under this subsection and shall equal 10 percent of the difference of (i) the Virginia qualified research and development expenses paid or incurred by the taxpayer during the taxable year and (ii) 50 percent of the average Virginia qualified research and development expenses paid or incurred by the taxpayer for the three taxable years immediately preceding the taxable year for which the credit is being determined. If the taxpayer did not pay or incur Virginia qualified research and development expenses in any one of the three taxable years immediately preceding the taxable year for which the credit is being determined, the tax credit shall equal five percent of the Virginia qualified research and development expenses paid or incurred by the taxpayer during the relevant taxable year.","type":"section","prefixes":["C"],"prefix":"C","entire_prefix":"C","prefix_anchor":"C","level":1,"prior_prefix":"B2","next_prefix":"C2"},"6":{"id":302047,"text":"The aggregate amount of credits allowed to each taxpayer under this subsection shall not exceed $45,000 for the taxable year, except that the aggregate amount of credits allowed to each taxpayer shall not exceed $60,000 for the taxable year if the Virginia qualified research was conducted in conjunction with a public institution of higher education in the Commonwealth or a private institution of higher education in the Commonwealth.","type":"section","prefixes":["C","2"],"prefix":"2","entire_prefix":"C2","prefix_anchor":"C2","level":2,"prior_prefix":"C","next_prefix":"D"},"7":{"id":302048,"text":"The aggregate amount of credits available under this section for each fiscal year of the Commonwealth shall be as follows:","type":"section","prefixes":["D"],"prefix":"D","entire_prefix":"D","prefix_anchor":"D","level":1,"prior_prefix":"C2","next_prefix":"D1"},"8":{"id":302049,"text":"For taxable years beginning on and after January 1, 2014, but before January 1, 2016, the total amount of credits granted for each of fiscal years 2015 and 2016 shall not exceed $6 million.","type":"section","prefixes":["D","1"],"prefix":"1","entire_prefix":"D1","prefix_anchor":"D1","level":2,"prior_prefix":"D","next_prefix":"D2"},"9":{"id":302050,"text":"For taxable years beginning on and after January 1, 2016, but before January 1, 2021, the total amount of credits granted for each fiscal year of the Commonwealth beginning with fiscal year 2017 shall not exceed $7 million.","type":"section","prefixes":["D","2"],"prefix":"2","entire_prefix":"D2","prefix_anchor":"D2","level":2,"prior_prefix":"D1","next_prefix":"D3"},"10":{"id":302051,"text":"For taxable years beginning on and after January 1, 2021, but before January 1, 2023, the total amount of credits granted for each fiscal year of the Commonwealth beginning with fiscal year 2022 shall not exceed $7.77 million.","type":"section","prefixes":["D","3"],"prefix":"3","entire_prefix":"D3","prefix_anchor":"D3","level":2,"prior_prefix":"D2","next_prefix":"D4"},"11":{"id":302052,"text":"For taxable years beginning on and after January 1, 2023, the total amount of credits granted for each fiscal year of the Commonwealth beginning with fiscal year 2024 shall not exceed $15.77 million.","type":"section","prefixes":["D","4"],"prefix":"4","entire_prefix":"D4","prefix_anchor":"D4","level":2,"prior_prefix":"D3","next_prefix":"E"},"12":{"id":302053,"text":"A taxpayer meeting the requirements of this section shall be eligible to receive a tax credit as provided herein. The Department shall develop and publish guidelines for applications and such guidelines shall be exempt from the Administrative Process Act (\u00a7 2.2-4000 et seq.). Applications must be received by the Department no later than September 1 of the calendar year following the close of the taxable year in which the expenses were paid or incurred. In the event that approved applications for the tax credits allowed under this section exceed the amount of credits specified in subsection D for the taxable year, the Department shall apportion the credits by dividing the amount of credits specified in subsection D by the total amount of tax credits approved, to determine the percentage of allowed tax credits each taxpayer shall receive. In the event that the total amount of approved tax credits under this section for all applications for any taxable year is less than the maximum amount of credits for the year as specified in subsection D, the Department shall allocate credits up to the maximum amount as specified in subsection D, on a pro rata basis, to taxpayers who are already approved for the tax credit for the taxable year, in the following amounts:","type":"section","prefixes":["E"],"prefix":"E","entire_prefix":"E","prefix_anchor":"E","level":1,"prior_prefix":"D4","next_prefix":"E1"},"13":{"id":302054,"text":"If the taxpayer computed the credit pursuant to subsection B, in an amount equal to 15 percent of the second $300,000 in qualified research expenses during the taxable year or 20 percent of the second $300,000 in qualified research expenses if the Virginia qualified research was conducted in conjunction with a public institution of higher education in the Commonwealth or a private institution of higher education in the Commonwealth; or","type":"section","prefixes":["E","1"],"prefix":"1","entire_prefix":"E1","prefix_anchor":"E1","level":2,"prior_prefix":"E","next_prefix":"E2"},"14":{"id":302055,"text":"If the taxpayer computed the credit under subdivision C 1, in an amount equal to the excess of the limitation set forth in subdivision C 2, up to an additional $45,000 per taxpayer, or $60,000 per taxpayer if the Virginia qualified research was conducted in conjunction with a public institution of higher education in the Commonwealth or a private institution of higher education in the Commonwealth.","type":"section","prefixes":["E","2"],"prefix":"2","entire_prefix":"E2","prefix_anchor":"E2","level":2,"prior_prefix":"E1","next_prefix":"F"},"15":{"id":302056,"text":"If the amount of the credit allowed exceeds the taxpayer’s tax liability for the taxable year, the amount that exceeds the tax liability shall be refunded to the taxpayer, subject to the limitations set forth in the guidelines developed by the Department.","type":"section","prefixes":["F"],"prefix":"F","entire_prefix":"F","prefix_anchor":"F","level":1,"prior_prefix":"E2","next_prefix":"G"},"16":{"id":302057,"text":"Any taxpayer who claims the tax credit for Virginia qualified research and development expenses pursuant to this section shall not use such expenses as the basis for claiming any other credit provided under the Code of Virginia.","type":"section","prefixes":["G"],"prefix":"G","entire_prefix":"G","prefix_anchor":"G","level":1,"prior_prefix":"F","next_prefix":"H"},"17":{"id":302058,"text":"Effective for taxable years beginning on or after January 1, 2016, no taxpayer with Virginia qualified research and development expenses in excess of $5 million for the taxable year shall claim both the credit allowed pursuant to this section and the credit allowed under § 58.1-439.12:11 for such year.","type":"section","prefixes":["H"],"prefix":"H","entire_prefix":"H","prefix_anchor":"H","level":1,"prior_prefix":"G","next_prefix":"I"},"18":{"id":302059,"text":"Credits granted to a partnership, limited liability company, or electing small business corporation (S corporation) shall be allocated to the individual partners, members, or shareholders, respectively, in proportion to their ownership interests in such entities or in accordance with a written agreement entered into by such individual partners, members, or shareholders, unless the partnership, limited liability company, or electing small business corporation (S corporation) elects for such credits not to be so allocated but to be received and claimed at the entity level by the partnership, limited liability company, or electing small business corporation (S corporation) pursuant to guidelines that shall be issued by the Department for purposes of such election.","type":"section","prefixes":["I"],"prefix":"I","entire_prefix":"I","prefix_anchor":"I","level":1,"prior_prefix":"H","next_prefix":"J"},"19":{"id":302060,"text":"The Department shall adopt guidelines to prescribe standards for determining when research and development is considered conducted in the Commonwealth for purposes of allowing the credit under this section. In adopting guidelines, the Department may consider (i) the location where the research and development is performed; (ii) the residence or business location of the taxpayer or taxpayers conducting the research and development; (iii) the location where supplies used in the research and development are consumed; and (iv) any other factors that the Department deems to be relevant.","type":"section","prefixes":["J"],"prefix":"J","entire_prefix":"J","prefix_anchor":"J","level":1,"prior_prefix":"I","next_prefix":"K"},"20":{"id":302061,"text":"The Tax Commissioner’s annual report to the Governor on revenue collections by tax source shall include (i) the total number of applicants approved for tax credits pursuant to this section for the applicable tax year and (ii) the total amount of such tax credits approved for the applicable tax year.","type":"section","prefixes":["K"],"prefix":"K","entire_prefix":"K","prefix_anchor":"K","level":1,"prior_prefix":"J","next_prefix":"L"},"21":{"id":302062,"text":"The Department shall require taxpayers applying for the credit to provide information including (i) the number of full-time employees employed by the taxpayer in the Commonwealth during the taxable year for which the credit is sought; (ii) the taxpayer’s sector or sectors according to the 2012 edition of the North American Industry Classification System (NAICS) as published by the United States Census Bureau; (iii) a brief description of the