Form Qba - Application For Designation As A Qualified Business For The Qualified Equity And Subordinated Debt Investments Tax Credit Page 3

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Instructions for the Qualified Business Designation Application - Form QBA

Qualified Equity and Subordinated Debt Investments Tax Credit

Pursuant to Va. Code § 58.1-339.4, this credit is effective for taxable years beginning on and after January 1, 1999. 23

VAC 10-110-225 et seq. provide regulations on this credit, including definitions of terms used in this application. Virginia

Tax Bulletin 00-5, dated July 31, 2000, also provides additional information on this credit. For a copy of the applicable

regulations, Tax Bulletin, or additional forms, see the Where to Get Help section.

• Holding Period Exception – Liquidation of the qualified

Under Va. Code § 58.1-339.4 (E), the Qualified Equity and

Subordinated Debt Investments Tax Credit is capped at $5

business issuing such equity; the merger, consolidation or

million annually. Budget language enacted by the General

other acquisition of such business; with or by a party not

Assembly provides the following exceptions.

affiliated with such business or the death of the taxpayer.

• For taxable years beginning between January 1, 2013,

If the 3 calendar year holding period is not met, the taxpayer

and December 31, 2013, the credit is limited to $4.5 million

forfeits the unused credit amount and will be assessed for

annually.

the credit used, to which shall be added interest, computed

at the rate of 1% per month, compounded monthly from the

• For taxable years beginning between January 1, 2014,

date the tax credits were claimed.

and December 31, 2014, the credit is limited to $5 million

annually.

Who Must File This Application, Form QBA

Any further adjustments to the credit limit will be addressed

Businesses that want to sell equity and subordinated debt

by future General Assembly action.

investments for which taxpayers may claim credit for the

Of the amount of available credit, one-half of this amount must

Qualified Equity and Subordinated Debt Investments Tax

be allocated to commercialization investments and the other

Credit must file. The qualification is valid for the calendar

half is available for all other qualifying investments. If credit

year of the application. A separate application is required for

applications for either half exceed the allowed amount, the

each year that the business wants to be eligible to offer this

credits for that half will be prorated. If credit applications for

credit to its investors.

either half are less than the allowed amount, the balance will

All businesses should be registered with the Department

be available for allocation to the other type of credits.

before completing Form QBA. If you are not registered,

complete Form R-1.

Where to Get Help

Write to Department of Taxation, Tax Credit Unit, P. O. Box

When to File This Application, Form QBA

715, Richmond, VA 23218-0715 or call 804-786-2992. To

File Form QBA any time during the calendar year.

order forms, bulletins or regulations call 804-440-2541. Visit

You need to reapply each year that you plan to be designated

for most Virginia tax forms, regulations

as a qualified business.

and additional tax information. Forms are available from your

local Commissioner of the Revenue, Director of Finance or

Where to File This Application, Form QBA

Director of Tax Administration.

File Form QBA with the Department of Taxation, Tax Credit

Tenemos servicios disponible en Español.

Unit, P.O. Box 715, Richmond, VA 23218-0715.

General Information Concerning This Credit

You may also fax it to 804-367-3021, but please do not do

The Qualified Equity and Subordinated Debt Investments Tax

both.

Credit is allowed to taxpayers making a qualified investment

Information to Be Provided to Taxpayers (Investors)

in the form of equity or subordinated debt from a qualifying

business which is engaged in business or does substantially

Upon issuance of equity or subordinated debt, the qualified

all of its production in Virginia. The credit equals 50% of the

business must provide each taxpayer with a copy of the

amount of qualifying investments made during the taxable

qualified business certification from the Department and a

year. The total amount of credit that may be used per taxable

statement on the business entity’s letterhead that contains

year is the lesser of the tax imposed or $50,000. The credit

the following information:

is nonrefundable. Excess credits may be carried forward for

• The investor’s name;

up to 15 years. If total annual requests for this credit exceed

• The investment by amount (list each amount separately);

$4.5 million, the Department will prorate the allowable credit

• The investment by type (equity or debt);

for each taxpayer.

• The investment by date (specific to each investment

amount); and

Taxpayers cannot receive a grant from the Small Business

• Verification that the investment meets the definition of

Investment Grant Fund and take the Qualified Equity and

a “qualified investment” for the purposes of claiming

Subordinated Debt Investments Tax Credit for the same

the credit pursuant to Va. Code § 58.1-339.4. 23 VAC

investment.

10-110-225 et seq. provide regulations on how this credit

• Equity received in connection with a qualified business

applies.

investment must be held by the taxpayer for at least 3 full

Please specifically state that the investor (name), nor any

calendar years following the calendar year for which a tax

of his/her family members, nor any entity affiliated with

credit is allocated.

him/her receives or has received compensation from the

• Subordinated Debt received in connection with a qualified

qualified business in exchange for services provided to

business investment must be held by the taxpayer for at

such business as an employee, officer, director, manager,

least 3 years from the date of issuance.

independent contractor or otherwise in connection

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