                                 CODE OF VIRGINIA

INTERNATIONAL TRADE FACILITY TAX CREDIT (§ 58.1-439.12:06)

A. As used in this section, unless the context requires a different meaning:
			&#8220;Affiliated companies&#8221; means two or more companies related to
each other so that (i) one company owns at least 80 percent of the voting power
of the other or others or (ii) the same interest owns at least 80 percent of the
voting power of two or more companies.
			&#8220;Capital investment&#8221; means the amount properly chargeable to a
capital account for improvements to rehabilitate or expand depreciable real
property placed in service during the taxable year and the cost of machinery,
tools, and equipment used in an international trade facility directly related to
the movement of cargo. Capital investment includes expenditures associated with
any exterior, structural, mechanical, or electrical improvements necessary to
expand or rehabilitate a building for commercial or industrial use and
excavations, grading, paving, driveways, roads, sidewalks, landscaping, or other
land improvements. For purposes of this section, machinery, tools, and equipment
shall be deemed to include only that property placed in service by the
international trade facility on and after January 1, 2011. Machinery, tools, and
equipment excludes property (i) for which a credit under this section was
previously granted; (ii) placed in service by the taxpayer, a related party as
defined in § 267(b) of the Internal Revenue Code, as amended, or by a trade or
business under common control as defined in § 52(b) of the Internal Revenue
Code, as amended; or (iii) previously in service in the Commonwealth that 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, as amended.
			&#8220;Capital investment&#8221; shall not include:

   1. The cost of acquiring any real property or building;

   2. The cost of furnishings;

   3. Any expenditure associated with appraisal, architectural, engineering, or
   interior design fees;

   4. Loan fees, points, or capitalized interest;

   5. Legal, accounting, realtor, sales and marketing, or other professional
   fees;

   6. Closing costs, permit fees, user fees, zoning fees, impact fees, and
   inspection fees;

   7. Bids, insurance, signage, utilities, bonding, copying, rent loss, or
   temporary facilities costs incurred during construction;

   8. Utility hook-up or access fees;

   9. Outbuildings; or

   10. The cost of any well or septic system.
   				&#8220;Credit year&#8221; means the first taxable year following the
   taxable year in which the international trade facility commenced or expanded
   its operations. A separate credit year and a three-year allowance shall exist
   for each distinct international trade facility of a single taxpayer.
   				&#8220;International trade facility&#8221; means a company that:

   1. Is engaged in port-related activities, including, but not limited to,
   warehousing, distribution, freight forwarding and handling, and goods
   processing;

   2. Uses maritime port facilities located in the Commonwealth; and

   3. Transports at least five percent more cargo through maritime port
   facilities in the Commonwealth during the taxable year than was transported by
   the company through such facilities during the preceding taxable year.
   				&#8220;New, permanent full-time position&#8221; means a job of indefinite
   duration, created by the company after establishing or expanding an
   international trade facility in the Commonwealth, requiring a minimum of 35
   hours of employment per week for each employee for the entire normal year of
   the company&#8217;s operations, or a position of indefinite duration that
   requires a minimum of 35 hours of employment per week for each employee for
   the portion of the taxable year in which the employee was initially hired for,
   or transferred to, the international trade facility in the Commonwealth.
   Seasonal or temporary positions, or a job created when a job function is
   shifted from an existing location in the Commonwealth to the international
   trade facility, and positions in building and grounds maintenance, security,
   and other such positions that are ancillary to the principal activities
   performed by the employees at the international trade facility shall not
   qualify as new, permanent full-time positions.
   				&#8220;Normal year&#8221; means at least 48 weeks in a calendar year.
   				&#8220;Qualified full-time employee&#8221; means an employee filling a
   new, permanent full-time position in an international trade facility in the
   Commonwealth.
   				&#8220;Qualified trade activities&#8221; means the completed exportation
   or importation of at least (i) one International Organization for
   Standardization ocean container with a minimum 20-foot length, (ii) 16 tons of
   noncontainerized cargo, or (iii) one unit of roll-on/roll-off cargo through
   any publicly or privately owned cargo facility located within the Commonwealth
   through which cargo is transported. Export cargo must be loaded on a barge or
   ocean-going vessel and import cargo must be discharged from a barge or
   ocean-going vessel at such facility.

B. For taxable years beginning on and after January 1, 2011, but before January
1, 2025, a taxpayer satisfying the requirements of this section shall be allowed
a credit against the taxes imposed by Articles 2 (&#xA7; 58.1-320 et seq.) and
10 (&#xA7; 58.1-400 et seq.). The amount of the credit earned pursuant to this
section shall be equal to either (i) $3,500 per qualified full-time employee
that results from increased qualified trade activities by the taxpayer or (ii)
an amount equal to two percent of the capital investment made by the taxpayer to
facilitate the increased qualified trade activities. The election of which tax
credit amount to claim shall be the responsibility of the taxpayer. Both tax
credits shall not be claimed for the same activities that occur in a calendar
year. The portion of the $3,500 credit earned with respect to any qualified
full-time employee who works in the Commonwealth for less than 12 full months
during the credit year shall be determined by multiplying the credit amount by a
fraction, the numerator of which is the number of full months such employee
worked for the international trade facility in the Commonwealth during the
credit year and the denominator of which is 12.