area, discipline, or field of Virginia qualified research performed by the taxpayer; (iv) the total gross receipts or anticipated total gross receipts of the taxpayer for the taxable year for which the credit is sought; and (v) whether the Virginia qualified research was conducted in conjunction with a Virginia public or private college or university. The Department shall aggregate and summarize the information collected and make it available to the Governor and any member of the General Assembly upon request, regardless of the number of taxpayers applying for the credit.","type":"section","prefixes":["L"],"prefix":"L","entire_prefix":"L","prefix_anchor":"L","level":1,"prior_prefix":"K","next_prefix":"M"},"22":{"id":302063,"text":"No tax credit shall be allowed pursuant to this section if the otherwise qualified research and development expenses are paid for or incurred by a taxpayer for research conducted in the Commonwealth on human cells or tissue derived from induced abortions or from stem cells obtained from human embryos. The foregoing provision shall not apply to research conducted using stem cells other than embryonic stem cells.","type":"section","prefixes":["M"],"prefix":"M","entire_prefix":"M","prefix_anchor":"M","level":1,"prior_prefix":"L"}},"ancestry":[{"id":13153,"edition_id":1,"name":"Tax Credits for Corporations","identifier":"13","label":"article","depth":4,"order_by":1,"parent_id":13152,"metadata":{},"date_created":"2026-06-26 03:44:21","date_modified":"2026-06-26 03:44:21","permalink":{"id":253497,"object_type":"structure","relational_id":13153,"identifier":"13","token":"58.1\/I\/3\/13","url":"\/58.1\/I\/3\/13\/","edition_id":1,"permalink":0,"preferred":1}},{"id":13152,"edition_id":1,"name":"Income Tax","identifier":"3","label":"chapter","depth":3,"order_by":1,"parent_id":12837,"metadata":{},"date_created":"2026-06-26 03:44:21","date_modified":"2026-06-26 03:44:21","permalink":{"id":253267,"object_type":"structure","relational_id":13152,"identifier":"3","token":"58.1\/I\/3","url":"\/58.1\/I\/3\/","edition_id":1,"permalink":0,"preferred":1}},{"id":12837,"edition_id":1,"name":"Taxes Administered by the Department of Taxation","identifier":"I","label":"subtitle","depth":2,"order_by":1,"parent_id":12703,"metadata":{},"date_created":"2026-06-26 03:43:55","date_modified":"2026-06-26 03:43:55","permalink":{"id":252075,"object_type":"structure","relational_id":12837,"identifier":"I","token":"58.1\/I","url":"\/58.1\/I\/","edition_id":1,"permalink":0,"preferred":1}},{"id":12703,"edition_id":1,"name":"Taxation","identifier":"58.1","label":"title","depth":1,"order_by":1,"parent_id":null,"metadata":{},"date_created":"2026-06-26 03:43:49","date_modified":"2026-06-26 03:43:49","permalink":{"id":251959,"object_type":"structure","relational_id":12703,"identifier":"58.1","token":"58.1","url":"\/58.1\/","edition_id":1,"permalink":0,"preferred":1}}],"structure_contents":[{"id":59349,"structure_id":13153,"section_number":"58.1-430","catch_line":"Repealed","url":"\/58.1-430\/","token":"58.1\/I\/3\/13\/58.1-430","metadata":false},{"id":79747,"structure_id":13153,"section_number":"58.1-431","catch_line":"Repealed","url":"\/58.1-431\/","token":"58.1\/I\/3\/13\/58.1-431","metadata":false},{"id":87213,"structure_id":13153,"section_number":"58.1-432","catch_line":"Tax credit for purchase of conservation tillage equipment","url":"\/58.1-432\/","token":"58.1\/I\/3\/13\/58.1-432","metadata":false},{"id":78377,"structure_id":13153,"section_number":"58.1-433","catch_line":"Expired","url":"\/58.1-433\/","token":"58.1\/I\/3\/13\/58.1-433","metadata":false},{"id":84600,"structure_id":13153,"section_number":"58.1-433.1","catch_line":"Virginia Coal Employment and Production Incentive Tax Credit","url":"\/58.1-433.1\/","token":"58.1\/I\/3\/13\/58.1-433.1","metadata":false},{"id":72145,"structure_id":13153,"section_number":"58.1-434","catch_line":"Repealed","url":"\/58.1-434\/","token":"58.1\/I\/3\/13\/58.1-434","metadata":false},{"id":62315,"structure_id":13153,"section_number":"58.1-436","catch_line":"Tax credit for purchase of conservation tillage and precision agricultural application equipment","url":"\/58.1-436\/","token":"58.1\/I\/3\/13\/58.1-436","metadata":false},{"id":62397,"structure_id":13153,"section_number":"58.1-437","catch_line":"Repealed","url":"\/58.1-437\/","token":"58.1\/I\/3\/13\/58.1-437","metadata":false},{"id":83316,"structure_id":13153,"section_number":"58.1-438","catch_line":"Not effective","url":"\/58.1-438\/","token":"58.1\/I\/3\/13\/58.1-438","metadata":false},{"id":56216,"structure_id":13153,"section_number":"58.1-438.1","catch_line":"Tax credit for vehicle emissions testing equipment, clean-fuel vehicles and certain refueling property","url":"\/58.1-438.1\/","token":"58.1\/I\/3\/13\/58.1-438.1","metadata":false},{"id":62311,"structure_id":13153,"section_number":"58.1-439","catch_line":"Major business facility job tax credit","url":"\/58.1-439\/","token":"58.1\/I\/3\/13\/58.1-439","metadata":false},{"id":63680,"structure_id":13153,"section_number":"58.1-439.1","catch_line":"Repealed","url":"\/58.1-439.1\/","token":"58.1\/I\/3\/13\/58.1-439.1","metadata":false},{"id":76474,"structure_id":13153,"section_number":"58.1-439.10","catch_line":"Tax credit for purchase of waste motor oil burning equipment","url":"\/58.1-439.10\/","token":"58.1\/I\/3\/13\/58.1-439.10","metadata":false},{"id":85121,"structure_id":13153,"section_number":"58.1-439.11","catch_line":"Repealed","url":"\/58.1-439.11\/","token":"58.1\/I\/3\/13\/58.1-439.11","metadata":false},{"id":59921,"structure_id":13153,"section_number":"58.1-439.12","catch_line":"Riparian forest buffer protection for waterways tax credit","url":"\/58.1-439.12\/","token":"58.1\/I\/3\/13\/58.1-439.12","metadata":false},{"id":71239,"structure_id":13153,"section_number":"58.1-439.12:01","catch_line":"Credit for cigarettes manufactured and exported","url":"\/58.1-439.12_01\/","token":"58.1\/I\/3\/13\/58.1-439.12_01","metadata":false},{"id":80405,"structure_id":13153,"section_number":"58.1-439.12:02","catch_line":" Biodiesel and green diesel fuels producers tax credit","url":"\/58.1-439.12_02\/","token":"58.1\/I\/3\/13\/58.1-439.12_02","metadata":false},{"id":77683,"structure_id":13153,"section_number":"58.1-439.12:03","catch_line":"Motion picture production tax credit","url":"\/58.1-439.12_03\/","token":"58.1\/I\/3\/13\/58.1-439.12_03","metadata":false},{"id":82387,"structure_id":13153,"section_number":"58.1-439.12:04","catch_line":"Tax credit for participating 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credit","url":"\/58.1-439.12_08\/","token":"58.1\/I\/3\/13\/58.1-439.12_08","metadata":false},{"id":54175,"structure_id":13153,"section_number":"58.1-439.12:09","catch_line":"Barge and rail usage tax credit","url":"\/58.1-439.12_09\/","token":"58.1\/I\/3\/13\/58.1-439.12_09","metadata":false},{"id":78639,"structure_id":13153,"section_number":"58.1-439.12:10","catch_line":"Virginia port volume increase tax credit","url":"\/58.1-439.12_10\/","token":"58.1\/I\/3\/13\/58.1-439.12_10","metadata":false},{"id":85547,"structure_id":13153,"section_number":"58.1-439.12:11","catch_line":"Major research and development expenses tax credit","url":"\/58.1-439.12_11\/","token":"58.1\/I\/3\/13\/58.1-439.12_11","metadata":false},{"id":65654,"structure_id":13153,"section_number":"58.1-439.12:12","catch_line":"Food donation tax credit","url":"\/58.1-439.12_12\/","token":"58.1\/I\/3\/13\/58.1-439.12_12","metadata":false},{"id":54927,"structure_id":13153,"section_number":"58.1-439.2","catch_line":" Coalfield employment enhancement tax credit","url":"\/58.1-439.2\/","token":"58.1\/I\/3\/13\/58.1-439.2","metadata":false},{"id":63351,"structure_id":13153,"section_number":"58.1-439.3","catch_line":"Repealed","url":"\/58.1-439.3\/","token":"58.1\/I\/3\/13\/58.1-439.3","metadata":false},{"id":58298,"structure_id":13153,"section_number":"58.1-439.4","catch_line":"Day-care facility investment tax credit","url":"\/58.1-439.4\/","token":"58.1\/I\/3\/13\/58.1-439.4","metadata":false},{"id":66742,"structure_id":13153,"section_number":"58.1-439.5","catch_line":"Agricultural best management practices tax credit","url":"\/58.1-439.5\/","token":"58.1\/I\/3\/13\/58.1-439.5","metadata":false},{"id":81908,"structure_id":13153,"section_number":"58.1-439.6","catch_line":"Worker retraining tax credit","url":"\/58.1-439.6\/","token":"58.1\/I\/3\/13\/58.1-439.6","metadata":false},{"id":60296,"structure_id":13153,"section_number":"58.1-439.6:1","catch_line":"Worker training tax credit","url":"\/58.1-439.6_1\/","token":"58.1\/I\/3\/13\/58.1-439.6_1","metadata":false},{"id":55856,"structure_id":13153,"section_number":"58.1-439.7","catch_line":"Tax credit for purchase of machinery and equipment used for advanced recycling and processing recyclable materials","url":"\/58.1-439.7\/","token":"58.1\/I\/3\/13\/58.1-439.7","metadata":false},{"id":82497,"structure_id":13153,"section_number":"58.1-439.8","catch_line":"Repealed","url":"\/58.1-439.8\/","token":"58.1\/I\/3\/13\/58.1-439.8","metadata":false},{"id":66196,"structure_id":13153,"section_number":"58.1-439.9","catch_line":"Tax credit for certain employers hiring recipients of Temporary Assistance for Needy Families","url":"\/58.1-439.9\/","token":"58.1\/I\/3\/13\/58.1-439.9","metadata":false}],"previous_section":{"id":58192,"structure_id":13153,"section_number":"58.1-439.12:07","catch_line":"Telework expenses tax credit","url":"\/58.1-439.12_07\/","token":"58.1\/I\/3\/13\/58.1-439.12_07","metadata":false},"next_section":{"id":54175,"structure_id":13153,"section_number":"58.1-439.12:09","catch_line":"Barge and rail usage tax credit","url":"\/58.1-439.12_09\/","token":"58.1\/I\/3\/13\/58.1-439.12_09","metadata":false},"metadata":false,"official_url":"https:\/\/law.lis.virginia.gov\/vacode\/58.1-439.12:08\/","history_text":"

