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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 section on Where to Get Help.

Beginning January 1, 2010, the total amount of credit granted

Credit must file. The qualification is valid for the calendar

is limited to $5 million. Of the amount of available credit, one-

year of the application. A separate application is required for

half of this amount must be allocated to commercialization

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

investments and the other half is available for all other qualifying

to its investors.

investments. If credit applications for either half exceed the

All businesses should be registered with the Department

allowed amount, the credits for that half will be prorated. If credit

of Taxation before completing Form QBA. If you are not

applications for either half are less than the allowed amount,

registered, complete Form R-1.

the balance will be available for allocation to the other type of

credits.

When to File This Application, Form QBA

File Form QBA any time during the calendar year.

Where to Get Help

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

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

as a qualified business.

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

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

Where to File This Application, Form QBA

for most Virginia tax forms, regulations

and additional tax information. Forms are available from your

File Form QBA with the Department of Taxation, Tax Credit

local Commissioner of the Revenue, Director of Finance or

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

Director of Tax Administration.

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

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both.

General Information Concerning This Credit

Information to Be Provided To Taxpayers (Investors)

The Qualified Equity and Subordinated Debt Investments Tax

Upon issuance of equity or subordinated debt, the qualified

Credit is allowed to taxpayers making a qualified investment

business must provide each taxpayer with a copy of the

in the form of equity or subordinated debt from a qualifying

qualified business certification from the Department of

business which is engaged in business or does substantially

Taxation and a statement on the business entity’s letterhead

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

that contains the following information:

amount of qualifying investments made during the taxable

• The investor’s name;

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

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

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

• The investment by type (equity or debt);

is nonrefundable. Excess credits may be carried forward for

• The investment by date (specific to each investment

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

amount); and

$5 million, the Department of Taxation will prorate the

• Verification that the investment meets the definition of a

allowable credit for each taxpayer.

qualified investment for purposes of claiming the credit

• Equity received in connection with a qualified business

pursuant to Va. Code § 58.1-339.4. Title 23 of Virginia

investment must be held by the taxpayer for at least three

Administrative Code (VAC) 10-110-225 et seq. provides

full calendar years following the calendar year for which a

regulations on how this credit applies.

tax credit is allocated.

•

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

• Subordinated debt received in connection with a qualified

any of his/her family members nor any entity affiliated

business investment must be held by the taxpayer for at

with him/her, receives or has received compensation

least three years from the date of issuance.

from the qualified business in exchange for services

provided to such business as an employee, officer,

• Holding Period Exception – liquidation of the qualified

director,

manager,

independent

contractor

business issuing such equity; the merger, consolidation or

otherwise in connection with or within one year before

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

or after the date of such investment. For the purposes

affiliated with such business or the death of the taxpayer.

hereof, reimbursement of reasonable expenses

If the three calendar year holding period is not met, the

incurred shall not be deemed to be compensation.

taxpayer forfeits the unused credit amount and will be

assessed for the credit used, to which shall be added interest,

• The statement should be signed by a company officer.

computed at the rate of one percent per month, compounded

For investors affiliated with the QBA, such as Corporate

monthly from the date the tax credits were claimed.

Officer, CFO, etc., the statement should be signed by

another member of the company.

Who Must File this Application, Form QBA

Please note: For married investors, the credit cannot be

Businesses that want to sell equity and subordinated debt

issued jointly. The investment must be made individually

investments for which taxpayers may claim credit for the

and a separate Form EDC and business statement must be

Qualified Equity and Subordinated Debt Investments Tax

provided for each spouse.

Form Qba - Application For Designation As A Qualified Business For The Qualified Equity And Subordinated Debt Investments Tax Credit Page 2

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