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If an equity investment, the statement must indicate that the

“Qualified business” means a business which

issuance is original, providing new capital to the qualified

(i) Has annual gross revenues of no more than $3 million in

business and that it is not required, or subject to an option,

its most recent fiscal year;

that the issuer redeem the issuance within three years of

(ii) Has its principal office or facility in the Commonwealth;

issuance date.

(iii) Is engaged in business primarily in or does substantially

If a subordinated debt investment, the statement must

all of its production in the Commonwealth;

indicate that the issuance is original, providing new capital

(iv) Has not obtained during its existence more than $3 million

to the qualified business and that, by its terms, requires no

in aggregate gross cash proceeds from the issuance of

repayment of principal for three years after issuance, is neither

its equity or debt investments (not including commercial

guaranteed nor secured by assets of the issuer nor by any

loans from chartered banking or savings and loan

other person or entity, and is subordinate to all indebtedness

institutions); and

and obligations to national or state chartered banking or

savings and loan institutions.

(v) Is primarily engaged or is primarily organized to engage

in the following fields:

The taxpayer is required to attach this statement to their

Qualified Equity and Subordinated Debt Investments Tax

1. advanced computing,

Credit Application (Form EDC).

2. advanced materials,

3. advanced manufacturing,

Definitions

4. agricultural technologies,

“Equity” means common stock or preferred stock, regardless

5. biotechnology,

of class or series, of a corporation; a partnership interest in

a limited partnership; or a membership interest in a limited

6. electronic device technology,

liability company, any of which is not required or subject to

7. energy,

an option on the part of the taxpayer to be redeemed by the

8. environmental technology,

issuer within three years from the date of issuance.

9. information technology,

“Subordinated debt” means indebtedness of a corporation,

general or limited partnership, or limited liability company

10. medical device technology,

that (i) by its terms requires no repayment of principal for the

11.

nanotechnology, or

first three years after issuance; (ii) is not guaranteed by any

12. any similar technology-related field determined by

other person or entity, or secured by any assets of the issuer

regulation by the Department of Taxation.

or any other person or entity; and (iii) is subordinated to all

“Commercialization investment” means a qualified

indebtedness and obligations of the issuer to national or state-

investment in a qualified business that was created to

chartered banking or savings and loan institutions.

commercialize research developed at or in partnership with

“Qualified investment” means a cash investment in a

an institution of higher education.

qualified business in the form of equity or subordinated

A business in its first taxable year of operation will be deemed

debt.

to have annual gross revenues of no more than $3 million

An investment shall not be qualified if the taxpayer who holds

and be primarily engaged in business and do substantially

such investment, or a member of taxpayer’s family, or any

all of its production in the Commonwealth if the commercial

entity affiliated with such taxpayer, receives (or has received)

domicile pursuant to 23 VAC10-120-140 of such business is

compensation from the qualified business in exchange for

within the Commonwealth. (23 VAC10-110-225).

services provided to such business as an employee, officer,

“Commercial domicile” means the state where the principal

director, manager, independent contractor or otherwise in

office from which the business affairs of the corporation are

connection with such business or within one year before or

normally directed or managed. See 23 VAC10-120-140 D.

after the date of such investment.

“Primarily engaged in business in the Commonwealth”

For purposes hereof, reimbursement of reasonable expenses

means 50% or more of the entity’s gross receipts are derived

incurred shall not be deemed to be compensation. A

from sources within Virginia.

qualified investment shall not include existing investments

or instruments that have been purchased, transferred, or

“Substantially all of its production in the Commonwealth”

otherwise obtained without providing new capital to a qualified

means 80% or more of the entity’s expenses are incurred

business.

within Virginia.

Virginia Tax Bulletin 00-5, dated July 31, 2000, and Title

23 of Virginia Administrative Code (VAC)10-110-225

provide additional information on this credit. To obtain

this bulletin, see “Where To Get Help” above.

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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