This law was first created in 2011. The record of its establishment is cataloged in chapters 742<\/a> and 745<\/a> of that year\u2019s edition of \u201cActs of Assembly,\u201d the annual state publication listing all changes made to the Code of Virginia in that year. It has been modified 4 times. Those modifications are cataloged by \u201cThe Acts of Assembly,\u201d a state publication, by year and chapter. Those modifications that can be read on the General Assembly\u2019s website will be linked accordingly. Those modifications are as follows: in 2014, chapters 227<\/a> and 306<\/a>; in 2016, chapters 300<\/a>, 433<\/a>, and 661<\/a>; in 2020, chapters 469<\/a> and 470<\/a>; in 2024, chapter 661<\/a>.<\/p>","references":false,"refers_to":[{"id":86911,"section_number":"2.2-4000","catch_line":"Short title; purpose","order_by":null,"url":"\/2.2-4000\/"},{"id":87019,"section_number":"58.1-1202","catch_line":"Bank capital assessable","order_by":null,"url":"\/58.1-1202\/"},{"id":62270,"section_number":"58.1-320","catch_line":"Imposition of tax","order_by":null,"url":"\/58.1-320\/"},{"id":58225,"section_number":"58.1-3700.1","catch_line":"Definitions","order_by":null,"url":"\/58.1-3700.1\/"},{"id":60955,"section_number":"58.1-400","catch_line":"Imposition of tax","order_by":null,"url":"\/58.1-400\/"},{"id":85547,"section_number":"58.1-439.12:11","catch_line":"Major research and development expenses tax credit","order_by":null,"url":"\/58.1-439.12_11\/"}],"permalink":{"id":253587,"object_type":"law","relational_id":84261,"identifier":"58.1-439.12:08","token":"58.1\/I\/3\/13\/58.1-439.12_08","url":"\/58.1-439.12_08\/","edition_id":1,"permalink":0,"preferred":1},"url":"\/58.1-439.12_08\/","token":"58.1\/I\/3\/13\/58.1-439.12_08","dublin_core":{"Title":"Research and development expenses tax credit","Type":"Text","Format":"text\/html","Identifier":"\u00a7 58.1-439.12:08","Relation":"Code of Virginia"},"html":"\n\t\t\t\t\t\t

