GOVERNOR'S RECOMMENDATION

1. Line 3, enrolled, Title, after amend the Code of Virginia

insert

by adding in Article 13 of Chapter 3 of Title 58.1 a section numbered 58.1-439.12:11 and

2. Line 11, enrolled, after amended

insert

by adding in Article 13 of Chapter 3 of Title 58.1 a section numbered 58.1-439.12:11 and

3. At the beginning of line 294, enrolled

insert

§ 58.1-439.12:11. Port of Virginia Economic and Infrastructure Development Zone.

A. The Virginia General Assembly, finding that (i) the further development and diversification of the Virginia economy through utilization of the Port of Virginia and Virginia's commercial maritime assets is in the best interest of the entire Commonwealth, (ii) the Port of Virginia is projected to experience tremendous growth over the next decade with the expansion of the Panama Canal, and (iii) the Port of Virginia cannot sustain such growth without the development of the logistical, manufactory, infrastructure, and other support facilities needed to promote such growth, does hereby designate the following localities to be part of the Port of Virginia Economic and Infrastructure Development Zone: the Counties of Brunswick, Chesterfield, Dinwiddie, Greensville, Isle of Wight, Mecklenburg, Montgomery, Prince George, Southampton, Surry, Sussex, and Warren and the Cities of Chesapeake, Colonial Heights, Emporia, Hopewell, Norfolk, Petersburg, Portsmouth, Richmond, Suffolk, and Virginia Beach.

B. As used in this section, unless the context requires a different meaning:

"Qualified company" means a corporation, limited liability company, partnership, joint venture, or other business entity that (i) was not previously located in the Zone; (ii) employs at least 25 qualified full-time employees during its first taxable year of operation within the Zone; (iii) is involved in maritime commerce or exports or imports manufactured goods through the Port of Virginia; and (iv) is engaged in one or more of the following: the distribution, freight forwarding, freight handling, goods processing, manufacturing, warehousing, crossdocking, transloading, or wholesaling of goods imported or exported through the Port of Virginia; shipbuilding and ship repair; dredging; marine construction; or offshore energy exploration and extraction.

"Qualified full-time employee" means an employee filling a new, permanent full-time position in the qualified company's location within the Zone. A new, permanent full-time position is a job of an indefinite duration, created by the company as a result of operations within the Zone, requiring a minimum of 35 hours of any employee's time per week for the entire normal year of the company's operations, which normal year shall consist of at least 48 weeks, or a position of indefinite duration that requires a minimum of 35 hours per week for the portion of the taxable year in which the employee was initially hired for, or transferred to, the qualified company's location within the Zone. Seasonal or temporary positions, or jobs created when the job functions are shifted from an existing location in the Commonwealth to the qualified company's location within the Zone, and positions in buildings and grounds maintenance, security, and other positions that are ancillary to the principal activities performed by the employees at the qualified company's location within the Zone shall not qualify as new, permanent full-time positions. A "qualified full-time employee" does not include an employee (i) for whom a credit was previously earned pursuant to § 58.1-439 or 58.1-439.12:06 by a related party as defined in § 267(b) of the Internal Revenue Code or by a trade or business under common control as defined in § 52(b) of the Internal Revenue Code; (ii) who was previously employed in the same job function in Virginia by a related party as defined in § 267(b) of the Internal Revenue Code; or (iii) whose job function was previously performed at a different location in Virginia by an employee of a related party as defined in § 267(b) of the Internal Revenue Code or a trade or business under common control as defined in § 52(b) of the Internal Revenue Code.

"Zone" means the Port of Virginia Economic and Infrastructure Development Zone.

C. Beginning July 1, 2014, but not later than June 30, 2019, any qualified company that locates within the Zone on or after July 1, 2012, shall be allowed to earn a credit against the taxes imposed by Articles 2 (§ 58.1-320 et seq.) and 10 (§ 58.1-400 et seq.) of Chapter 3 of Title 58.1. The credit may be earned for the qualified company's first taxable year of operation within the Zone. Such credits may be claimed for the taxable year immediately following the taxable year in which the credit was earned, or in the case of a qualified company that locates in the Zone between July 1, 2012, and June 30, 2014, in the qualified company's first taxable year beginning on or after July 1, 2014. If the amount of the credit claimed exceeds the taxpayer's liability for the taxable year in which the credit is claimed, the excess amount may be carried over for the next five taxable years.

The maximum amount of credits allowed for all qualified companies pursuant to this section shall not exceed $10 million for each calendar year. If the cumulative amount of tax credits requested in a calendar year by qualified companies exceeds $10 million in a calendar year, then such credits shall be prorated among the qualified companies requesting the credits. To receive the credit under this section, qualified companies shall apply for such credit pursuant to policies and guidelines established by the Department of Taxation.