C. The Tax Commissioner shall issue tax credits under this section, and in no
case shall the Tax Commissioner issue more than $1,250,000 in tax credits
pursuant to this section in any fiscal year of the Commonwealth. If the amount
of tax credits requested under this section for any taxable year exceeds
$1,250,000, such credits shall be allocated proportionately among all qualified
taxpayers. The Tax Commissioner shall not issue tax credits under this section
subsequent to the Commonwealth&#8217;s fiscal year ending on June 30, 2025. The
taxpayer shall not be allowed to claim any tax credit under this section unless
it has applied to the Department for the tax credit and the Department has
approved the credit. The Department shall determine the credit amount allowable
for the taxable year and shall provide a written certification to the taxpayer,
which certification shall report the amount of the tax credit approved by the
Department. The taxpayer shall attach the certification to the applicable income
tax return.

D. The amount of the credit allowed pursuant to this section shall not exceed 50
percent of the tax imposed for the taxable year. Any remaining credit amount may
be carried forward for the next 10 taxable years. In the event a taxpayer who is
subject to the limitation imposed pursuant to this subsection is allowed a
different tax credit pursuant to another section of the Code, or has a credit
carry forward from a preceding taxable year, such taxpayer shall be considered
to have first utilized any credit that does not have a carry forward provision,
and then any credit carried forward from a preceding taxable year, before using
any of the credit allowed pursuant to this section.

E. No credit shall be earned for any employee (i) for whom a credit under this
section was previously earned by a related party as defined in &#xA7; 267(b) of
the Internal Revenue Code, as amended, or a trade or business under common
control as defined in &#xA7; 52(b) of the Internal Revenue Code, as amended;
(ii) who was previously employed in the same job function in Virginia by a
related party as defined in &#xA7; 267(b) of the Internal Revenue Code, as
amended, or a trade or business under common control as defined in &#xA7; 52(b)
of the Internal Revenue Code, as amended; (iii) whose job function was
previously performed at a different location in Virginia by an employee of the
taxpayer, by a related party as defined in &#xA7; 267(b) of the Internal Revenue
Code, as amended, or by a trade or business under common control as defined in
&#xA7; 52(b) of the Internal Revenue Code, as amended; or (iv) whose job
function previously qualified for a credit under this section at a different
major business facility, as defined in subsection C of &#xA7; 58.1-439, on
behalf of the taxpayer, by a related party as defined in &#xA7; 267(b) of the
Internal Revenue Code, as amended, or a trade or business under common control
as defined in &#xA7; 52(b) of the Internal Revenue Code, as amended.

F. For purposes of this section, the amount of any credit attributable to a
partnership, electing small business corporation (S corporation), or limited
liability company shall be allocated to the individual partners, shareholders,
or members, respectively, in proportion to their ownership or interest in such
business entities.

G. For purposes of this section, two or more affiliated companies may elect to
aggregate the number of jobs created for qualified full-time employees or the
amounts of capital investments as the result of the establishment or expansion
by the individual companies in order to qualify for the credit allowed herein.

H. Recapture of the credit amount, under the following circumstances, shall be
accomplished by increasing the tax in any of the five years succeeding the
taxable year in which a credit has been earned pursuant to this section if the
number of qualified full-time employees falls below the average number of
qualified full-time employees during the taxable year. The tax increase amount
shall be determined by (i) recalculating the credit that would have been earned
for the original taxable year using the decreased number of qualified full-time
employees and (ii) subtracting the recalculated credit amount from the amount
previously earned. In the event that the average number of qualified full-time
employees employed at an international trade facility falls below the number
employed by the taxpayer prior to claiming any credits pursuant to this section
in any of the five taxable years succeeding the year in which the credits were
earned, all credits earned with respect to the international trade facility
shall be recaptured. No credit amount shall be recaptured more than once
pursuant to this subsection. Any recapture pursuant to this subsection shall
reduce credits earned but not yet allowed, and credits allowed but carried
forward, before the taxpayer&#8217;s tax liability is increased.

I. Notwithstanding the provisions of &#xA7; 58.1-3, the Department of Taxation
shall annually provide information to the Virginia Port Authority related to tax
credits issued pursuant to this section.

J. The Tax Commissioner shall issue guidelines that are necessary and desirable
to carry out the provisions of this section, including (i) the computation,
carryover, and recapture of the credits provided under this section; (ii) the
establishment of criteria for (a) international trade facilities, (b) qualified
full-time employees at such facilities, and (c) capital investments; and (iii)
the computation, carryover, recapture, and redemption of the credit by
affiliated companies. Such guidelines shall be exempt from the provisions of the
Administrative Process Act (&#xA7; 2.2-4000 et seq.).

HISTORY: 2011, c. 49; 2012, cc. 846, 849; 2014, c. 423; 2016, c. 69; 2021, Sp.
Sess. I, c. 373.