                                 CODE OF VIRGINIA

TAX CREDIT FOR PURCHASE OF MACHINERY AND EQUIPMENT USED FOR ADVANCED RECYCLING
AND PROCESSING RECYCLABLE MATERIALS (§ 58.1-439.7)

A. 1. For taxable years beginning on and after January 1, 1999, but before
January 1, 2025, a taxpayer shall be allowed a credit against the tax imposed
pursuant to Articles 2 (§ 58.1-320 et seq.) and 10 (§ 58.1-400 et seq.) of
Chapter 3 of this title, in an amount equal to 20 percent of the purchase price
paid during the taxable year for (i) machinery and equipment used predominantly
in or on the premises of manufacturing facilities or plant units which
manufacture, process, compound, or produce items of tangible personal property
from recyclable materials, within the Commonwealth, for sale and (ii) machinery
and equipment used predominantly in or on the premises of facilities that are
predominantly engaged in advanced recycling. For purposes of determining
&#8220;purchase price paid&#8221; under this section, the taxpayer may use the
original total capitalized cost of such machinery and equipment, less
capitalized interest. For purposes of this section, &#8220;advanced
recycling&#8221; means the operation of a single-stream or multi-stream
recycling plant that converts waste materials into new materials for resale by
processing them and breaking them down into their raw constituents.
&#8220;Advanced recycling&#8221; includes the operation of a materials recovery
facility or materials reclamation facility that receives, separates, and
prepares recyclable materials for sale to end-user manufacturers.

   2. The Department of Environmental Quality shall certify that such machinery
   and equipment are integral to the recycling process before the taxpayer shall
   be allowed the tax credit under this section. The taxpayer shall also submit
   purchase receipts and invoices as may be necessary to confirm the
   taxpayer&#8217;s statement of purchase price paid, with the income tax return
   to verify the amount of purchase price paid for the recycling machinery and
   equipment.

   3. No taxpayer shall be denied the credit under this section based solely on
   another person&#8217;s use of the tangible personal property produced by the
   taxpayer, provided that the tangible personal property was sold by the
   taxpayer to an unaffiliated person in an arm&#8217;s-length sale.

   4. No credit shall be allowed under this section for machinery and equipment
   unless the machinery and equipment manufacture, process, compound, or produce
   items of tangible personal property from recyclable materials.

B. The total credit allowed under this section in any taxable year shall not
exceed 40 percent of the Virginia income tax liability of such taxpayer.

C. Any tax credit not used for the taxable year in which the purchase price on
recycling machinery and equipment was paid may be carried over for credit
against the taxpayer&#8217;s income taxes in the 10 succeeding taxable years
until the total credit amount is used.

D. The Department of Taxation shall administer the tax credits under this
section. Beginning with credits allowable for taxable year 2015, in no case
shall the Department issue more than $2 million in tax credits pursuant to this
section in any fiscal year of the Commonwealth. A taxpayer shall not be allowed
to claim any tax credit unless it has applied to the Department of Environmental
Quality for certification as described in subdivision A 2 and the Department of
Environmental Quality has issued a written certification stating that the
machinery and equipment purchased are integral to the recycling process. If the
amount of tax credits approved under this section by the Department of Taxation
for any taxable year exceeds $2 million, the Department shall apportion the
credits by dividing $2 million by the total amount of tax credits so approved,
to determine the percentage of otherwise allowed tax credits each taxpayer shall
receive.

E. In the event a corporation converts to a partnership, limited liability
company, or electing small business corporation (S corporation), such business
entity shall be entitled to any unused credits of the corporation. Credits
earned by a partnership, limited liability company, electing small business
corporation (S corporation), or a predecessor corporation entitled to such
credits, shall be allocated to the individual partners, members, or
shareholders, respectively, in proportion to their ownership or interest in such
business entities.

HISTORY: 1998, c. 253; 2001, c. 91; 2004, c. 611; 2007, cc. 529, 593; 2009, c.
34; 2015, cc. 49, 94; 2020, c. 789.