A.<\/span> As used in this section, unless the context requires a different meaning:\n\t\t\t“Virginia base amount<\/span>” means the base amount as defined in \u00a7 41(c) of the Internal Revenue Code, as amended, that is attributable to Virginia, determined by (i) substituting “Virginia qualified research<\/span> and development expense<\/span>” for “qualified research expense<\/span>”; (ii) substituting “Virginia qualified research<\/span>” for “qualified research”; and (iii) instead of “fixed base percentage,” using: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> The percentage that the Virginia qualified research<\/span> and development expense<\/span> for the three taxable years immediately preceding the current taxable year in which the expense is incurred is of the taxpayer<\/span>’s total gross receipts<\/span> for such years; or <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> The percentage that the Virginia qualified research<\/span> and development expense<\/span> for the applicable number of taxable years immediately preceding the current taxable year in which the expense is incurred is of the taxpayer<\/span>’s total gross receipts for such years, for the taxpayer<\/span> that has fewer than three but at least one prior taxable year.\n\t\t\t\t“Virginia gross receipts<\/span>” means the same as “gross receipts” as defined in § 58.1-3700.1<\/a>.\n\t\t\t\t“Virginia qualified research<\/span>” means qualified research, as defined in § 41(d) of the Internal Revenue Code, as amended, that is conducted in the Commonwealth.\n\t\t\t\t“Virginia qualified research<\/span> and development expenses<\/span><\/span>” means qualified research expenses<\/span>, as defined in § 41(b) of the Internal Revenue Code, as amended, incurred for Virginia qualified research<\/span>. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