D. The amount of the credit allowed for a qualified company pursuant to this section shall be equal to:

1. Twenty-five percent of the qualified company's income tax liability attributable to income from sources within the Zone if the qualified company employs at least 25 qualified full-time employees during its first taxable year of operation within the Zone;

2. Fifty percent of the qualified company's income tax liability attributable to income from sources within the Zone if the qualified company employs at least 50 qualified full-time employees during its first taxable year of operation within the Zone;

3. Seventy-five percent of the qualified company's income tax liability attributable to income from sources within the Zone if the qualified company employs at least 75 qualified full-time employees during its first taxable year of operation within the Zone; or

4. One hundred percent of the qualified company's income tax liability attributable to income from sources within the Zone if the qualified company employs at least 100 qualified full-time employees during its first taxable year of operation within the Zone.

E. If the number of qualified full-time employees for any year for which a credit is claimed pursuant to this section falls below the number of qualified full-time employees during the qualified company's first taxable year of operation within the Zone, the amount of the credit for that year shall be recalculated using the decreased number of qualified full-time employees.

F. The qualified company's income tax liability attributable to income from sources within the Zone shall be calculated by multiplying the qualified company's tax liability for the prior year by a fraction, the numerator of which is the qualified company's taxable income from sources within the Zone, as determined pursuant to subsection G, and the denominator of which is the qualified company's taxable income from all sources within the Commonwealth. For purposes of determining the credit allowable under this section, the qualified company's income tax liability is the amount of income tax due after taking into account any Virginia additions, subtractions, or deductions, and the apportionment of income, if applicable, but prior to applying any tax credits, payments, penalty, or interest.

G. For purposes of this section, a company may be deemed to have income from sources within the Zone if it has:

1. Items or income, gain, loss, or reduction attributable to (i) the ownership of any interest in real or tangible personal property within the Zone or (ii) a business, trade, profession, or occupation carried on in the Zone; or

2. Income from intangible personal property, including annuities, dividends, interest, royalties, and gains from the disposition of intangible personal property to the extent that such income is from property employed by the taxpayer in a business, trade, profession, or occupation carried on in the Zone.

H. If the entire business of a qualified company within the Commonwealth is transacted or conducted within the Zone, the tax credit created pursuant to this section shall be computed using the entire Virginia tax liability of such company for the prior taxable year. The entire business of the qualified company shall be deemed to have been transacted or conducted within the Zone if such company has no income from sources within any other county or city of the Commonwealth.

I. Any corporation having income from sources within the Zone and within other counties or cities of the Commonwealth shall allocate and apportion its Virginia taxable income as provided in §§ 58.1-407 through 58.1-420, omitting the sales factor, substituting "Port of Virginia Economic and Infrastructure Development Zone" for the words "state" or "Commonwealth," substituting "in the Commonwealth" for "everywhere," and substituting "total business in the Commonwealth" for "total business." Any qualified company other than a corporation having income from sources within the Zone and within other counties or cities of the Commonwealth shall allocate and apportion its Virginia taxable income in the same manner except that such company shall also substitute "business entity" for "corporation" in §§ 58.1-407 through 58.1-420.

J. No tax credit may be claimed under this section by an otherwise qualified company if (i) the qualified company, a related party as defined in § 267(b) of the Internal Revenue Code, or a trade or business under common control as defined in § 52(b) of the Internal Revenue Code was located within the Zone prior to July 1, 2012; (ii) a credit pursuant to § 58.1-439 or 58.1-439.12:06 is claimed for the same employees or for capital expenditures at the same facility by the qualified company, by a related party as defined in § 267(b) of the Internal Revenue Code, or by a trade or business under common control as defined in § 52(b) of the Internal Revenue Code; or (iii) the qualified company was a party to a reorganization as defined in § 368(b) of the Internal Revenue Code, and any corporation involved in the reorganization as defined in § 368(a) of the Internal Revenue Code was located within the Zone prior to July 1, 2012, or previously received a tax credit under this section for the same facility or operations.

K. If a qualified company files a consolidated or combined income tax return pursuant to § 58.1-442, the tax credit provided under this section shall be computed using only the income tax liability and taxable income attributable to the corporation or corporations that separately meet the requirements of this section.

L. 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.

M. The Tax Commissioner shall develop guidelines for implementing the provisions of this section. Such guidelines shall be exempt from the provisions of the Administrative Process Act (§ 2.2-4000 et seq.).

4. Line 317, enrolled, after represent

insert

one of

5. Line 319, enrolled, after financial,

strike

and

insert

or

6. Line 394, enrolled

strike

all of lines 394 through 402