                                 CODE OF VIRGINIA

MANUFACTURING COMPANIES; APPORTIONMENT (§ 58.1-422)

A. For taxable years beginning on or after July 1, 2011, the Virginia taxable
income of a manufacturing company, excluding income allocable under § 58.1-407,
may be apportioned within and without the Commonwealth as provided in §
58.1-408 or as follows:

   1. From July 1, 2011, until July 1, 2013, by multiplying such income by a
   fraction, the numerator of which is the property factor plus the payroll
   factor plus triple the sales factor and the denominator of which is five,
   except when the sales factor does not exist, the denominator of the fraction
   shall be the number of existing factors, and when the sales factor exists but
   the payroll factor or property factor does not exist, the denominator of the
   fraction shall be the number of existing factors plus two;

   2. From July 1, 2013, until July 1, 2014, by multiplying such income by a
   fraction, the numerator of which is the property factor plus the payroll
   factor plus quadruple the sales factor and the denominator of which is six,
   except when the sales factor does not exist, the denominator of the fraction
   shall be the number of existing factors, and when the sales factor exists but
   the payroll factor or property factor does not exist, the denominator of the
   fraction shall be the number of existing factors plus three; and

   3. From July 1, 2014, and thereafter, by multiplying such income by the sales
   factor.

B. If the taxpayer makes one or more of the elections described in subdivision A
1, A 2, or A 3, the taxpayer may not revoke the election for a period of three
taxable years.
			In addition, the taxpayer shall certify to the Department that the average
weekly wage of its full-time employees is greater than the lower of the state or
local average weekly wages for the taxpayer&#8217;s industry.

C. If the average annual number of full-time employees of a manufacturing
company for the first three taxable years (in which the manufacturing company
used the alternative apportionment set forth in this section) is less than 90
percent of the base year employment, or the average wage of its full-time
employees as certified by the taxpayer is not greater than the lower of the
state or local average weekly wage, then the Department of Taxation shall assess
the manufacturing company with additional taxes pursuant to this article
computed as the difference between (i) the taxes that would have been due under
the apportionment formula provided under &#xA7; 58.1-408 for such three taxable
years, minus (ii) the taxes due under the alternative apportionment provided
under this section for such three taxable years. Interest shall accrue and shall
be assessed on such additional taxes at the rate prescribed under &#xA7;
58.1-15, with such interest accruing from the original due date for filing of
the income tax return to the date of payment of such additional taxes.
			Such additional taxes and interest are hereby imposed on manufacturing
companies using the alternative apportionment set forth in this section.

D. As used in this section, unless the context requires another meaning:
			&#8220;Base year employment&#8221; means the average number of full-time
employees employed by the manufacturing company in the Commonwealth in the
taxable year that ended immediately prior to the first taxable year in which the
manufacturing company used the alternative apportionment set forth in this
section.
			&#8220;Full-time employee&#8221; means an employee of a manufacturing company
who is employed for an indefinite duration in the Commonwealth for which the
standard fringe benefits are paid by the manufacturing company, for which
employment requires a minimum of either (i) 35 hours of an employee&#8217;s time
per week for the entire normal year of such manufacturing company&#8217;s
operations, which &#8220;normal year&#8221; shall consist of at least 48 weeks,
or (ii) 1,680 hours per year.
			&#8220;Manufacturing company&#8221; means a domestic or foreign corporation
primarily engaged in activities that, in accordance with the North American
Industrial Classification System (NAICS), United States Manual, United States
Office of Management and Budget, 1997 Edition, would be included in Sector 11,
31, 32, or 33.

E. The General Assembly of Virginia finds that job creation is essential to the
continued fiscal health of the Commonwealth. In this modern economy, states
often compete for quality manufacturing jobs. Accordingly, the provisions of
this section relating to manufacturing companies that increase their employment
in Virginia are integral to the purpose of the election allowed pursuant to this
section. If any provision of this section is for any reason held to be invalid
or unconstitutional by the decision of a court of competent jurisdiction, that
provision shall not be deemed severable.

F. Any eligible company, as defined in &#xA7; 58.1-405.1, that elects to
apportion its income pursuant to subsection A may subtract the value of its
sales in the Commonwealth during the taxable year from the numerator of the
ratio in subdivision A 3. Such eligible company may make such modification for
the taxable year in which it first becomes eligible and for the six subsequent,
consecutive taxable years, except for any year in which the eligible
company&#8217;s (i) total, cumulative new capital investment falls below the
applicable initial threshold or (ii) number of new jobs falls below the
applicable initial threshold.

HISTORY: 2009, c. 821; 2012, c. 427; 2018, cc. 801, 802.