B.<\/span> 1. For taxable years beginning on or after January 1, 2011, but before January 1, 2021, a taxpayer<\/span> shall be allowed a credit against the tax levied pursuant to \u00a7 58.1-320<\/a> or 58.1-400<\/a> in an amount equal to (i) 15 percent of the first $300,000 in Virginia qualified research<\/span> and development expenses<\/span><\/span> paid or incurred by the taxpayer<\/span> during the taxable year or (ii) 20 percent of the first $300,000 in Virginia qualified research<\/span> and development expenses<\/span><\/span> paid or incurred by the taxpayer<\/span> during the taxable year if the Virginia qualified research<\/span> was conducted in conjunction with a public or private institution of higher education in the Commonwealth, to the extent the expenses exceed the Virginia base amount<\/span> for the taxpayer<\/span>. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> For taxable years beginning on or after January 1, 2021, but before January 1, 2025, a taxpayer<\/span> shall be allowed a credit against the tax levied pursuant to § 58.1-320<\/a>, 58.1-400<\/a>, or 58.1-1202<\/a> in an amount equal to (i) 15 percent of the first $300,000 in Virginia qualified research<\/span> and development expenses<\/span><\/span> paid or incurred by the taxpayer<\/span> during the taxable year or (ii) 20 percent of the first $300,000 in Virginia qualified research<\/span> and development expenses<\/span><\/span> paid or incurred by the taxpayer<\/span> during the taxable year if the Virginia qualified research<\/span> was conducted in conjunction with a public or private institution of higher education in the Commonwealth, to the extent the expenses exceed the Virginia base amount<\/span> for the taxpayer<\/span>. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

