In March 2011, the Governor of Virginia signed into law a new refundable research and development credit for individuals and businesses undertaking qualified activities within the state. The legislation allows income tax credits for individuals and businesses for qualified research and development expenses for taxable years beginning on or after January 1, 2011, but before January 1, 2016. Highlights of the credit include:

  • 15% of the first $167,000 in Virginia qualified research and development expenses, to the extent the expenses exceed a base amount.
  • 20% of the first $175,000 of Virginia qualified research and development expenses if the research was conducted in conjunction with a Virginia public or private college or university, to the extent the expenses exceed a base amount.
  • There is a $5 million cap on the total amount of credits allowed in any fiscal year.

The Department of Taxation is currently developing guidelines to carry out the provisions of this credit, including rules regarding the location where the research and development is performed, the residence or business location of the taxpayer or taxpayers conducting the research and development, and the location where supplies used in the research and development are consumed.