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2016 SESSION

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SB 58 Research and development expenses; modifies the existing tax credits.

Introduced by: Ryan T. McDougle | all patrons    ...    notes | add to my profiles

SUMMARY AS PASSED SENATE: (all summaries)

Research and development expenses tax credits. Modifies the existing research and development expenses tax credit and creates a similar tax credit for businesses with Virginia research and development expenses in excess of $5 million for the taxable year. The bill changes the existing tax credit by (i) extending the expiration date from January 1, 2019, to January 1, 2022; (ii) increasing the credit from 15 percent of the first $234,000 of the business's Virginia qualified research and development expenses that exceed a base amount to 15 percent of the first $300,000 of such expenses and from 20 percent of the first $234,000 of such expenses to 20 percent of the first $300,000 of such expenses if the research and development was conducted in conjunction with a Virginia college or university; (iii) establishing an alternative computation for the tax credit at the election of the taxpayer beginning with taxable year 2016; and (iv) increasing from $6 million to $7 million the maximum amount of tax credits that may be granted by the Department of Taxation for each fiscal year beginning with fiscal year 2017.

Under current law, a taxpayer is allowed a refundable credit equal to (a) 15 percent of the first $234,000 of the taxpayer's Virginia qualified research and development expenses that exceed a base amount or (b) if the research and development was conducted in conjunction with a Virginia college or university, 20 percent of the taxpayer's first $234,000 in Virginia qualified research and development expenses that exceed a base amount. Under the alternative computation established by the bill for the existing credit, the taxpayer will be allowed a refundable tax credit equal to 10 percent of the difference of (1) the taxpayer's Virginia qualified research and development expenses for the current taxable year and (2) 50 percent of such taxpayer's average Virginia qualified research and development expenses for the immediately preceding three taxable years. If the taxpayer did not pay or incur Virginia qualified research and development expenses in any one of the immediately preceding three years, the credit will equal five percent of the taxpayer's Virginia qualified research and development expenses for the current taxable year. The maximum credit allowed to a taxpayer each year under the alternative computation will be $45,000, or $60,000 if the research and development was conducted in conjunction with a Virginia public or private college or university.

The bill also creates a new tax credit beginning with taxable year 2016 for businesses with Virginia research and development expenses in excess of $5 million for the taxable year. The new tax credit will include the same elements as described above for the alternative computation, except that it is not refundable and there is no annual limit on the maximum amount of credits allowed to the taxpayer. In addition, the Department may grant up to $20 million in tax credits each fiscal year beginning with fiscal year 2017. The amount of the new tax credit that may be claimed by the taxpayer for each year will be limited to 75 percent of the taxpayer's Virginia income tax liability for the year. Any unused credit for the year may be carried forward and applied against the taxpayer's income taxes in the next 10 succeeding taxable years. The new research and development expenses tax credit expires January 1, 2022. The bill prohibits a taxpayer from claiming a credit for expenses incurred using embryonic stem cells.

The bill prohibits a taxpayer from claiming both the existing and new research and development expenses tax credit for the same taxable year. This bill incorporates SB 161, and is identical to HB 884.


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