C.<\/span> 1. Effective for taxable years beginning on or after January 1, 2016, at the election of the taxpayer<\/span>, the credit otherwise allowed under this section shall be computed under this subsection and shall equal 10 percent of the difference of (i) the Virginia qualified research<\/span> and development expenses<\/span><\/span> paid or incurred by the taxpayer<\/span> during the taxable year and (ii) 50 percent of the average Virginia qualified research<\/span> and development expenses<\/span><\/span> paid or incurred by the taxpayer<\/span> for the three taxable years immediately preceding the taxable year for which the credit is being determined. If the taxpayer<\/span> did not pay or incur Virginia qualified research<\/span> and development expenses<\/span><\/span> in any one of the three taxable years immediately preceding the taxable year for which the credit is being determined, the tax credit shall equal five percent of the Virginia qualified research<\/span> and development expenses<\/span><\/span> paid or incurred by the taxpayer<\/span> during the relevant taxable year. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> The aggregate amount of credits allowed to each taxpayer<\/span> under this subsection shall not exceed $45,000 for the taxable year, except that the aggregate amount of credits allowed to each taxpayer<\/span> shall not exceed $60,000 for the taxable year if the Virginia qualified research<\/span> was conducted in conjunction with a public institution of higher education in the Commonwealth or a private institution of higher education in the Commonwealth. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

D.<\/span> The aggregate amount of credits available under this section for each fiscal year of the Commonwealth shall be as follows: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> For taxable years beginning on and after January 1, 2014, but before January 1, 2016, the total amount of credits granted for each of fiscal years 2015 and 2016 shall not exceed $6 million. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> For taxable years beginning on and after January 1, 2016, but before January 1, 2021, the total amount of credits granted for each fiscal year of the Commonwealth beginning with fiscal year 2017 shall not exceed $7 million. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

3.<\/span> For taxable years beginning on and after January 1, 2021, but before January 1, 2023, the total amount of credits granted for each fiscal year of the Commonwealth beginning with fiscal year 2022 shall not exceed $7.77 million. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

4.<\/span> For taxable years beginning on and after January 1, 2023, the total amount of credits granted for each fiscal year of the Commonwealth beginning with fiscal year 2024 shall not exceed $15.77 million. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

E.<\/span> A taxpayer<\/span> meeting the requirements of this section shall be eligible to receive a tax credit as provided herein. The Department<\/span> shall develop and publish guidelines for applications and such guidelines shall be exempt from the Administrative Process Act (\u00a7 2.2-4000<\/a> et seq.). Applications must be received by the Department<\/span> no later than September 1 of the calendar year following the close of the taxable year in which the expenses were paid or incurred. In the event that approved applications for the tax credits allowed under this section exceed the amount of credits specified in subsection D for the taxable year, the Department<\/span> shall apportion the credits by dividing the amount of credits specified in subsection D by the total amount of tax credits approved, to determine the percentage of allowed tax credits each taxpayer<\/span> shall receive. In the event that the total amount of approved tax credits under this section for all applications for any taxable year is less than the maximum amount of credits for the year as specified in subsection D, the Department<\/span> shall allocate credits up to the maximum amount as specified in subsection D, on a pro rata basis, to taxpayers<\/span> who are already approved for the tax credit for the taxable year, in the following amounts: <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

1.<\/span> If the taxpayer<\/span> computed the credit pursuant to subsection B, in an amount equal to 15 percent of the second $300,000 in qualified research expenses<\/span> during the taxable year or 20 percent of the second $300,000 in qualified research expenses<\/span> if the Virginia qualified research<\/span> was conducted in conjunction with a public institution of higher education in the Commonwealth or a private institution of higher education in the Commonwealth; or <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

2.<\/span> If the taxpayer<\/span> computed the credit under subdivision C 1, in an amount equal to the excess of the limitation set forth in subdivision C 2, up to an additional $45,000 per taxpayer<\/span>, or $60,000 per taxpayer<\/span> if the Virginia qualified research<\/span> was conducted in conjunction with a public institution of higher education in the Commonwealth or a private institution of higher education in the Commonwealth. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

F.<\/span> If the amount of the credit allowed exceeds the taxpayer<\/span>’s tax liability for the taxable year, the amount that exceeds the tax liability shall be refunded to the taxpayer<\/span>, subject to the limitations set forth in the guidelines developed by the Department<\/span>. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

G.<\/span> Any taxpayer<\/span> who claims the tax credit for Virginia qualified research<\/span> and development expenses<\/span><\/span> pursuant to this section shall not use such expenses as the basis for claiming any other credit provided under the Code of Virginia. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

H.<\/span> Effective for taxable years beginning on or after January 1, 2016, no taxpayer<\/span> with Virginia qualified research<\/span> and development expenses<\/span><\/span> in excess of $5 million for the taxable year shall claim both the credit allowed pursuant to this section and the credit allowed under § 58.1-439.12:11<\/a> for such year. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

I.<\/span> Credits granted to a partnership, limited liability company, or electing small business corporation<\/span> (S corporation<\/span>) shall be allocated to the individual<\/span> partners, members, or shareholders, respectively, in proportion to their ownership interests in such entities or in accordance with a written agreement entered into by such individual<\/span> partners, members, or shareholders, unless the partnership, limited liability company, or electing small business corporation<\/span> (S corporation<\/span>) elects for such credits not to be so allocated but to be received and claimed at the entity level by the partnership, limited liability company, or electing small business corporation<\/span> (S corporation<\/span>) pursuant to guidelines that shall be issued by the Department<\/span> for purposes of such election. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

J.<\/span> The Department<\/span> shall adopt guidelines to prescribe standards for determining when research and development is considered conducted in the Commonwealth for purposes of allowing the credit under this section. In adopting guidelines, the Department<\/span> may consider (i) the location where the research and development is performed; (ii) the residence or business location of the taxpayer<\/span> or taxpayers<\/span> conducting the research and development; (iii) the location where supplies used in the research and development are consumed; and (iv) any other factors that the Department<\/span> deems to be relevant. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

K.<\/span> The Tax Commissioner<\/span>’s annual report to the Governor on revenue collections by tax source shall include (i) the total number of applicants approved for tax credits pursuant to this section for the applicable tax year and (ii) the total amount of such tax credits approved for the applicable tax year. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

L.<\/span> The Department<\/span> shall require taxpayers<\/span> applying for the credit to provide information including (i) the number of full-time employees employed by the taxpayer<\/span> in the Commonwealth during the taxable year for which the credit is sought; (ii) the taxpayer<\/span>’s sector or sectors according to the 2012 edition of the North American Industry Classification System (NAICS) as published by the United States Census Bureau; (iii) a brief<\/span> description of the area, discipline, or field of Virginia qualified research<\/span> performed by the taxpayer<\/span>; (iv) the total gross receipts or anticipated total gross receipts of the taxpayer<\/span> for the taxable year for which the credit is sought; and (v) whether the Virginia qualified research<\/span> was conducted in conjunction with a Virginia public or private college or university. The Department<\/span> shall aggregate and summarize the information collected and make it available to the Governor and any member of the General Assembly upon request, regardless of the number of taxpayers<\/span> applying for the credit. <\/i><\/a><\/p><\/section>\n\t\t\t\t\t\t

M.<\/span> No tax credit shall be allowed pursuant to this section if the otherwise qualified research and development expenses are paid for or incurred by a taxpayer<\/span> for research conducted in the Commonwealth on human cells or tissue derived from induced abortions or from stem cells obtained from human embryos. The foregoing provision shall not apply to research conducted using stem cells other than embryonic stem cells. <\/i><\/a><\/p><\/section>","plain_text":" CODE OF VIRGINIA\n\nRESEARCH AND DEVELOPMENT EXPENSES TAX CREDIT (\u00a7 58.1-439.12:08)\n\nA. As used in this section, unless the context requires a different meaning:\n\t\t\t“Virginia base amount” means the base amount as defined in \u00a7\n41(c) of the Internal Revenue Code, as amended, that is attributable to\nVirginia, determined by (i) substituting “Virginia qualified research and\ndevelopment expense” for “qualified research expense”; (ii)\nsubstituting “Virginia qualified research” for “qualified\nresearch”; and (iii) instead of “fixed base percentage,”\nusing:\n\n 1. The percentage that the Virginia qualified research and development expense\n for the three taxable years immediately preceding the current taxable year in\n which the expense is incurred is of the taxpayer’s total gross receipts\n for such years; or\n\n 2. The percentage that the Virginia qualified research and development expense\n for the applicable number of taxable years immediately preceding the current\n taxable year in which the expense is incurred is of the taxpayer’s total\n gross receipts for such years, for the taxpayer that has fewer than three but\n at least one prior taxable year.\n \t\t\t\t“Virginia gross receipts” means the same as “gross\n receipts” as defined in § 58.1-3700.1.\n \t\t\t\t“Virginia qualified research” means qualified research, as\n defined in § 41(d) of the Internal Revenue Code, as amended, that is\n conducted in the Commonwealth.\n \t\t\t\t“Virginia qualified research and development expenses” means\n qualified research expenses, as defined in § 41(b) of the Internal\n Revenue Code, as amended, incurred for Virginia qualified research.\n\nB. 1. For taxable years beginning on or after January 1, 2011, but before\nJanuary 1, 2021, a taxpayer shall be allowed a credit against the tax levied\npursuant to \u00a7 58.1-320 or 58.1-400 in an amount equal to (i) 15 percent of the\nfirst $300,000 in Virginia qualified research and development expenses paid or\nincurred by the taxpayer during the taxable year or (ii) 20 percent of the first\n$300,000 in Virginia qualified research and development expenses paid or\nincurred by the taxpayer during the taxable year if the Virginia qualified\nresearch was conducted in conjunction with a public or private institution of\nhigher education in the Commonwealth, to the extent the expenses exceed the\nVirginia base amount for the taxpayer.\n\n 2. For taxable years beginning on or after January 1, 2021, but before January\n 1, 2025, a taxpayer shall be allowed a credit against the tax levied pursuant\n to § 58.1-320, 58.1-400, or 58.1-1202 in an amount equal to (i) 15\n percent of the first $300,000 in Virginia qualified research and development\n expenses paid or incurred by the taxpayer during the taxable year or (ii) 20\n percent of the first $300,000 in Virginia qualified research and development\n expenses paid or incurred by the taxpayer during the taxable year if the\n Virginia qualified research was conducted in conjunction with a public or\n private institution of higher education in the Commonwealth, to the extent the\n expenses exceed the Virginia base amount for the taxpayer.\n\nC. 1. Effective for taxable years beginning on or after January 1, 2016, at the\nelection of the taxpayer, the credit otherwise allowed under this section shall\nbe computed under this subsection and shall equal 10 percent of the difference\nof (i) the Virginia qualified research and development expenses paid or incurred\nby the taxpayer during the taxable year and (ii) 50 percent of the average\nVirginia qualified research and development expenses paid or incurred by the\ntaxpayer for the three taxable years immediately preceding the taxable year for\nwhich the credit is being determined. If the taxpayer did not pay or incur\nVirginia qualified research and development expenses in any one of the three\ntaxable years immediately preceding the taxable year for which the credit is\nbeing determined, the tax credit shall equal five percent of the Virginia\nqualified research and development expenses paid or incurred by the taxpayer\nduring the relevant taxable year.\n\n 2. The aggregate amount of credits allowed to each taxpayer under this\n subsection shall not exceed $45,000 for the taxable year, except that the\n aggregate amount of credits allowed to each taxpayer shall not exceed $60,000\n for the taxable year if the Virginia qualified research was conducted in\n conjunction with a public institution of higher education in the Commonwealth\n or a private institution of higher education in the Commonwealth.\n\nD. The aggregate amount of credits available under this section for each fiscal\nyear of the Commonwealth shall be as follows:\n\n 1. For taxable years beginning on and after January 1, 2014, but before\n January 1, 2016, the total amount of credits granted for each of fiscal years\n 2015 and 2016 shall not exceed $6 million.\n\n 2. For taxable years beginning on and after January 1, 2016, but before\n January 1, 2021, the total amount of credits granted for each fiscal year of\n the Commonwealth beginning with fiscal year 2017 shall not exceed $7 million.\n\n 3. For taxable years beginning on and after January 1, 2021, but before\n January 1, 2023, the total amount of credits granted for each fiscal year of\n the Commonwealth beginning with fiscal year 2022 shall not exceed $7.77\n million.\n\n 4. For taxable years beginning on and after January 1, 2023, the total amount\n of credits granted for each fiscal year of the Commonwealth beginning with\n fiscal year 2024 shall not exceed $15.77 million.\n\nE. A taxpayer meeting the requirements of this section shall be eligible to\nreceive a tax credit as provided herein. The Department shall develop and\npublish guidelines for applications and such guidelines shall be exempt from the\nAdministrative Process Act (\u00a7 2.2-4000 et seq.). Applications must be received\nby the Department no later than September 1 of the calendar year following the\nclose of the taxable year in which the expenses were paid or incurred. In the\nevent that approved applications for the tax credits allowed under this section\nexceed the amount of credits specified in subsection D for the taxable year, the\nDepartment shall apportion the credits by dividing the amount of credits\nspecified in subsection D by the total amount of tax credits approved, to\ndetermine the percentage of allowed tax credits each taxpayer shall receive. In\nthe event that the total amount of approved tax credits under this section for\nall applications for any taxable year is less than the maximum amount of credits\nfor the year as specified in subsection D, the Department shall allocate credits\nup to the maximum amount as specified in subsection D, on a pro rata basis, to\ntaxpayers who are already approved for the tax credit for the taxable year, in\nthe following amounts:\n\n 1. If the taxpayer computed the credit pursuant to subsection B, in an amount\n equal to 15 percent of the second $300,000 in qualified research expenses\n during the taxable year or 20 percent of the second $300,000 in qualified\n research expenses if the Virginia qualified research was conducted in\n conjunction with a public institution of higher education in the Commonwealth\n or a private institution of higher education in the Commonwealth; or\n\n 2. If the taxpayer computed the credit under subdivision C 1, in an amount\n equal to the excess of the limitation set forth in subdivision C 2, up to an\n additional $45,000 per taxpayer, or $60,000 per taxpayer if the Virginia\n qualified research was conducted in conjunction with a public institution of\n higher education in the Commonwealth or a private institution of higher\n education in the Commonwealth.\n\nF. If the amount of the credit allowed exceeds the taxpayer’s tax\nliability for the taxable year, the amount that exceeds the tax liability shall\nbe refunded to the taxpayer, subject to the limitations set forth in the\nguidelines developed by the Department.\n\nG. Any taxpayer who claims the tax credit for Virginia qualified research and\ndevelopment expenses pursuant to this section shall not use such expenses as the\nbasis for claiming any other credit provided under the Code of Virginia.\n\nH. Effective for taxable years beginning on or after January 1, 2016, no\ntaxpayer with Virginia qualified research and development expenses in excess of\n$5 million for the taxable year shall claim both the credit allowed pursuant to\nthis section and the credit allowed under § 58.1-439.12:11 for such year.\n\nI. Credits granted to a partnership, limited liability company, or electing\nsmall business corporation (S corporation) shall be allocated to the individual\npartners, members, or shareholders, respectively, in proportion to their\nownership interests in such entities or in accordance with a written agreement\nentered into by such individual partners, members, or shareholders, unless the\npartnership, limited liability company, or electing small business corporation\n(S corporation) elects for such credits not to be so allocated but to be\nreceived and claimed at the entity level by the partnership, limited liability\ncompany, or electing small business corporation (S corporation) pursuant to\nguidelines that shall be issued by the Department for purposes of such election.\n\nJ. The Department shall adopt guidelines to prescribe standards for determining\nwhen research and development is considered conducted in the Commonwealth for\npurposes of allowing the credit under this section. In adopting guidelines, the\nDepartment may consider (i) the location where the research and development is\nperformed; (ii) the residence or business location of the taxpayer or taxpayers\nconducting the research and development; (iii) the location where supplies used\nin the research and development are consumed; and (iv) any other factors that\nthe Department deems to be relevant.\n\nK. The Tax Commissioner’s annual report to the Governor on revenue\ncollections by tax source shall include (i) the total number of applicants\napproved for tax credits pursuant to this section for the applicable tax year\nand (ii) the total amount of such tax credits approved for the applicable tax\nyear.\n\nL. The Department shall require taxpayers applying for the credit to provide\ninformation including (i) the number of full-time employees employed by the\ntaxpayer in the Commonwealth during the taxable year for which the credit is\nsought; (ii) the taxpayer’s sector or sectors according to the 2012\nedition of the North American Industry Classification System (NAICS) as\npublished by the United States Census Bureau; (iii) a brief description of the\narea, discipline, or field of Virginia qualified research performed by the\ntaxpayer; (iv) the total gross receipts or anticipated total gross receipts of\nthe taxpayer for the taxable year for which the credit is sought; and (v)\nwhether the Virginia qualified research was conducted in conjunction with a\nVirginia public or private college or university. The Department shall aggregate\nand summarize the information collected and make it available to the Governor\nand any member of the General Assembly upon request, regardless of the number of\ntaxpayers applying for the credit.\n\nM. No tax credit shall be allowed pursuant to this section if the otherwise\nqualified research and development expenses are paid for or incurred by a\ntaxpayer for research conducted in the Commonwealth on human cells or tissue\nderived from induced abortions or from stem cells obtained from human embryos.\nThe foregoing provision shall not apply to research conducted using stem cells\nother than embryonic stem cells.\n\nHISTORY: 2011, cc. 742, 745; 2014, cc. 227, 306; 2016, cc. 300, 433, 661; 2020,\ncc. 469, 470; 2021, Sp. Sess. I, cc. 47, 48; 2024, c. 661.","edition":{"id":1,"name":"2025","slug":"2025","date_created":"2026-06-21 22:39:22","date_modified":"2026-06-21 22:39:22","current":1,"order_by":1,"last_import":null}}